Thursday, May 12: Five Things the markets speak of
The currency markets are should remain quiet until Friday when the US is scheduled to release retail sales figures, key economic data that should trigger a movement among major currency pairs.
However, the pound could be the exception, though for a short period this morning as today's "super Thursday" for the Bank of England (BoE).
Brexit Investors get the latest monetary policy decision, the minutes of the meeting, the latest inflation report and also hear the governor Carney within hours.
1. Brexit governs the agenda Carney
The market will focus on the BoE rate decision to see if the risk Brexit transforms all members MPC doves.
Expect BoE Governor Carney to walk a fine line today, hoping not to disturb or to provide support for both sides of the debate when he Brexit communicate the economic impacts of a Brexit and the implications for monetary policy.
With only six weeks to go until the British referendum on membership in the European Union, the governor has already warned that the uncertainty can be weighed on growth.
Already the nervousness Brexit take a toll on demand. U.K. services, the largest part of their economy, fell to its lowest level in more than three years last month. While recent engravings manufacturing and industrial production also fell short of expectations.
The rates should not change, but one or two of the team of nine MPC members may vote for further easing concerns that Brexit transform into doves -. This will provide the volatility of the sterling bond market and the UK
2. Rousseff of Brazil suspended
Senate Brazil voted to suspend President Rousseff's office to face an impeachment trial earlier this morning after a marathon session. A new government will now take command of the largest economy in Latin America. Senators voted 55 against 22 to open impeachment trial.
The Brazilian impeachment process is long and complicated. Rousseff must now resign and stand trial in the Senate, in a process that could by law last as long as six months and lead to its permanent removal from the office.
Analysts expect a government acting to fulfill a program more "investor friendly", but do not believe that the impact of asset prices to limit the change of power was well transmitted.
3. The BoJ remains orally active
Yen managed to leave his 18 months in downright weak dollars (¥ 105.57) print from last week, supported by the rhetoric "official" of the Japanese Government in recent sessions. The verbal intervention has succeeded in weakening the yen (¥ 109.18) a little, a very crowded trade.
The BoJ has now taken over the governor Kuroda indicating that central banks "can further relax monetary policy significantly" if necessary. Kuroda said the effects of quantitative and qualitative easing, or QQE with negative interest rates are "already very clear" on the financial markets, but "we have to wait a few months to see the effects of the economy real. "
M .. Kuroda said that the recent strength of the yen is not the result of the policy of the BoJ, but the uncertainty of the Chinese economy, weak oil prices and the lower expectations for the Fed's interest rate increases led to yen appreciation. He believes that "external factors begin to stabilize." If he is right, bear positions in the yen will begin to pay.
4. The Central Bank of Norway waits
Earlier this morning the Central Bank of Norway (Norges) has left its deposit rate unchanged as expected at + 0.50%.
Norges policy statement noted that it did not consider a cut, but to follow "the same game plan" of Mars. Analysts note that the overall development has not deviated much in the seven week. Inflation remained high, but (€ 9.2531) The strength of NOK could contribute to more rapid decline in inflation.
official suggested that the recent rise in the oil price rise could reduce uncertainty and contribute to higher economic growth. Governor Olsen noted that NOK has appreciated and is stronger than expected compared to their March forecast. Both monetary and fiscal policy were taken into consideration in their decision.
5. European borrowers continue to go long
The yield curves continue to flatten. Why? As the search for investors for yields, high yield bonds with longer maturities have become more popular.
Companies are borrowing happy longer term, lower rate allows them to lock funding "cheap" This change took place mostly on the back of the ECB's stimulus measures pushed down bond yields and reduced borrowing costs across the region. over time.
Already this week, the Spanish government went to the market with 50-year bonds for the first time and Ireland issued bonds to 100 years ago few weeks.
love cheap funding of the borrower, but for investors, the long products, despite offering the prospect of positive returns, are more exposed to sudden changes in interest rates (the yields and prices have an inverse relationship).
strong US demand for auction of 10-yearYesterday, suggests that investors "remain cautious on the outlook for global growth and the inflation outlook, especially with US stocks near records and oil hit 2016 highs.
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