Bank Research Consensus Weekly 12.05.11
Autumn Statement - Borrowing to Be Revised Significantly Higher
Jonathan Ashworth, Morgan Stanley
There were very few surprises on the policy front. The Chancellor provided few major surprises in terms of policy as most of the measures (e.g., credit easing for SMEs, increased infrastructure investment from pension funds, pulling forward some government spending on infrastructure, policies to boost youth unemployment) had already been widely leaked to the press over the weekend. He did cap public sector pay rises at 1% per annum for two years after the current wage freeze ends next year and brought forward the timing of the increase in the pension age to 2026. Moreover, the OBR has increased its estimate of total public sector job losses from 400K to around 700K by 2017.
FX: Big week for the Euro
Kasper Kirkegaard, Senior Analyst, Danske Bank
In a week heavy on economic releases and central bank meetings (six among the G10), focus is nonetheless expected to be mainly on the ECB and the EU policy response. The question is will Draghi, Merkel and Sarkozy be able to meet market expectations and trigger a relief rally?
LIBOR Appears to be Stabilizing
John E. Silvia, Chief Economist, Wells Fargo
On Wednesday, major central banks announced actions that are intended to stop the rise in LIBOR rates that have been under way over the past few months. By making it cheaper for other central banks to borrow dollars from the Federal Reserve, the action is designed to reduce the demand for dollars in the interbank funding market, thereby arresting the upward climb in rates. (For further reading, see Coordinated Action by Major Central Banks, which is posted on our website.) So far, the action appears to have had its desired effects. U.S. dollar LIBOR rates have been steady to slightly lower over the past two days. LIBOR rates should continue to drift lower in coming weeks as some European banks go directly to the ECB for dollar funding.
Canada – Is Another Storm Coming?
Francis Fong, Economist,TD Bank Financial Group
While many Americans are still in Turkey hangover mode from their Thanksgiving festivities yesterday, others are out in full force today looking for bargains and the best deal possible. With the Canadian Thanksgiving taking place in October, retailers on this side of the border are increasingly using the U.S. Black Friday to kick-start their own holiday shopping season. What can Canadian retailers expect in terms of activity over the next several weeks now that the flood gates to the season are ‘officially’ open?
Compiled by David Song, Currency Analyst
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