Bank Research Consensus Weekly 03-16-09

Published March 16th, 2009 - 03:36 GMT

With G10 official interest rates approaching zero and several major central banks engaged in various forms of quantitative easing (QE), we think that money supply is a key indicator to watch in order to gauge whether monetary policy action will find traction.

Stephen Roach, Head Economist, Morgan Stanley



Weekly Bank Research Center 03-16-09



 

Show Me the Money

Stephen Roach, Head Economist, Morgan Stanley

With G10 official interest rates approaching zero and several major central banks engaged in various forms of quantitative easing (QE), we think that money supply is a key indicator to watch in order to gauge whether monetary policy action will find traction. A closer look at the data suggests that conventional and unconventional monetary easing has in fact started to lift money supply growth in major economies, which we see as an important intermediate step towards economic stabilisation later this year and recovery in 2010. True, velocity – the speed at which money changes hands, defined as the ratio of nominal spending to money supply – has declined, but this is normal in the early stages of monetary expansion simply because monetary policy affects the real economy with a lag. Moreover, we show that velocity has often continued to decline even during past economic recoveries. Thus, we disagree with the popular notion that monetary policy cannot find traction as long as velocity keeps falling.

 

Full Story

 


 

More EUR and JPY Weakness Ahead

Niels-Henrik Bjørn Sørensen, Senior Analyst, Danske Bank

With the prospects of alternative measures of monetary stimulus being implemented by both the Bank of England and the Riksbank, we pencilled in additional GBP and SEK weakness in our last FX forecasts. While Quantative Easing (QE) has since become a reality in the UK, it is still uncertain whether the Riksbank will follow suit and to what extent. However, this has not prevented the SEK (as well as the pound) from being among the worst performing G10 currencies over the past month, although the SEK has recently strengthened. The latest month has also seen the yen weaken significantly, on the back of the first current account deficit in 13 years as well as poor prospects for growth going forward.

 

Full Story

 


 

China Slowed Further in Q1

E. Silvia, Ph.D. Chief Economist, Wachovia

China released a slew of economic data this week that gave investors a sense of where the Chinese economy is at present. The bad news is that growth in industrial production appears to have slowed further in the first quarter. The timing of Chinese New Year complicates the interpretation of IP data in the first two months of the year. Industrial production in January, when Chinese New Year occurred this year, dropped 3.4 percent relative to the same month in 2008. In February, IP growth rebounded to 11.0 percent (New Year in 2008 fell in February). Taking the two months together, IP was up only 3.8 percent, down from the 6.4 percent rate that was registered in the fourth quarter (see chart at left).

 

Full Story

 


Not Building Many Houses, Not Creating Any Jobs…

Steve Chan, Economist, TD Bank Financial Group

It just doesn’t seem fair. While Canada has been lauded for the strengths of its financial system and its strong record of fiscal management, even our domestic sector can’t escape the tide sweeping over the global economy. This was on display this week once again in both the housing and employment market statistics. In the housing sector, data out early this week showed Canadian housing starts fell to 134,000 - their lowest level since June of 2000. To be fair the Canadian housing market has had an incredible run, building over 200,000 homes in each of the last seven years. To put that number in context, Canada’s population is roughly 11% of the U.S. Controlled for population size, this pace of housing construction would be like building close to 2 million homes in the U.S. (as of January they were only building 466,000 at an annualized rate).

 

Full Story

 


Other Pre-screened Independent Contributors

J-Chart

J-Chart is an innovative charting and bias-neutral market analysis tool. Based on its proprietary theoretical concept and display of market price action, J-Chart provides a much clearer and unique insight into the market than conventional charting methods. This innovative charting and market analysis tool is designed to visualize market price action that constructs unique price patterns called "Equilibriums". Based on its "non-fixed time frame" concept and "Kinetic Equilibrium" application, J-Chart users are able to forecast markets' future movements with high accuracy.

 

J-Chart Weekly Newsletter

Compiled by: David Song, Currency Analyst and Geng Chen, Dailyfx.com

You may also like