Bank Research Consensus Weekly 06.04.12
ECB Preview: We Expect ECB To Cut In June
Anders Møller Lumholtz and Lars Tranberg Rasmussen, Danske Bank
Recent leading indicators have been very weak and even the core countries are in recession. We expect the ECB to respond with a rate cut on Wednesday. A cut is partly priced in the market although unchanged rates remain the consensus among analysts.
Fear Triumphs—in the Short-Run
John E. Silvia, Chief Economist, Wells Fargo
Fears of the downside in the European economic and financial future have altered the outlook for U.S. and global interest rates in ways outside the domestic fundamentals in each country.
Weaker European growth implies weaker U.S. exports and, by implication, weakness in employment and capital spending since less labor and less capital will be required to produce the lower expected pace of U.S. growth. Weaker growth expectations have also lowered inflation expectations and thereby the pricing power of firms selling to consumers and other businesses; therefore, inflation measures have also show some weakness in recent months.
U.S. – Never Say Never
James Marple, Senior Economist,TD Bank Financial Group
It seems that every week that the European crisis goes on, a new record is broken. This week, government bond yields in the United States and Germany broke through their previous historic lows to even more historic levels. In Germany, the 2-year government bond yield actually fell negative. In the U.S. the 10-year bond yield has breached the 1.5% mark, a level never seen in the 200 years that data has been recorded. Government bonds of safe-haven countries have turned into the equivalent of Brink’s trucks – investors are willing to pay a premium just to get their money back in a few years time. In Germany’s case, it’s “most,” not “all” of their money. We are truly in uncharted territory.
Compiled by David Song, Currency Analyst
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