China Economics: Hard to Reach 9.0% This Year, but We Remain Bullish
Global Economic Team, Morgan Stanley
Still bullish on the macro outlook: With more policy measures streaming in, we believe China's GDP growth has now troughed and will accelerate noticeably in the third and fourth quarter this year.
FX: Euro Under Pressure
Morten Helt, Senior Analyst, Danske Bank
Since the Greek elections on 2 May the euro has been under a severe pressure against the US dollar and EUR/USD has in May fallen from above 1.32 to currently 1.25. The main reasons are obviously the risk of a Greek default or that the country decides to leave the euro. We think that things could get much worse before they get better and we see further near-term downside risk to EUR/USD, EUR/GBP and EUR/JPY.
Slower Growth Cuts Yields Further
John E. Silvia, Chief Economist, Wells Fargo
The wall of worry related to the European financial crisis, combined with reports of slower economic growth in China, has pulled interest rates lower and reduced interest expectations going forward. The 10-year Treasury yield is ending the month just below 1.75 percent and the two-year Treasury remains below 0.3 percent. The federal funds rate has actually traded a bit firmer in recent weeks, possibly reflecting the effect of modestly stronger loan growth. Despite being a couple of basis points higher, expectations for the timing of a firming in monetary policy remain unchanged, with the majority of Open Market Committee members and market participants expecting the first tightening move no sooner than the middle of 2014.
U.S. – Europe’s Imbalances
Chris Jones, Economist,TD Bank Financial Group
Fears over Europe’s future reached a new pitch this week after it emerged that senior officials were drawing up contingency plans for a potential Greek exit from the currency union. We also released a report detailing how a Greek departure might take place and how it might affect the U.S. economy. No doubt a messy divorce will have consequences. But what is often underappreciated is the fact that this crisis isn’t just about governments who can’t pay their bills. This is a balance of payments crisis that extends far beyond Greece’s borders.
Compiled by David Song, Currency Analyst