Macro Weekly – Lies, damn lies and US GDP

door: Nick Kounis , Aline Schuiling , Roy Teo

Macro Weekly - 30 June 2014 - Lies, damn lies and US GDP.pdf (401 KB)
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  • Big Picture: US GDP collapsed in Q1 but this looks like an aberration and most data suggest that the economy is going from strength to strength. Eurozone business surveys softened in June. They underline that the eurozone economy is experiencing only a moderate recovery currently, though it should gradually gain some pace. Meanwhile, the BoE took direct measures to restrain housing and mortgage lending. Such macro-prudential measures can reduce the need for aggressive policy rate hikes to prevent imbalances.
  • Rates: Government bond yields across the eurozone continued to move lower last week. Speculation about a large-scale QE programme by the ECB seems to be the main driver behind the decline in yields, although the rise in inflation in Germany spoiled some of the fun later in the week. We do not expect the ECB to ultimately shift to QE. Together with an ongoing economic recovery, this should result in core government bond yields moving up later in the year.
  • FX: Better than expected US data supported the dollar early last week. However, gains were erased after the sharper than expected contraction in the first quarter of this year. Low volatility in currency markets and higher oil prices continue to support currencies with attractive carry and the currencies of net oil exporters. Historically, volatility in the currency markets has tended to remain low during the summer, while the Fed and ECB are likely to remain dovish in the near term. Hence carry trades could remain in vogue in the coming months.