Longer Term Structural

The Week Ahead ■The Bank of England's next move ■Is this the beginning of the end for the Eurozone? ■Fed officials reluctant to signal more easing ■Broader risk environment outweighs Japanese rhetoric The Bank of England's next move The BOE kept rates on hold when it concluded its May meeting last week; it also allowed the asset purchase program to come to an end. Since the UK slipped back into recession in Q1 2012 and the growth figures at the start of the second quarter have continued to look weak, the decision to hold interest rates was mostly down to the sticky outlook for inflation. The attention now turns to Wednesday's Inflation Report. The focus will be on the Bank's growth and inflation forecasts. The growth forecasts are likely to be revised lower. Even ...

U.S. Review Modest Growth on a Broadening Base - The underlying tone of the recent economic reports remains consistent with modest economic growth. Consumer spending ended the first quarter on a solid note and spending is now on track to grow at a 2 percent pace in the second quarter. - Reports from the regional manufacturing surveys showed some weakness but the National ISM report came in stronger than expected. The nonmanufacturing survey, however, came in below expectations. - Nonfarm employment rose by 115,000 jobs in April and the unemployment rate fell 0.1 percent to 8.1 percent. Modest Growth on a Broadening Base This week's ISM report came in better than expected, rising 1.4 points to 54.8 in April, which greatly relieves fears built up from the weaker factory orders ...

(Reuters) - With the U.S. jobless rate "far too high," the Federal Reserve will need to keep its foot on the monetary gas pedal for quite some time, San Francisco Fed President John Williams said on Thursday. The U.S. central bank has kept inflation "well under control" and near its 2 percent target, but the unemployment rate, at 8.2 percent, is still about 2 percentage points higher than the point where inflation pressures could be expected to kick in, Williams told the Santa Barbara County Economic Summit. Taken together, he said, those conditions mean "It's essential that we keep strong monetary stimulus in place for quite some time." Williams, who is a voting member this year on the Fed's policy-setting panel, did not suggest the Fed would need to add to its stimulus. The Fed has ...

The Week Ahead Highlights UK Q1 GDP to put the brakes on more QE French political risk comes to a head Italy and Spain turn attention to fiscal targets BOJ to back up rhetoric with action FOMC still in wait-and-see mode Market Moves UK Q1 GDP to put the brakes on more QE The major data release in the UK this week will be the preliminary Q1 GDP reading. There is considerable uncertainty around this figure due to some strong data in the services sector, especially retail sales, balanced by some disappointments in the manufacturing and construction sectors. Retail sales for March rose 1.5%, more than the 0.4% expected. This was mostly due to the effects of good weather boosting demand for clothes, footwear and gardening equipment. This helped to reverse some of the ...

(Reuters) - Bank of Japan Governor Masaaki Shirakawa stressed on Wednesday the central bank is fully committed to continuing powerful monetary easing, but warned that central banks can only buy time for governments to pursue structural reforms. The Bank of Japan holds its next policy review on April 27 and Shirakawa's comments signal its readiness to keep monetary policy ultra-loose and act when deemed necessary to beat deflation in the world's third-biggest economy. He noted, however, the potential drawbacks of keeping monetary conditions too loose for too long, such as planting the seeds of asset price bubbles and financial imbalances even when inflation remains subdued. "Structural reforms must be implemented within the breathing space provided by the provision of central bank ...

(Reuters) - Fierce debate is growing in Europe over whether austerity or growth offers the best strategy to overcome the continent's sovereign debt crisis. As if it were that simple. As the euro zone hovers on the brink of its second recession in three years, the battle launched in academic journals, blogs and the financial press has spread to the hustings in France, Greece and soon in EU economic powerhouse Germany too. "Europe can't cut and grow," Sony Kapoor, head of the Re-Define think-tank, and Peter Bofinger, a member of the German Council of Economic Advisers, said in an article before European Union leaders adopted a budget discipline pact last month. "The EU needs a growth compact, not a fiscal one. Swift action on tax and jobs is the way out of the crisis." The growth camp ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD The dollar had a surprise recovery overnight, and quickly reclaimed all ground lost to the euro after Friday’s weak US payrolls. However, flows were light as New Zealand, Australia, and Hong Kong remained closed. A stronger-than-expected China CPI failed to generate much interest, and allowed AUDUSD to take the news largely in its stride. Our core bullish dollar view is unchanged; we still expect the Fed to gradually back away from QE3 as other major central banks maintain an easier bias, likely ensuring outperformance of the US dollar over other majors this year. Our analysts stress that the soft 120k US nonfarm payrolls print for March reflected ‘payback’ due to weather effects rather than fundamental weakening, with the earlier weather- ...

(Reuters) - Gary Feeman has been searching for a job for 16 months. He's not ready to give up just yet, but the 60-year-old worries he is running out of options. Feeman is among the more than 5 million Americans who have been out of work for more than six months and who represent the heart of the crisis in the labor market. Their plight also poses a warning that U.S. unemployment may not drop back to its pre-recession levels and could be stuck higher than many policymakers expect. Feeman, from Lancaster County, Pennsylvania, has sent out as many as 100 resumes. But the former maintenance director at a small amusement park in the area, has had only one interview in person. That was in January. "I have tried everything under the sun," he said. "The frustrating thing to me is that when ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD Subdued trading in Asia meant EURUSD was confined to a 25-pip range. The price action in USDJPY and AUDUSD was somewhat more lively, but flows were light across the board in pre-holiday trade. Newswires would have been mostly silent were it not for Japan‘s Finance Minister Azumi defending his intervention policy. He said that even if there were differences of opinion with the US on yen intervention, this would not affect Japan‘s stance. Asian equity markets were mixed, and did not seemly overly perturbed by yesterday’s sell-off in Europe. Meanwhile the shift in FOMC opinion continues. San Francisco Fed President Williams – traditionally a notable dove – conceded that the argument for a new dose of monetary stimulus is not that strong now. ...