Tuesday, March 24, 2015

Fed view on the dollar not affecting their view on rates

•     Fed view on the dollar not affecting their view on rates
–    Several FOMC members have said that they think the stronger dollar will restrain exports and be a headwind to growth
–    However, none of them have said that this would prevent them from hiking rates. On the contrary, most of them agree that they should consider hiking rates around June.
–    I believe the market is filtering their messages to justify profit-taking and will eventually have to revise their outlook, at which point the dollar’s rally will resume

•     Merkel offers Tsipras tea & sympathy but no money
–    “Reforms have to be discussed with the institutions, not with Germany”
–    Greece may submit a list of reforms by the end of the week. Otherwise, it could run out of money by April 8th. Greece remains a risk factor for the euro

•     China HSBC/Markit PMI back in contractionary territory
–    Both China PMIs are showing contraction, confirming the slowdown seen in Jan  Feb
–    Negative for AUD especially; AUD/NZD may resume its slow grind to parity

•     Today:
–    Eurozone: Manufacturing & service-sector PMIs for Eurozone, Germany & France
–    UK:  CPI for Feb expected to fall to just above deflation = GBP-negative

–    US: CPI for Feb expected to remain in deflation, but core CPI expected to accelerate = USD-positive. Markit manufacturing PMI expected to slow = USD-negative

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