Bank Research Consensus Weekly 01.09.12
Fed Thoughts for 2012: Into the Heart of Darkness
Vincent Reinhart, Morgan Stanley
Part of the challenge in making a call about Fed policy is that there are many moving parts. Fed officials can alter the size and composition of the balance sheet and the structure of administered rates (including those charged on discount loans and swap draw-downs and the one paid on excess reserves), as well as the way they communicate decisions. Our call is that the Fed will pull a few of those levers in 1H12.
FX: Euro Sell-Off Continues
Sverre Holbek, Senior Analyst, Danske Bank
The euro was the big loser among the major currencies in a week dominated by continued concern about the debt crisis, Hungary and geopolitical tensions in the Middle East. It weakened against both the US dollar and the yen, as well as against the commodity currencies (NZD and AUD), which have been buoyed by higher oil prices. However, these currencies could be vulnerable if the situation in Iran, which has helped push up oil prices, seriously begins to impact on market sentiment.
Will the ECB Ease Again?
John E. Silvia, Chief Economist, Wells Fargo
After hiking its main policy rate by 50 bps between April and July, the European Central Bank (ECB) has reversed course with an equal amount of rate cuts in the past two months. Will the ECB cut rates again at its next policy meeting on Thursday? Although we would not be totally surprised by another rate cut on Thursday, we believe the ECB will remain on hold next week. That said, we look for further ECB easing in the months ahead.
United States – Happy New Year…No More
Martin Schwerdtfeger, Senior Economist,TD Bank Financial Group
Data released this week showed the U.S. economy gained some traction towards the end of last year. Both ISM manufacturing and non-manufacturing surveys signaled some acceleration in the rate of economic expansion during December. Automotive sales also maintained momentum last month, bringing total 2011 annual sales to 12.74 million units – 22% higher than 2009’s trough.
Compiled by David Song, Currency Analyst
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