bank research
Article
Previous Articles
Print
- Nov, 16 Bank Research Consensus Weekly 11.16.09
- Nov, 09 Bank Research Consensus Weekly 11.09.09
- Oct, 26 Bank Research Consensus Weekly 10-26-09
- Oct, 20 Bank Research Consensus Weekly 10-19-09
- Oct, 12 Bank Research Consensus Weekly 10-10-09
While the start of the reporting season – and the positive surprises that it brought – was able to further boost risk appetite in the market, exchange rate movements in the past week have indicated that the market has a real need to see further improvements in economic activity data if it is to maintain the positive trend.
Sverre Holbek & Kasper Kirkegaard, Chief Economist, Danske Bank
Weekly Bank Research Center 11-02-09
Reversing Excessive Excess Reserves
Manoj Pradhan, Global Economics Team, Morgan Stanley
Excess reserves on the Fed's balance sheet will soon cross the US$1 trillion mark. Our US economics team expects the combination of more QE asset purchases, smaller further decreases in passive QE and the wind-down of the Supplemental Financing Program (SFP) of the Treasury to drive excess reserves in the US to US$1.2 trillion by January 2010 (see US Economics: Fedspeak: Roadmap for the Exit, October 26, 2009). And balance sheets and reserves in other countries are at elevated levels too. Confronted with such massive amounts, even the normally straightforward task of draining excess reserves is no longer a simple task for central banks.
FX: Positive Signs Ahead of Busy Week Interest Rates: Uncertainty as We Move Back to Real Market Pricing
While the start of the reporting season – and the positive surprises that it brought – was able to further boost risk appetite in the market, exchange rate movements in the past week have indicated that the market has a real need to see further improvements in economic activity data if it is to maintain the positive trend. The week started badly, with disappointing data for the US housing market and consumer confidence, which led to procyclical currencies (e.g. AUD, NZD, CAD and Scandies) coming under pressure. Later in the week, however, we got data that showed the US economy was again growing, so clearly there are signs that the global economy is pulling out of its deep recession. The positive numbers meant the week ended on a more upbeat note, and the pro-cyclical currencies firmed. It is worth noting that the dollar continues to react negatively to positive surprises in the US data. This is due to the negative correlation between market risk appetite and the dollar. While we expect this correlation to gradually normalise, with relative developments across countries gaining greater importance, there is clearly no sign of this happening as yet.
John E. Silvia, Ph.D. Chief Economist, Wachovia
For decision-makers, the major risk over the next six months is the transition from today’s government-subsidized interest rates to the unknown true free-market rates as the Federal Reserve ends its purchases and the Obama administration potentially proposes a sustainable fiscal policy. Monetary policy has generated an excess supply of credit to mop up the excess supply of autos and housing. This excess credit supply is reflected in very low nominal interest rates which are unsustainable over time. Moreover, real interest rates are very high relative to a flat path for real GDP. This relationship gives rise to a debt burden that increases faster than income. In today’s economy the thrust of fiscal policy is so strong that the monetary authority could lose its handle on inflation even if the central bank retains control over the monetary base.
United States – Recession? Quoth The Raven, “Nevermore”
Richard Kelly, Senior Economist, TD Bank Financial Group
Once upon a midnight dreary, some questioned the merits of economic theory. In the midst of the Great Recession, there was concern that zombie banks would lead to a perennial economic equivalent of the Night of the Living Dead. But while the economic threat was larger than anything we saw in the last fifty years, so too were the weapons brought to bear. As a result of the Federal Reserve taking interest rates to effectively zero and fiscal stimulus being directed into the economy, we continue to get economic data supporting the fact that the economic recovery is alive.
Credit Conditions Have Eased, But Challenges Remain
Trevor Williams, Chief Economist at Lloyds TSB Financial Markets
The Bank of England’s (BoE) latest monthly Trends in Lending report was published last week. The report provides a timely assessment of lending conditions in the UK, and provides an update on the BoE’s recently released Q3 Credit Conditions survey. Below, we examine the recent BoE surveys and assess the extent to which credit constraints have eased. With the UK FTSE-100 recently hitting a new twelve-month high and spreads in the interbank markets having dropped to their precrisis levels, sentiment in the financial markets have clearly improved. But a prerequisite for any enduring financial or economic \ recovery is a sustained rise in the supply of and demand for credit.
Other Pre-screened Independent Contributor
J-Chart is an innovative charting and bias-neutral market analysis tool. Based on its proprietary theoretical concept and display of market price action, J-Chart provides a much clearer and unique insight into the market than conventional charting methods. This innovative charting and market analysis tool is designed to visualize market price action that constructs unique price patterns called "Equilibriums". Based on its "non-fixed time frame" concept and "Kinetic Equilibrium" application, J-Chart users are able to forecast markets' future movements with high accuracy.
Compiled By: Michael Wright, Daily FX Research
DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM.
Resources
