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RBA May Board Minutes Highlight Financial Conditions and Data Flow

The May Board minutes highlighted financial conditions and the data flow as key factors in the policy decisions at the July Board meeting. However the Board still supports the view that the conditions necessary to justify a rate increase are unlikely until 2024 at the earliest. The minutes from the...

RBA Minutes Reaffirmed Likelihood of QE Expansion in July

The RBA minutes for the May minutes reaffirmed our view that further expansion in the asset purchase program would be announced later this year. The most likely timing for the announcement would be July. Domestically, the members noted that the economic was in the transition from recovery to expansion. The...

China’s Growth Slowed Across the Board in April

China’s April data sent a mixed message about the economy. Retail sales expanded +17.7% y/y in April, significantly weaker than consensus of +25% and March’s +34.2%.  Urban fixed asset investment (FAI) growth moderated to +19.9% in the first 4 months of the year, from +25.6% in 1Q21. The market...

Rate and Crude Oil Price to Support CAD Outlook

Year-to-date, Canadian dollar is the best performing currency against US dollar. Indeed, most of the gains has been accumulated after the April BOC meeting, at which policymakers announced QE tapering and hinted about rate hike in as soon as next year. Despite recent disappointment in macroeconomic data, we expect...

Dollar in Trouble? Markets Believe the Fed on Tapering But Not on Inflation

The US dollar has crashed below its uptrend line as its bullish narrative has once again been called into question. The shockingly big miss of the April NFP estimate has proven the Fed right and the markets wrong on the economy. Subsequently, the dollar has been knocked off its...

Upside in Crude Oil Prices Limited as OPEC+ is Prone to Ramp Up Output

Oil output from OPEC-10 and the nine non-OPEC producers joined the “output-cut” deal increased to 34.43M bpd in April, up from 34.26M bpd a month ago. The total compliance level slipped -0.2 ppt to 111%. Saudi Arabia’s voluntary cut of 1M bpd continued to contribute significantly to overall compliance....

Fed Monitor: “Still a Long Way to Go” – Fed is Currently “Employment-based”

Key takeaways The Fed remains outcome-based (or, to be more precise, employment-based near-term) and with the weak jobs report on Friday, we do not expect the Fed to change policy signals near-term. The likelihood of a hawkish shift already in June has declined. The Fed still thinks the labour...

Copper Price Soars to New Record. Supply is Unlikely to Keep Pace with Demand as Major Economies Shift to Green Energy

The recent rally in copper price has been driven by potential supply deficit in coming years. Stimulus measures rolled by major economies, such as the US, the UK and China, have put strong focus on green energy. Developments of which are expected to significantly raise demand for copper. Meanwhile,...

China’s Growth Momentum Accelerates Further in Second Quarter, as Shown in Latest PMI and Trade Data

The latest data suggests that China’s economy continues to improve in the second quarter. The Markit/Caixin services PMI increased to 56.3 in April, highest since December 2020. The reading also beat consensus of 54.2 and March’s 54.3. Separately, China's trade surplus tripled in April, compared with a month ago. Markit/Caixin...

BOE Predicts Economy to Expand at Strongest Pace since WWII; Announces QE Tapering from this Month

At today's meeting, the BOE voted unanimously to leave the Bank rate unchanged at a record low of 0.1%. Meanwhile, the central bank voted 8-1 to keep the asset purchase program at 895B pound, of which 875B pound is government bonds. Policymakers also announced to slow the pace of...

Bank of England Eases Foot Off Monetary Policy Accelerator

Summary The Bank of England (BoE) kept its key policy parameters at today's announcement, keeping the Bank Rate at 0.10% and maintaining its asset purchase target at £895 billion. However, in a modest tweak towards less accommodative monetary policy the BoE reduced the pace of its weekly asset purchases by...

RBA Board Maintains Policy Settings; More Optimistic Economic Forecasts

The Reserve Bank Board has lifted its growth forecast in 2021 to well above Consensus while lowering its unemployment forecast by end 2021 to 5%. There has been a slight upward revision to the inflation outlook. Policy changes will now be considered at the July Board meeting. As expected, the...

RBA Keeps Policy Intact but Signals Amendments in July

The RBA left all monetary policy measures unchanged in May and reiterated that a rate hike would "unlikely to be until 2024 at the earliest". However, the central bank upgraded economic projections and signaled that some amendments would be made on yield curve control (YCC) and QE in July. Economic...

Fed Refrained from Giving Any Hint about QE Tapering

The Fed voted unanimously to leave the Fed funds rate target at 0-0.25%. It also decided to keep the asset purchases at US$120B per month. As expected, the Fed upgraded the economic assessments but continued to warn of downside risks. Fed Chair Jerome Powell at the press conference noted...

April FOMC: A Subtle Change In Tune

Summary The April FOMC meeting statement and opening remarks from Chair Powell's press conference struck a slightly more optimistic tone but did nothing to dissuade expectations that the current stance of policy will remain unchanged for months to come. While acknowledging a clear pickup in activity since its March meeting...

