Tag Archives: newsletter

The much anticipated ECB meeting is at hand.   Yesterday's disappointing eurozone CPI figures only fanned the anticipation. Today the service PMI was softer than expected at 54.2, down from 54.6.   What will Draghi do?  There are four moving parts.   The first is the deposit rate, which currently stands at -20 bp.  When first adopted in September 2014, that rate was said to be have exhausted the scope for interest rate policy.  Of course, we know factually it is not because other...

Defying the expectations a few months ago, Greece remained in the Economic and Monetary Union.  It recently succeeded in implementing sufficient reforms to earn another tranche of aid.   However, the entire exercise exhausted whatever trust there may have been.  It has also further soured Greece's attitude toward the EU. This leaves officials ill-prepared to deal with other issues.   The refugee challenge is such an issue.  The Financial Times reported that some EU officials are...

The anticipation is nearly over.  The softer than expected preliminary EMU inflation figures encourages expectations for the more aggressive range of actions by the ECB tomorrow.  Draghi has claimed that movement toward the inflation target was too slow.  Today's data showed a 0.1% increase year-over-year in the headline rate.  The market had anticipated a 0.2% increase.  Although the ECB targets headline inflation, it clearly also tracks core inflation.  Core price increases slowed to...

Canada reported its monthly GDP estimate for September, and at the same time, provided its first estimate of Q3 GDP.   The Great Graphic, created on Bloomberg, shows both time series. The monthly GDP is depicted by the yellow line and the quarterly estimate is the white line.  Clearly they track each other, as one would expected.   The good news is that after contracting in the first two quarters of the year, the Canadian economy expanded by 2.3% in Q3. The bad news is that the growth...

(Here is a draft of a monthly column I write for a Chinese paper) It is official.  The Chinese yuan will be in the SDR.  At a 10.4% share, it is a bit more than I expected, but less than the 14%-16% share that the IMF staff has intimated a few months ago.  This is a significant event, even if there is no short-term market opportunity.   The yuan’s exchange rate against the dollar has steadily declined over the month of November contrary to conspiracy theories that warned Chinese...

(Here is a draft of a monthly column I write for a Chinese paper) It is official.  The Chinese yuan will be in the SDR.  At a 10.4% share, it is a bit more than I expected, but less than the 14%-16% share that the IMF staff has intimated a few months ago.  This is a significant event, even if there is no short-term market opportunity.   The yuan’s exchange rate against the dollar has steadily declined over the month of November contrary to conspiracy theories that warned Chinese...

The US dollar is trading with a heavier bias today amid some last minute position squaring ahead of the key events of the week, which are stacked in the second half.  The ECB meeting and US jobs data are the two most important events in a jam packed week for most participants.   The recent pattern has been for new lows in the euro to be greeted with a bit of profit-taking.  This pattern is holding.  New lows were made yesterday just below $1.0560, and short-covering lifted it to nearly...

I had the privilege of being on CNBC to discuss the significance of China being included in the IMF's Special Drawing Right. Here is the link to the discussion.  The decision was announced shortly after the interview on CNBC.  It was largely a foregone conclusion that China would join.  Besides the confirmation, the new news was in the weighting.   China's yuan got an almost 11% share of the new SDR that will be launched 1 October 2016.  The room for the yuan comes comes mostly at the...

The decline in the labor force participation rate helps explain the substantial decline in the US unemployment rate over the past couple of years.  That decline has helped bring the Federal Reserve to the point that a December rate hike is thought to be extremely likely barring a significant disappointment at the end of the week with the November jobs report.   This Great Graphic was posted on Ritholtz's Big Picture Blog and was compiled by Deutsche Bank's Torsten Slok from BLS data.  ...

(from my colleagues Dr. Win Thin and Ilan Solot) This is set to be one of the most important weeks of the year. EM is likely to take a backseat between the ECB monetary policy decision, the OPEC meeting and the US jobs report. That said, there are several potential sources of idiosyncratic risk to key an eye on. There could be more headline risks from the Russia-Turkey situation. Some think that the leader of Brazilian lower house may bring forward the impeachment process this week,...