Likely Warranted Keeping

The Weekly Bottom Line : 19/05/2012 HIGHLIGHTS OF THE WEEK United States - Global economic concerns ratcheted up this week. Widespread discussion of a Greek exit continued, Spanish banks faced rating downgrades and periphery sovereign debt yields moved higher. - Financial markets have responded to these global worries with increased risk aversion. The S&P is poised to end the week 3% lower, and 10-year treasuries are yielding just 1.7%. - U.S. economic data has proved somewhat more encouraging, but growth is still struggling to breakout beyond a moderate pace. This has kept the possibility of additional monetary stimulus alive even if the threshold remains quite high. Canada - Recent economic indicators are showing a resurgence of strength in the Canadian economy. Strong ...

Consolidation Continues Post The Spanish Bond Auction The big event of the morning was the Spanish bond auction, however it failed to generate anything more than an immediate ripple in the FX market. The auction raised just below the top of its target amount of EU2.5bn, at EU 2.49bn. Although demand was strong, Madrid had to pay up to attract investors to its debt. The yield on the 2015 debt it sold jumped to 4.375% vs. 2.89% at an auction in April, the 2016 debt sold with a yield of 4.876% vs. 4.037% at an auction earlier this month. Will Germany soften its stance? In the aftermath, EURUSD is down about 20 pips but it remains above 1.27, while Spanish bond yields have actually fallen. The consolidation period in the market may continue as we lead up to the G8 summit in the US this ...

(Reuters) - One of President Barack Obama's nominees to the Federal Reserve said on Tuesday that if the economic recovery accelerates, the central bank should abandon its pledge to hold interest rates near zero until late 2014. At a hearing to consider his nomination for a spot on the central bank's Washington board, Harvard economist Jeremy Stein said changing economic conditions could alter the currently expected policy course. "If the economy were to strengthen faster than expected, it would be absolutely warranted to revisit, guided by the dual mandate, to revisit the path of the easing," he told the Senate Banking Committee. The Fed's dual mandate is to promote maximum employment and fight inflation. In January, the Fed said economic conditions would likely warrant keeping rates " ...

(Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday warned Congress that putting off a decision on the fate of expiring Bush administration tax cuts could unsettle businesses and households, undercutting the U.S. economic recovery. With presidential and congressional elections looming in November, many analysts think Congress is unlikely to act until the final months of the year. The tax cuts expire on January 1. Bernanke told the Senate Budget Committee that lawmakers might not have the luxury of waiting. "I don't know exactly when the uncertainty would become a factor, but surely as we get closer to January 1 and Congress has not given a clear road map for how it plans to proceed, that would certainly affect planning, business decisions, household decisions, as they look ...

Weekly Economic and Financial Commentary : 07/01/2012 U.S. Review Great Car, Just Be Sure to Look Under the Hood Total nonfarm payrolls jumped 200,000 in December and the unemployment rate dropped to a cycle-low 8.5 percent. Coming on the heels of several weeks of improvement in unemployment insurance claims and improving business sentiment, this seems to put an exclamation point on recent firming in the labor market. To be sure, the job market is healing but we suspect the jump in December may overstate the extent of this improvement. In this week's U.S. Review, we point to some one-off factors and benchmark revisions affecting the job numbers. Overstating the Might of the Labor Market? The economic indicators released in the first week of 2012 offered a mixed, but mostly ...

Forex News and Events: Yesterday ran late and at the 11th hour EU leaders did come up with an agreement very close to markets expectations. The subsequent risk rally was seen across asset classes as a reward for European policymakers hard work . The positive initial reaction by investors is predictable given the massive uncertainty that dominated pre-summit, and the emergent worry that nothing solid would be announced. EURUSD was able to break above the 1.4000 handle, while Asian regional indices were broadly higher. Commodity currencies traded higher on the back of the risk-on mood and bullish commodity rally spearheaded by Chinese buying of copper. Market had to wait until the EU summit press conference and concrete conformation of details before stepping back into risk correlated ...

(Reuters) - Two top Federal Reserve officials on Monday defended the central bank's most recent effort to boost growth, and one suggested further steps may be justified. The Fed last week announced it would weight its $2.85 trillion portfolio more heavily with longer term securities in an effort to drive borrowing costs lower, warning of "significant" downside risks to the economy, Fed Governor Sarah Raskin and the president of the St. Louis Federal Reserve Bank, James Bullard, both defended that move as warranted given the U.S. 9.1 percent unemployment rate. Raskin hinted she would support more action. "Additional policy accommodation is warranted under present circumstances," Raskin said at an event sponsored by the University of Maryland's Smith School of Business. Noting that ...

(Reuters) - Two top Federal Reserve officials on Monday defended the central bank's most recent effort to boost growth, with one suggesting further steps may be justified. The central bank last week, warning of "significant" downside risks to the economy, announced it would weight its $2.85 trillion portfolio more heavily with longer term securities in an effort to drive borrowing costs lower. Fed Governor Sarah Raskin and St. Louis Federal Reserve Bank President James Bullard both defended that move as warranted given the nation's 9.1 percent unemployment rate, with Raskin hinting she would support more action. "Additional policy accommodation is warranted under present circumstances," Raskin said at an event sponsored by the University of Maryland's Smith School of Business. She said ...

The royal pound slumped strongly today on the strong dovish tone from the Bank of England where the September meeting minutes expressed the members growing fear over the outlook and discussed the option of cutting rates closer to zero and increasing the asset purchases as the recovery stalls. As we widely expected, the vote on the notion to keep rates at 0.5% was unanimous and the descend was on the Asset Purchases Facility as Adam Posen still opted to increase the APF by 50 billion pounds to 250 billion. The majority of members saw the possibility to expand the asset purchases and see that the continued deterioration in economic conditions would likely warrant an action from the bank. The MPC said it is “increasingly probable that further asset purchases to loosen monetary conditions ...