Fed Chairman Maintained

The European morning session has been fairly volatile for FX markets, with the euro starting off looking fairly well supported at 1.32 and then falling through the floor on the back of some weak Eurozone economic data. The first blow to the single currency came from Germany where it was reported that the unemployment rate jumped by 19,000 in April and the unemployment rate had been revised up to 6.8% from 6.7% for March, which is where it remained last month. This is the largest increase in German unemployment for three years. Although a German labour market official said the decline could be down to the timing of Easter, it was enough to spook the markets. Not such a two-speed economy? The other blow to hit the market was the fall in the German manufacturing PMI survey to 46.2, the ...

The Weekly Bottom Line HIGHLIGHTS OF THE WEEK United States - Europe provided plenty of negative headlines this week. Both Spain and the U.K. confirmed their economies fell back in recession, while the former saw its unemployment rate jump to 24.4%. - The Dutch government collapsed over a dispute regarding fiscal tightening measures and S&P downgraded Spain's sovereign rating by two notches to BBB+. - Although unspectacular, things were better in the U.S. First quarter GDP growth came softer than expected. However moderate, a 2.2% q/q annualized economic expansion feels comforting against the European backdrop. Canada - Retail trade slid by 0.2% in February as auto sales declined following strong January results. - Newfoundland and Labrador brought down its budget, ...

Weekly Economic and Financial Commentary U.S. Review First-Quarter GDP Growth Slows The U.S. economy grew at a 2.2 percent annual rate in the first quarter, somewhat slower than the consensus had expected. Consumption remained the primary driver of growth as business spending slowed and the government sector continued to scale back spending. In our U.S. review section this week, we discuss the GDP report in the context of the big miss in durables and consider what it means for business spending going forward. We also look at a very small change in the Fed statement this week that reflects an improving view on the troubled housing sector. Business Spending Poised for a Slowdown? Durable goods orders for March were ugly. The 4.2 percent drop was the largest decline since the U.S. ...

The Federal Reserve on Wednesday offered a modestly brighter assessment of the economy's prospects and few clues on the path of monetary policy, as it reiterated that interest rates likely will not rise until at least late 2014. The central bank described the economy as expanding moderately, just as it did in March, and said the unemployment rate had declined but remains elevated. In March, it had said the jobless rate had declined "notably." But its statement after a two-day meeting was slightly more upbeat than its March announcement. Fed policymakers nodded to "some signs of improvement" in the housing sector and, while repeating that they expect moderate economic growth in coming quarters, said the recovery should then "pick up gradually." "To support a stronger economic recovery ...

Dollar Weaker ahead of FOMC USD softer against all of its major counterparts except for the British pound. Sentiment is improving today as global equities are broadly higher and yield spreads in Europe continue to ease. US Treasury yields are up with the 10-year yields approaching the pivotal 2.00% and the dollar index is lower as it remains below its daily cloud and Kijun line. Due out shortly at 0830ET are March durable goods orders which are expected to decline by -1.7% from the prior +2.2% on the headline print. The Federal Open Market Committee (FOMC) concludes its 2-day meeting today and with no change expected on policy, the focus will be on the bank’s updated projections and Chairman Bernanke’s press conference. With recent commentary from some of the more hawkish Fed officials ( ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD Surprisingly-strongUS earnings reports released after the NY close generated an upbeat tone in Asia, allowing the Australian dollar to claw back all losses it has suffered since Tuesday’s soft CPI reading. Asian equities also got a boost, and USDJPY is still looking firm ahead of tonight’s Fed policy announcements. There are three FOMC-related events to watch out for. The policy statement will be published first, but our US economists doubt the Fed will alter its view that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. Ninety minutes later the quarterly forecasts may show some modest upward revisions to inflation and growth projections, and some Fed officials may ...

The Weekly Bottom Line : 30/03/2012 HIGHLIGHTS OF THE WEEK United States February's personal income and spending report revealed some mixed signals about the U.S. economy. Real after-tax incomes declined 0.1%, but real consumer spending managed an impressive 0.5% increase. Even after this solid spending gain, Q1 GDP growth is tracking close to 2%, and growth is unlikely to breakout above the 3% range until the end of 2013. This leaves questions about whether the recent pace of improvement in the job market can be sustained. In a highly publicized speech this week, Bernanke emphasized this theme and made it clear that the Fed is focused on jobs, and stands ready to act if conditions worsen. Canada Equity markets ended the quarter strongly with the S&P/TSX Composite ...

The Week Ahead Highlights FOMC minutes and US labour market in focus More QE for the UK Spain and other sovereign concerns RBA to hold for now Market Moves FOMC minutes and US labour market in focus The past week has seen a multitude of Fed speakers express their views on the economic outlook and monetary policy. Voting members Bernanke, Lacker, Lockhart, Duke, and Dudley all delivered speeches as well as non-voters Plosser, Fisher, and Rosengren. The main focus was on Chairman Bernanke who reiterated his concern that the economic recovery is "slower than we would have hoped" and that "the job market remains far from normal". The Fed Chairman noted the benefits of continued accommodation and kept open the option for further easing. Markets will look to the release ...

Containing inflation will be critical when the time finally comes for the U.S. Federal Reserve to reverse its ultra loose monetary policy, two top Fed officials said on Thursday. With inflation hovering near the Fed's 2.0 percent target, the focus for U.S. policymakers has been kick-starting economic growth and lowering the 8.3 percent unemployment rate. Still, there are lingering concerns that the central bank's unprecedented actions have sown the seeds for a possible big jump in prices. "As always, we have to look at the inflation side and be comfortable that price stability will be maintained and that inflation will be low and stable," Fed Chairman Ben Bernanke told students at George Washington University. "Those are the things we'll be looking at. There's no simple formula but as ...