A range of financial market developments suggest that the ECB should be getting more concerned that “an unwarranted tightening of monetary policy” is occurring. The euro TWI is up nearly 5% (due to risk aversion effects, looking likely to knock ¼pp off the ECB’s inflation forecast), EA real interest rates have risen sharply (more than … More ECB need to start to recognising “an unwarranted tightening of monetary policy”
This week’s dovish Fed minutes, disappointing US CPI, further oil price falls, growing Chinese uncertainties (Friday’s Chinese manufacturing PMI dropping to its lowest since March 2009) and sharp falls in global equity prices seem to have tipped the balance more decisively against a September 17th Fed rate hike. Market pricing has suggested around/less than a … More The Week A September Fed Hike Died? USD Bulls on the Run
I’ve previously argued that likely weak credit and labour market dynamics pose downside risks to the nascent Euro Area recovery. And Friday’s Q2 GDP data were disappointing at both the aggregate and country level, adding to other recent weak/mixed data. Given the ECB’s unprecedented monetary stimulus, support to real incomes from lower oil price and nascent … More More Euro Area Glass Half Empty Evidence, EUR strengthening not helpful
Last week’s PBOC update to their FX policy – substantially raising the CNY daily fix three times and, more importantly, apparently giving market forces a larger (if slightly opaque) role – led to substantial global FX volatility. With the benefit of a couple of days distance the bottom lines seem to be: (a) PBOC will … More PBOC and the Yuan: Near-term panic over but still likely end of an era
Today’s BoE data deluge has been interpreted by the market as a dovish event – GBPUSD declined 0.7% and 10 year gilts fell 6 basis points i.e. not huge moves, as per my preview. The market seems to have focussed on Weale’s surprising unchanged vote was (he’ll hopefully fill us in in a forthcoming speech, … More Was BoE Super Thursday really that dovish? Has MPC transparency really improved?
Tomorrow represents a landmark in BoE communication: the MPC decision, MPC minutes and August Inflation Report will be released simultaneously at 12 noon, with the IR press conference starting at 12.45. With a view to the deluge of information to process, I offer some views on what market participants should be paying watching out for, … More Bank of England Super Thursday: Three is the magic number for further GBP strength?
Recent Euro area data have been moderately positive, albeit far from stellar: the Citi EA Economic surprises indicator has been broadly flat since mid-May. Probably the nicest recent upside surprise was the bounce in core HICP inflation from 0.8% to 1.0% in the flash July data, the highest since April 2014, beating market expectations of … More Should the ECB be concerned about labour market dynamics and inflation breakevens?