Research Germany: End of the “Era Merkel’ Leaves German Politics in Unchartered Territory

The 2021 election will push German politics into unchartered territory, with the potential of CDU/CSU returning into opposition for the first time since 2005. The Green party will be king-makers in any future governing coalition, opening up the potential for a more relaxed fiscal stance down the line....

BOJ Downgrades Inflation Forecasts Significantly as It Struggles with Limited Tools

The BOJ left its monetary policy measures unchanged in April. However, it revised sharply lower the inflation forecasts for this fiscal year. The country’s economy has been far below the +2% inflation despite a decade’s unconventional easing measures. On the economy, the central bank acknowledged that “Japan’s economy has picked...

A Panoramic View of the US Economy and Dollar in 10 Charts

The pandemic inflicted a lot of damage on the US economy, but thankfully, the worst has passed. It turns out that when Congress and the Federal Reserve join forces to fight a crisis, the stimulus response is so overwhelming that it eclipses everything else. Take a look below for...

Flash: ECB Review: Not a ‘Significant’ Meeting

Key takeaways The ECB meeting concluded today was not a 'significant' meeting, with no new signals leaving many decisions for the June meeting. Near term growth outlook was 'titled to the downside' while the medium term growth risk was 'broadly balanced'. The latter has paved the way for...

ECB Expects Growth to Resume in 2Q21. Yet, PEPP Tapering is Still Premature

As we have anticipated, the ECB left all monetary policy measures unchanged in April. Policymakers indicated the current pace (increased since March) of asset purchases in the PEPP would remain intact. Other monetary policy measures will stay unchanged with the Asset Purchase Program (APP) (traditional QE) at 20B euro/...

BOC Tapers QE Program and Delivers Upbeat Economic Outlook

As we have expected, the BOC delivered a hawkish tapering of QE purchases in April. the weekly asset purchases will reduce to CAD3B/week, from CAD4B/week previously. Meanwhile, it also upgraded the economic assessments for both the country and the world. Policymakers now expect the spare capacity to be fully...

FX Market Remains Prisoner to the Vaccination Race

The dynamics in the FX market have changed this year. The speed of vaccinations has turned into the most powerful element driving currency moves, as investors recalibrate their expectations for economic growth and the timeline of central bank rate increases. Britain and America have done better than Europe and...

April Flashlight for the FOMC Blackout Period: Rapidly Strengthening Data, but Is It “Substantial”?

Summary We do not expect any significant policy changes at the FOMC's April 27-28 meeting, or even a hint that changes may occur soon. Inter-meeting data have generally been quite strong, but the committee has made clear it needs to see rather than merely forecast a more complete labor...

Kiwi Shoots Higher as RBNZ Appears Less Concerned about its Rise

As expected, the RBNZ left all monetary policy measures unchanged at the April meeting. While acknowledging the dampening effects of the government’s housing policy, policymakers need more time to assess the impacts on the real economy. Meanwhile, the members appear more comfortable with the current level of New Zealand...

FX 2nd Quarter Outlook: DXY, EUR/USD, GBP/USD, USD/JPY, EUR/GBP

With vaccine rollouts and US stimulus checks in hand, the second quarter is expected to boom. The IMF recently adjusted their 2021 GDP outlook to 6% from 5.5% and recent strong economic data has shown that the recovery in some parts of the world has already begun. Many central...

Crude Oil Prices to Hover around Current Levels as Supply Increases amidst Better Demand Outlook

Both crude oil benchmarks have been range-bounded after pulling back from the peaks in early March. Although global economic recovery is still underway and the pandemic situation has largely stabilized, the ramp-up of output by OPEC members and non-OPEC producers have raised concerns over whether the growth in world...

ECB’s Minutes Revealed that Upside from US’ Fiscal Stimulus Not Yet Reflected in March Forecasts

ECB's minutes for the March meeting have lent support to EURUSD. The minutes revealed that policymakers saw upside risks to the economic outlook, thanks to US’ huge fiscal stimulus. Meanwhile, despite higher inflation in the near-term, it should remain subdued and below the central bank’s target. Policymakers also pledged...

Fed Upbeat on Recovery, while Pledged to Maintain Stimulus Until Substantial Progress is Seen On Economy

The FOMC minutes for the March meeting revealed that members turned more optimistic over the economic outlook. They were more hopeful of continuous improvement in light of the "significant declines in the number of new cases, hospitalizations, and deaths over the intermeeting period as well as a pickup...

RBA Hints to Expand QE In Order to Boost Job and Inflation

The RBA left all its monetary policy measures unchanged in April. The cash rate target stays at 0.1%. correspondingly, the 3-year Australian Government Bond yield target (yield curve control) and the Term Funding Facility (TFF) interest rate also remain at 0.1%. The size QE purchases is kept at AUD100...

RBA: The Dynamics of QE and Yield Curve Control

The Reserve Bank Board meets next week on April 6. We expect that the Board will decide to maintain its current policy settings. These settings are the targets of 10 basis points for the cash rate and the yield on the 3 year Australian Government bond as well as the parameters...