With rates low, Fed officials fret over next U.S. recession;
In the midst of an unprecedented leadership transition, Fed officials are publicly debating how to prepare for the next downturn. Should they scrap their approach to inflation targeting? How big of a balance sheet should they retain? How much further can they raise interest rates and still keep the economy on a growth path?
All this comes against a backdrop of an unexpectedly large boost from tax cuts and government spending that will drive up deficits, leaving less room for a fiscal rescue in the next recession.
“The thing that keeps me up at night is that when that next recession happens, and hopefully not for a long time, I don’t think we have as strong a toolkit as we would like to have to respond to that,” San Francisco Federal Reserve Bank President John Williams said Friday at a Town Hall Los Angeles event. Read More @ https://www.reuters.com/article/us-usa-fed/with-rates-low-fed-officials-fret-over-next-u-s-recession-idUSKCN1G72PI
USD TECHNICLA CHART
BANK OF ENGLAND IS OPTIMISTIC OF THE FUTURE – BoE’s Ramsden sees case to raise rates sooner than he thought;
Ramsden was one of two policymakers who opposed the BoE’s decision in November to raise interest rates for the first time in a decade, but appears to have shifted his stance somewhat in comments published by the Sunday Times newspaper.
Earlier this month the central bank said interest rates might need to rise somewhat sooner and by somewhat more over the next three years than policymakers had expected in November, due to a strong global economy and signs wages are rising faster.
“We all will keep a close eye on what happens through the early part of this year to see if that (BoE) forecast of wage growth picking up to 3 percent is realised,” Ramsden was quoted as saying by the Sunday Times. Read More @ https://www.reuters.com/article/us-britain-boe-ramsden/boes-ramsden-sees-case-to-raise-rates-sooner-than-he-thought-idUSKCN1G80Y0
OIL & CAD
OPEC and its allies including Russia may next year ease the crude-output curbs that have helped prices recover from the worst crash in a generation, according to Saudi Arabia’s oil minister. With the market moving toward equilibrium and bloated inventories shrinking, the next step for global producers will be to phase out the reductions, Khalid Al-Falih told reporters in New Delhi on Saturday. The nations taking part in the supply curbs are currently studying what a crude re-balancing will entail, and will announce their next steps once that’s analyzed, he said. The production curbs may be eased “sometime in 2019, but we don’t know when and we don’t know how,” Al-Falih said. “What we know is that it’s going to be done in a way that it will not in any way disturb the balance and undo the hard work since 2016.” Read More @ https://www.bloomberg.com//news/articles/2018-02-24/saudis-see-oil-output-cuts-easing-in-2019-without-hurting-market
CANADA INDEX TECHNICAL CHART
Fed’s MPR didn’t offer anything new
Fed’s MPR didn’t offer anything new in its executive summary, and reads much like the FOMC minutes. Indeed, it repeated the phrase the “FOMC expects that, with further gradual adjustments in the stance of monetary policy.” The report said activity increased at a solid pace over 2H 2017 and that the labor market continued to strengthen, what’s become a boilerplate statement. It also reiterated 12-month inflation has remained below target. And it added that despite the tight labor market, wage growth has been moderate, in part held down by low productivity growth. The Fed also indicated that “resource slack and commodity prices, as well as, for the U.S., movements in the U.S. dollar, appear to explain inflation’s behavior fairly well.” However, it also added, “our understanding is imperfect.” There’s nothing in the report to suggest the FOMC will stray from its gradualist normalization approach for now, leaving a March rate hike on tap, and more tightening down the road. This report will be the basis for Chairman Powell’s congressional testimony Tuesday.
Eurozone January HICP inflation was confirmed
Eurozone January HICP inflation was confirmed at 1.3% year over year, in line with the preliminary number and down from 1.4% year over year in the previous month. The core index nudged higher to 1.0% year over year from 0.9% year over year in December. Energy price inflation actually declined, as did food price inflation. Services price inflation remained steady at 1.2% year over year, while prices for non-energy industrial goods nudged higher to 0.6% year over year from 0.5% year over year. The headline rate remains far below the ECB’s upper limit for price stability, but even central bank officials are now admitting that there are signs that underlying inflation is starting to pick up as surveys show that companies are running into capacity constraints and selling prices are rising amid still robust demand.
German Q4 GDP was confirmed
German Q4 GDP was confirmed at 0.6% quarter over quarter, as expected. The working day adjusted annual rate reached 2.9% year over year. The breakdown, released for the first time, confirmed a turnaround in the sources of growth, in the second half of last year, with consumption growth stagnating and net exports taking over as the main driver of growth in what looks almost like a reversal of Germany’s usual growth trends. Gross fixed investment also stagnated at the end of the year, despite a rise of 0.7% quarter over quarter in equipment investment. All in all a still robust number but with the weakness in consumption and investment clearly a concern. Both should pick up as companies run into capacity constraints, the labor market is looking robust and wages set to pick up, but the lingering political vacuum clearly is also weighing on consumer sentiment. (Yahoo Finance).
MONDAY NEWS THAT MIGHT AFFECT YOUR TECHNICAL TRADES
- China will be back to trading after the long holdout last week “Chinese New Year” – the volatility will re-start this week.
- It will be a quiet morning with most currencies ranging.
- 10.00pm – ECB Mario Draghi will speak and we believe that the time is right for Mario Draghi to be hawkish. We maintain BUY for EUR.
- 11.00pm – US will release New Home Sales and we believe that the data will be no change or weak.
Be cautious on Monday as the market looks for direction; always observe money management at all times.
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