The global financial crisis of 2007–2009 underlined the need for central banks and financial regulators to take a macroprudential perspective on financial risk, i.e., to monitor and regulate the buildup of systemic financial risk in the economy as a whole, as opposed to simply monitoring the condition of individual financial institutions (microprudential regulation).
Demand for services rose in the U.S. as non-manufacturing activity increased slightly, as many analysts expected.
In June, the Institute of Supply Management’s non-manufacturing index rose to 56%, up from 55.7% in May in a sign that demand for services continued to increase in America. The ISM noted that the reading indicated “continued growth” in the economy, with the gains driven by more business activity and new orders.
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The US dollar is enjoying broad gains today. It is extending its recent gains after a consolidative session yesterday as investors tried digesting the weekend developments. The yen is the sole exception among the majors. It is managing to hold its own against the dollar.
The Bank for International Settlements (BIS) is the oldest global financial organization still in existence. Made up of 60 central banks from all over the world, it monitors national bank regulation trends and their impacts on the global economy.
The global capital markets responded in a typical risk-off fashion to the sharp victory in Greece for the rejection of the creditors’ demands. However, by the time European markets opened, some semblance of stability emerged and European equities gapped lower, but quickly began recovering. Core bond yields fell and peripheral bonds weakened, but in a contained fashion.
Polls indicate that the outcome of the Greek referendum is too close to call. However, the results of the Scottish Referendum and the British national election are fresh our memories, and the polls there provided little guidance. While there is much uncertainty, there are a few things look clear.
1. FX Price Action: The US dollar is little changed against most of the major currencies. The notable exception is the Australian dollar. It has been sold to new six-year lows to near $0.7500. Recall that is the level that RBA Governor Stevens previously identified as reasonable. This illustrates one of the problems of nominal and bilateral exchange rate targets. The continued negative terms of trade, shock (e.g., iron ore prices have renewed their decline) and knock-on impact from poor Chinese developments make whatever fair value means more dynami
House prices continue to rise in the United States, but at a slower pace than before.
A new study by S&P Dow Jones shows that home prices rose 4.9% year-over-year in the 20 largest cities in the country, while prices gained 4.6% year-over-year in the 10-city composite. Those figures are for April, when some analysts expected price gains to slow because of cold weather hindering demand.
Two major trends are boosting economic expectations in the United States, as the mortgage market continues to strengthen and consumers get more confident across the country.
The total amount of seriously delinquent mortgages on single-family homes for Freddie Mac loans fell to 1.58% in May, the lowest rate since the end of 2008. That is still far above the pre-crisis average of about 0.7%, but indicates a continued decline from the peak, when serious delinquencies rose to over 4% at the beginning of 2010.
The US dollar has been trending gently higher against the major currencies over the past 3-4 sessions but is trading heavier today. It is largely within yesterday’s trading range. The two main drivers remain Greece and the US economy.
