A Reuters poll of global strategists says that the euro should weaken to 1.04 and six months into 1.03 in 12 months time. With the pair ar 1.0500 today, we are not that far away from either of those targets. I guess it says they are more bearish on average. In response to other questions:
51 of 63 strategists say Trump administrations dollar policy is not clear
29 of 56 strategists say risks to their US dollar predictions skew more to the upside over the coming year (that is opposed to 23 of 39 in Jan). 27 say the risks are to the downside. So overall, the analysts are split.
42 of 59 strategists say risks to their US dollar predictions in the near-term skew more to the downside if fiscal stimulus delayed to next year
The Fed jawboning has gone well… too well. Dudley, Harker, Kaplan, Williams, and Brainard have managed to push the market-implied probability of a March rate hike from around 20% to 90% in a week. The Fed is now cornered…
(we do note that Bloomberg’s WIRP function uses midpoints and is likely overvaluing the probability but the trend is unmistakable)
What happens to Fed credibility if they do not hike rate now?
The number of Americans applying for first-time unemployment benefits fell to a near 44- year low last week, reinforcing the picture painted by recent economic indicators of continued strength in the US labor market.
US jobless claims fell by 19,000 to 223,000 in the week ending February 25, according to the Labour Department — confounding market expectations for a rise to 245,000.
The figures would represent the lowest level of weekly claims since the week of March 31 1973.
The lack of an uptick in jobless claims further underscores the strength of the US labour market, one of the primary considerations weighed by the Federal Reserve as it readies to raise interest rates perhaps as soon as this month.
Spokesperson for UK PM May out with a statement 2 March
she has been clear that the bill to trigger Article 50 should be passed unamended
intend to overturn amendments
deadline of 31 March for Article 50 remains unchanged
The statement follows the House of Lords vote last night that defeated the govt motion by 358 to 256 to guarantee the rights of EU nationals living in the UK after Brexit.
MPs will have the chance to remove the Lords’ amendment when the bill returns to the House of Commons. Before then, next Tuesday, the Lords will consider backing other possible amendments to the bill, which authorises Theresa May to trigger Brexit.
Government sources said the bill should simply be about invoking Article 50 of the Lisbon Treaty, beginning formal negotiations.
A novel dilemma for the European Central Bank to contend with: above target inflation.
Prices in the single currency area have climbed by 2 per cent on the year for the first time in over four years, posing a fresh headache for the ECB’s dovish policymakers who will mark their two-year quantitative easing anniversary next week.
At the ECB’s latest meeting next Thursday, president Mario Draghi will face the task of convincing his more hawkish colleagues that the current leap in annual prices – from 1.8 per cent in January – is unlikely to be sustained having been driven by volatile energy costs. The central bank, which has been battling with more than three years of low prices, targets inflation of just under 2 per cent.
Here’s what analysts are making of Mr Draghi’s dilemma.
Despite the recent upsurge in inflation driven by higher oil prices Pete Vanden Houte at ING thinks inflation will begin to stabilise over the coming months. If anything, he says the ECB will opt to let inflation run above target to compensate for years of weak prices:
There is little doubt that the ECB will continue to be criticized for its loose monetary policy, especially in the core countries. But the bank will no doubt recall that the inflation target has to be reached over the medium term and for the whole of the Eurozone. If anything the ECB is more likely to err on the side of inflation, to compensate for the fact that consumer price increases have significantly undershot the ECB’s target for now 4 years in a row.
We therefore don’t see any change in monetary policy this year. However, in the third quarter, the ECB might announce its exit strategy, which in our view will probably entail a new extension of the QE program until mid-2018, but with some tapering included.