Category: Economic Conditions

Volatile Durable Goods in the U.S. and Eurozone Finance Ministers Meet Over Greece

The US dollar is softer against all the major currencies today, led by the euro and sterling. The main exception is the New Zealand dollar.  Dovish comments by the deputy governor of the RBNZ fanning speculation of an easing bias at next week’s policy meeting caught a speculative market that had turned net long (at least in the futures market).

Are You Living, or Stuck, in a Middle-Income Economy?

The notion of a middle-income trap has generated much interest and discussion, but little consensus. There is no agreement on what the trap is or how long a country needs to be at the middle-income stage to be considered trapped. Much of the current discussion is about growth slowdowns, but is a slowdown the same as a trap? It is also possible that the trap does exist but we do not know what causes it.

Disappointing Data from Asia and Europe Highlight the Middle of the Week

A string of soft data in Asia and Europe has helped underpin the dollar, but choppy range trading persists.  Asian shares still rallied, helped by the biggest rally in Taiwan in almost two-years on the back of reports that China is studying a link between Taipei and Shanghai. European shares are trading heavy.   US shares are trading off in Europe as well. 

The Dollar Slips on Fundamental Developments

Today, there have been several fundamental developments encouraging the dollar’s slippage.  Japan reported its first trade monthly trade surplus in nearly three years; further easing of rate cut expectations by Australia; BOE minutes warning of a faster pass through of a sterling’s depreciation on inflation; and the German government revised its 2015 GDP to 1.8% from 1.5%. 

The Fed Reaffirms its Tightening Bias and Germany’s ZEW Survey Results are Mixed

The US dollar is extending yesterday’s gains but remains well within ranges that have confined the greenback for more than a month now. There are two main catalysts.

First NY Fed President Dudley reaffirmed the idea that the Federal Reserve has a tightening bias. It is looking to raise rates. It wants the data to provide a suitable opportunity. It still sees Q1 weakness as largely transitory and anticipates such an opportunity to arise later this year.

Implications of the Moves by China and Greece Fatigue to Start the Week

The US dollar is firmer against most of the European currencies but is weaker within the dollar-bloc and many emerging market currencies.  Against the yen, the greenback is little changed. 

The US dollar has been pushed a more than a cent off the $1.0850 level approached before the weekend.   Sterling’s push toward $1.5050 is a distant memory as it retreats to $1.4900 support. 

What about Investment Climate Change?

The US dollar’s strong advance ended a month ago.  Weak economic data encouraged investors to push out their expectations of the Fed’s first interest rate hike. Some are even shifting it out of 2015 entirely.

At the same time, economic conditions and lending improved in the Eurozone. The stabilization, and then recovery in the price of oil, has helped ease, on the margin, deflationary forces.