Macro Weekly – Three Big Questions

by: Han de Jong

  • Big Picture: The economic outlook currently depends on three questions. The most pressing is whether or not emerging economies can avoid suffering significant damage from current stress. The second is to what extent the rise in borrowing costs will undermine the acceleration of US economic growth. And the third question is if the Syrian conflict will impact the global economy. We take a cautiously optimistic view on these issues.
  • Eurozone: The ECB President will have another go at this week’s press conference to convince markets that their expectations of future short-term interest rates are too high. Indeed, we expect Mr Draghi to sound rather dovish and strengthen the ECB’s forward guidance.
  • US: This week, crucial reports in the shape of the ISM surveys and the labour market report should tip the scales firmly towards a tapering of asset purchases at this month’s FOMC. Together with dovish commentary by the ECB, this could put downward pressure on EUR/USD.
  • Asia: China’s official PMI rose significantly in August, adding to the evidence that the economy is regaining traction. Meanwhile, manufacturing sector data – both hard and surveys – were also positive in Japan. The slowdown in India’s GDP in Q2 was the one cloud in an otherwise improving picture.