FXPRIMUS_Education
Fxprimus Representative
- Messages
- 0
Market Brief of the Week for 18 August 2014: Jackson Hole Will Decide the Fate of Greenback in the Near Term
Economic Insights
Yellen is expected to be dovish this week
Federal Reserve (Fed) Chair Janet Yellen and European Central Bank (ECB) President Mario Draghi are among the speakers at the Federal Reserve Bank of Kansas City’s conference on the economy and monetary policy in Jackson Hole, Wyoming. Fed Chair Janet Yellen has a stubborn warning light blinking on her labour market dashboard, which indicates that a group of Americans larger than Washington State’s population can find only part-time work. As Yellen heads to this week’s Fed symposium in Jackson Hole, Wyoming, where the focus will be on the labour market, those 7.5 million part-time workers who want full-time jobs are inflating the broad measure of underemployment which she watches to gauge the job market health. Involuntary part-time workers have increased by 325,000 from February’s five-year low.
With employment and inflation nearing Fed goals, Yellen has consistently cautioned that some labour market measures still show enough slack to warrant on keeping interest rates low.
The Fed has planned to release the minutes of its July 29-30 meeting of the Federal Open Market Committee (FOMC) and the Bank of England (BOE) is publishing its minutes from August. U.S. sales of previously owned homes probably will increase to an eight month high in July, a report in the coming week may show.
Some previous conferences have foreshadowed some of the Fed’s biggest policy shifts since the financial crisis. In 2010 and 2012, the then Chairman Ben S. Bernanke signalled new bond buying that has pumped up the Fed’s balance sheet to a record USD 4.43 trillion.
Heading into this year’s Jackson Hole assembly, the labour market is giving off mixed signals even as unemployment falls. About 28% of all part-time workers in July reported that slack business conditions or a dearth of full-time jobs kept them from finding full-time work. That’s up from a 19% share at the start of the downturn.
The U.S. consumer-price index probably rose at the slowest pace in five months. Congressional primaries are taking place in Alaska and Wyoming. ECB President Mario Draghi had a plan to revive the European economy in the form of Targeted Longer-Term Refinancing Operations, or TLTROs. Launched in June this year, the program allowed lenders to apply for funds from the ECB at 10 basis points above the benchmark interest rate, which was cut to a record-low 0.15% in June.
The program was part of a wider package, including a negative deposit rate for the first time, aimed at returning inflation to just below 2%. This month, Draghi called the TLTRO program “very, very attractive” and will lead to a “significant expansion in credit.”
However, on the contrary the reality is singing to a different tune. Analysts this month estimated that banks will borrow 650 billion euros from the TLTROs. That’s down from 710 billion euros estimated in last month’s survey. In July, Draghi said that the maximum size of the program could be about 1 trillion euros. On 7th August, he said market estimates and indications by individual banks pointed to a take up of between 450 billion euros and 850 billion euros.
The reduction show concerns that the outlook for the currency bloc may be too weak to drive demand for loans. More than a quarter of respondents in a recent Bloomberg Survey said conditions will deteriorate in the next four weeks, compared to the 10% in July. Almost half identified inadequate structural reforms as the biggest risk, with 39% citing the Ukraine crisis.
The escalating standoff with Russia threatens to worsen the prospects for the 18-nation euro area, where growth has already ground to a halt and inflation is running at the weakest pace in almost five years. Data last week showed the euro-area recovery unexpectedly halted in the second quarter as the region’s three biggest economies failed to grow.
Germany’s gross domestic product (GDP) fell more than forecasted, France’s economy stagnated for a second straight quarter and Italy succumbed to its third recession since 2008.
Economic Insights
Yellen is expected to be dovish this week
Federal Reserve (Fed) Chair Janet Yellen and European Central Bank (ECB) President Mario Draghi are among the speakers at the Federal Reserve Bank of Kansas City’s conference on the economy and monetary policy in Jackson Hole, Wyoming. Fed Chair Janet Yellen has a stubborn warning light blinking on her labour market dashboard, which indicates that a group of Americans larger than Washington State’s population can find only part-time work. As Yellen heads to this week’s Fed symposium in Jackson Hole, Wyoming, where the focus will be on the labour market, those 7.5 million part-time workers who want full-time jobs are inflating the broad measure of underemployment which she watches to gauge the job market health. Involuntary part-time workers have increased by 325,000 from February’s five-year low.
With employment and inflation nearing Fed goals, Yellen has consistently cautioned that some labour market measures still show enough slack to warrant on keeping interest rates low.
The Fed has planned to release the minutes of its July 29-30 meeting of the Federal Open Market Committee (FOMC) and the Bank of England (BOE) is publishing its minutes from August. U.S. sales of previously owned homes probably will increase to an eight month high in July, a report in the coming week may show.
Some previous conferences have foreshadowed some of the Fed’s biggest policy shifts since the financial crisis. In 2010 and 2012, the then Chairman Ben S. Bernanke signalled new bond buying that has pumped up the Fed’s balance sheet to a record USD 4.43 trillion.
Heading into this year’s Jackson Hole assembly, the labour market is giving off mixed signals even as unemployment falls. About 28% of all part-time workers in July reported that slack business conditions or a dearth of full-time jobs kept them from finding full-time work. That’s up from a 19% share at the start of the downturn.
The U.S. consumer-price index probably rose at the slowest pace in five months. Congressional primaries are taking place in Alaska and Wyoming. ECB President Mario Draghi had a plan to revive the European economy in the form of Targeted Longer-Term Refinancing Operations, or TLTROs. Launched in June this year, the program allowed lenders to apply for funds from the ECB at 10 basis points above the benchmark interest rate, which was cut to a record-low 0.15% in June.
The program was part of a wider package, including a negative deposit rate for the first time, aimed at returning inflation to just below 2%. This month, Draghi called the TLTRO program “very, very attractive” and will lead to a “significant expansion in credit.”
However, on the contrary the reality is singing to a different tune. Analysts this month estimated that banks will borrow 650 billion euros from the TLTROs. That’s down from 710 billion euros estimated in last month’s survey. In July, Draghi said that the maximum size of the program could be about 1 trillion euros. On 7th August, he said market estimates and indications by individual banks pointed to a take up of between 450 billion euros and 850 billion euros.
The reduction show concerns that the outlook for the currency bloc may be too weak to drive demand for loans. More than a quarter of respondents in a recent Bloomberg Survey said conditions will deteriorate in the next four weeks, compared to the 10% in July. Almost half identified inadequate structural reforms as the biggest risk, with 39% citing the Ukraine crisis.
The escalating standoff with Russia threatens to worsen the prospects for the 18-nation euro area, where growth has already ground to a halt and inflation is running at the weakest pace in almost five years. Data last week showed the euro-area recovery unexpectedly halted in the second quarter as the region’s three biggest economies failed to grow.
Germany’s gross domestic product (GDP) fell more than forecasted, France’s economy stagnated for a second straight quarter and Italy succumbed to its third recession since 2008.