domenica 30 marzo 2014

Week In FX Europe – CB’s, Debt Agencies and Governments Gotta Work Together

Are we about to face a period of “considerable turmoil’? Central Banks in the developed world are preparing to reverse some of the stimulus programs that they have put in place over the past six-years. The Paris based research body – OECD – insists that the agencies that have been responsible for selling government bonds will have to work with their respective CB’s to ensure that the “exit from all said programs run smoothly.”

The reversing of stimulus needs to come, but the potential problems have more to do with CB’s communicating their respective exit strategies without creating unnecessary volatility that could cause longer lasting negative effects. The challenge for CB’s and relevant agencies is to go about their “exit” strategy without causing yields to back up aggressively. Central Banks have yet to decide on what portion of their holdings they will be required to sell and over what time period.

The OECD said that bond sales by CB’s would likely take place when the borrowing needs of governments remain high – this will obviously lead to interest rates to back up further. Backing up is only natural; it’s the speed and aggressiveness that could become an issue. Already we have seen that investors reaction to a Fed taper has caused US yields to “move earlier and more sharply” than probably warranted by policy makers. This is not a good situation for any economy that has questionable growth rates. The reality is that this is all new for Central bankers and investors alike. Tapering has been a “novelty” and reversing this stimulus has never been done before. With that in mind it may not be possible for the financial markets to execute an “exit” without at least causing some minor financial turbulence.

Expect to hear unified dulcet tones from Central Banks, governments and debt management agencies getting louder as we approach an exit!

European Banks Slow Down Debt Repayment Schedules

Greek Economy Starts Showing Signs of Recovery

IMF Announces Ukraine’s $18 Billion Bailout

European Consumer Confidence Rises in March

Russia Growth Was Questionable Even Before Crimea

UK Recovery Could Signal End to Low Rates

New Technologies Could Offset Russian Gas Supply Shortage

After Sanctions Russia Looks East

UK GDP Growth Downgraded to 1.7 Percent in 2013

UK Current Account Deficit Reaches 22.4 Billion Pounds

UK House Prices Rise 7 Percent in January

Dutch PM Warns Russia If Further Action Taken

Italy Holds Key To Europe’s Recovery

BNP Paribas Optimistic About Eastern Europe

German Business Sentiment Drops On Crimea But Hopeful on Economy

German Central Banker Says QE Not Out of The Question

Russia and West Continue Dialogue Over Crimea Actions

Russia Sanctions Could Push Nation into Recession

G7 Meeting To Suspend G8 Until Russia Changes Course

ECB Council Member Says Bank Keeping an Eye on Euro Regarding Inflation

G7 To Focus on Ukraine This Week

Anti-Austerity Protest in Spain Turns Violent

WEEK AHEAD

* EUR Euro-Zone Consumer Price Index Estimate

* CAD Gross Domestic Product

* AUD Reserve Bank of Australia Rate Decision

* EUR German Unemployment

* USD ISM Manufacturing

* EUR European Central Bank Rate Decision

* USD ISM Non-Manufacturing Composite

* CAD Net Change in Employment

* CAD Unemployment Rate

* USD Change in Non-farm Payrolls

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