Bank Research Consensus Weekly 09.10.12
FX: ECB Action Supports the Euro
Arne Lohmann Rasmussen, Chief Analyst, Danske Bank
The ECB managed to fulfil market expectations this week as it scheduled a framework forsovereign bond buying in potentially unlimited amounts, once the country involved is under an EFSF programme. The ECB also removed the senior status on its new purchases. During the press conference, ECB President Draghi said that the new programme will be a “fully effective backstop that removes tail risks from the euro area”.
Fed Rhetoric Suggests QE3
John E. Silvia, Chief Economist, Wells Fargo
Economic fundamentals suggest continued subpar economic growth, an above 8 percent unemployment rate and a below 2 percent inflation rate for the second half of this year and extending into the first part of 2013. In addition, there is the downside risk of a fiscal cliff hitting the economy early next year. All of this has not changed over recent months.
U.S. – Weak Payrolls Put Fed One Step Closer To QE
Martin Schwerdtfeger, Senior Economist, TD Bank Financial Group
There couldn’t have been a better way to end the week than with a market rally fueled by the saving grace of the European Central Bank and a strong U.S. payrolls report. Although things didn’t play out exactly that way – the ECB gift came with strings attached and the payroll report was dismal – stock markets remained upbeat. At the time of writing, European stocks were up by more than 4% on the week, and the S&P 500 was trading 2.7% higher than last Friday. It seems that the unlimited size of the ECB’s bond buying plan announced yesterday was enough to eclipse the fact that countries will have to face tough conditions to qualify for it, and that the poor payrolls figure has cemented the expectation of a new round of quantitative easing by the Fed next week.
Compiled by David Song, Currency Analyst
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