To give the ECB
even more ammunition for an additional easing move, Spain
is still struggling with deflation
. Here is a month-over-month CPI chart.
We had some positive news from France
where business investment in 2015 rose sharply. Hopefully this can be sustained given all the market uncertainty.
According to Bloomberg, investor attention has shifted to the Bank of England
as the next central bank to ease. The short-term implied vol on GBPUSD
options has spiked as traders bet the BoE will respond to the BoJ. This is somewhat surprising, given that while the BoE is clearly concerned about disinflationary pressures, the UK economy remains relatively robust.
We've seen some relief for the Swiss
National Bank in the currency markets. In spite of the ECB's dovish stance, the Swiss franc has been weakening lately. Some of this was driven by the SNB selling Swiss francs
(buying euros), but whatever the case the central bank has been able to stabilize the nation's currency. This is very much needed to keep the country's most severe deflation from worsening.
As expected, Malaysia's consumer sentiment hit new lows.
2. The Ukrainian
) is declining again. The nation's central bank is trying to preserve its limited FX reserves, not making dollars available in the market. There is also a delay in the next tranche of the IMF bailout funds ($17.5 bn).
3. S&P has downgraded Azerbaijan's debt to junk. The currency of the oil-dependent nation has been devalued dramatically last year. The chart below shows the US dollar appreciating against Azerbaijan's
budget gap worsened. The recent spike was due to a one-time event, but it was worse than consensus nevertheless. The overall budget deficit jumped to a record BRL 613bn in 2015.
5. Fitch shows a link between the US dollar strength and the deterioration its EM sovereign ratings index. Not surprising.
Back in the United States
, here are some trends making news lately.
1. With the global yields continuing to fall (discussed above), here is the 10-year treasury yield.
2. US employment cost index of wages remains barely above 2% on a year-over-year basis. Those wage pressures we've been promised remain elusive.
3. The Citi economic surprise index has been below zero most of the past year and is moving lower this year.
4. As this next chat shows, the US dollar strength has been a significant drag on US GDP growth.
Turning to Food for Thought, we have 4 items this morning:
1.Let's begin with politics. The economy remains the top issue for US voters. Interestingly, many candidates seem to be focused on immigration and terrorism instead.
2. Here is an interesting graphic from the Economist showing the key events faced by the USSR and later Russia - with the oil price overlaid.
3. iPhone vs. iPad sales.
Thanks to Josh, @NickatFP, @MattGarrett3, Jake Badalamenti, and Ycharts.com for helping with research for the Daily Shot.
— Edited by Clemens Bomsdorf* Walter Kurtz is an alias
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