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Euro area manufacturing is not out of the woods

After two consecutive months of contraction, euro area industrial production (IP, excluding construction) rose by 0.9% month on month (m-o-m) in May, above consensus expectations. Production of consumer goods surged in May. Output of capital goods and energy also increased. However, output of intermediate goods slipped. While the monthly print was solid, a closer look […]

US FX intervention still someway off

The Trump administration has been focusing on the US’s trade deficit with some of its main trading partners such as China and Germany. A strong dollar is exacerbating this deficit and has visibly exasperated President Donald Trump. Indeed, the Fed’s broad dollar index was recently back close to its December 2016 high. In response, and […]

China: Q2 growth lowest in decades

Chinese real GDP growth came in at 6.2% year-over-year (y-o-y) in Q2, down from 6.4% in Q1, and the lowest quarterly growth in over two decades. The tertiary sector (mainly services) continued to lead growth, expanding by 7.0% y-o-y in Q2, the same as in Q1. In comparison, growth in the secondary sector (mainly manufacturing) declined to 5.6% […]

Is the Fed too focused on corporates?

The Federal Reserve (Fed)’s leading priority now is to help sustain the US business cycle, hence the concept of ‘insurance’ rate cuts put forward by Fed chairman Jerome Powell, with some echoes of Alan Greenspan’s philosophy in the 1990s. Low Fed interest rates tend to percolate quickly down to the corporate sector. Indeed, low borrowing […]

Weekly View – SHOW TIME

In his testimony to Congress last week, Fed chairman Jerome Powell delivered a dovish report, reinforcing current expectations for a rate cut later this month. He focused on mounting risks to the US economy due to slowing global growth and persistent trade uncertainty over June’s strong US jobs report. Despite a higher-than-expected CPI inflation print […]

Uncertainty mounts over Mexico’s direction

Carlos Urzúa, the Mexican Finance Minister, unexpectedly quit on Tuesday. His resignation, announced in a letter in which he set out the “many” disputes he had had with the administration of president Andrés Manuel López Obrador (AMLO), is meaningful from several standpoints. A respected official, Urzúa was seen by financial markets as a moderate, whose […]

The US-Iranian snake pit

Iran has sought to goad Europe, Russia and China into providing relief from sanctions introduced since the Americans withdrew from the Joint Comprehensive Plan of Action last year. In particular, at the start of July, Iran said it had exceeded the limit set on stockpile of low-enriched uranium under the 2015 nuclear deal, and a […]

Powell’s Congressional testimony sets the scene for rate cut

During his testimony before the House of Representatives on Wednesday, Federal Reserve Chairman Jerome Powell repeated the dovish signals he gave at the Fed press conference in June, hinting at a rate cut at the next Federal Open Market Committee (FOMC) meeting on 31 July. Powell’s priority is to preserve the economic expansion, now 10 […]

Asian manufacturing sector in contraction

The average of manufacturing purchasing manager indices (PMIs) for Asia (excluding Japan) came in at 49.6 in June, down from 49.9 in May. This was the second consecutive month in which this measure fell below the 50 threshold and indicates that manufacturing activity in Asia is contracting. China is the largest contributor to the slowdown, […]

The ECB moves to keep euro bond yields down

Since Mario Draghi in June signalled the European Central Bank’s (ECB) readiness to embark on more easing should the euro area economy fail to regain speed, euro sovereign bonds yields have fallen across the board, with the 10-year Bund yield briefly moving below -0.4% (the same level as the deposit rate) in intraday trading on […]

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