Latest news on Asian Morning Update 22nd May 2008
| The German IFO and FOMC comments should inflict further damage on the Dollar European releases overnight: May
Most were concerned that lowering rates while inflation pressures were strong. However, a few members voiced their belief that the economy is proving resilient to the downturns in credit and housing markets. Others felt the “impact on the economy could be more substantial than implied by the central projection.” George Soros and PIMCO reckon the latter is correct and they are almost certainly right while inflation is driven by external influences and continues on the same trend over the coming months.
The German IFO provided the catalyst for more Euro strength but it was the FOMC minutes which grabbed most of the attention. However, just as suggested yesterday it wasn’t clear enough to really make too much impact. The rate cut was apparently a close call with growth still under pressure, expected to decline further in Q2 while inflation is still firmly underpinned. However, most members felt it was not appropriate to ease if economy slows or contracts slightly in near term. Housing remained a drag on growth though the credit turmoil was seen as easing. What do we make of that? Certainly the way of thinking that had been permeating into the market’s collective mind was that an improvement in the credit woes equaled a U.S. recovery. However, they are not necessarily linked. The combination of the sucker blow that the subprime turmoil inflicted on the economy and the coincident burst of upward oil and food prices was enough to summon a greater demon from the underworld in the form of consumer fear. Europe has taken its share of the subprime fallout but has mostly been able to avoid any market confidence shattering events. It is suffering from the bursting of the globalization bubble that was inflicted by the subprime but has so far seen a moderate impact only. Following the better than expected German IFO and ZEW survey results the market will be more inclined to look for a weaker Dollar given the rise in risk that Euro interest rates could now be hiked. However, there are two things to keep in mind. Firstly, Germany cannot carry the Euro-zone economy and signs elsewhere are not as rosy. Both Italy and France are stumbling a little, not quite irretrievably, but risk is still there. France is also facing a series of worker strikes amid the rise in inflation and if prolonged could generate problems. However, these are medium term issues and for now, whether this be direct or indirect we should be discounting a lower Dollar still.
The following releases are due from Asia due today: Australia Japan The Cabinet Office is due to publish their monthly economic report See Also
Read More Here
|
|
0 15 30 45 60 75 90 105 120 135 150 165 180 195 210 225 240 255 270 285 300 315 330 345 360 375 390 405 |