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April 7, 2014

UK GDP Keeps Growing But Population Rise Limits Recovery

Britain has recovered little of the ground lost during the deep recession of 2008-09 once a rising population is taken into account, the Office for National Statistics said.

Announcing seven alternative ways of measuring economic well-being, the ONS said per capita gross domestic product remained well below its peak in 2013.

“Unlike GDP, which has now recovered substantially from the falls in the recent recession, GDP per capita has recovered only a little of the fall seen during the recession,” the UK’s statistical agency said.

It said GDP remained the “central and indispensible” measure of activity in the UK economy but said a “dashboard” of supplementary measures would help assess changes in wellbeing.

The ONS said these were:

- GDP per capita, which takes into account population growth

- Net Domestic product, which adjusts GDP for capital consumption

- Real Net National Disposable Income per capita, a measure that excludes income generated in the UK but which is not paid to UK residents

- Real Net Financial and Physical Assets, a measure of the stock of national wealth

- Real Adjusted Household Disposable Income per capita, which is the income received by UK households adjusted for inflation, taxes paid and benefits received

- Median real household income, which seeks to show whether the proceeds of growth are being evenly distributed by looking at the income received by the household in the middle of the income distribution

- Real Household Net Financial and Physical Assets, a measure of household wealth largely made up of housing and financial assets

The ONS said: “Given that it measures aggregate activity in the economy, GDP, supported by other information, inevitably and correctly plays a central role in discussion about monetary and fiscal policy and about the state of the economy generally. It is therefore of vital importance.”

via The Guardian

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March 28, 2014

March 24, 2014

Russia Sanctions Could Push Nation into Recession

Sanctions imposed by the U.S. and the European Union are pushing Russia toward a recession as the intensity of their economic penalties increases after the annexation of Crimea earlier this month.

Banks including state-run VTB Capital say the world’s ninth-biggest economy will shrink for at least two quarters as penalties for annexing Crimea rattle markets, curb investment and raise the cost of borrowing. Sanctions that have so far focused on individuals via visa bans and asset freezes may be expanded to target specific areas of the economy.

President Vladimir Putin sent his popularity surging to a five-year high by making Crimea a part of Russia again after 60 years and says he won’t be swayed by foreign retaliation. Even so, the costs of the decision are starting to unfold, with Russian stocks this year’s worst performers and the economy set to suffer more than the West, said Mircea Geoana, Romania’s government representative for diplomacy and economic projects.

via Bloomberg

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March 3, 2014

IMF Lagarde Cools Down End of Recession Optimism in Spain

Christine Lagarde, the head of the International Monetary Fund, has poured cold water on claims from the Spanish government that the recession is over and the country is on the road to recovery.

Speaking at the Global Forum on Spain in Bilbao she said: “Thanks to the formidable actions over the past five years, Europe – and Spain –are now turning the corner. Yet the task is far from finished. Growth remains too low and unemployment too high for us to declare victory on the crisis.”

The scars of the crisis run deep and will take years to heal, Lagarde said. “There is no doubt that the reforms that I have outlined for Europe and for Spain will take several years of determined efforts by both government and society.” The good news, she said, is that Spanish exports have risen faster than Germany’s.

Insisting that the “strong reform momentum must be maintained”, she called for a continued shakeup of the labour market, and said reforms “should not benefit those in work but those without it”.

via The Guardian

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January 16, 2014

US and European Post Recession Recovery Comparison

If we compare the economic recovery of the United States since the Great Recession with that of Europe – or more specifically the eurozone countries – the differences are striking, and instructive. The US recession technically lasted about a year and a half – from December 2007 to June 2009. (Of course, for America’s 20.3 million unemployed and underemployed, and millions of others, the recession never ended – but more on that below.) The eurozone had a recession of similar length from around January 2008 to April 2009. But it then fell into a longer recession in the third quarter of 2011 that lasted for another two years, and may only be exiting that recession currently.

This makes a big difference in people’s lives. In the eurozone, unemployment is at near record levels of 12.1%; while in the US, it is currently 6.7%. Despite the incompleteness of these measures, these numbers are comparable. And, of course, in Spain and Greece unemployment is 26.7 and 27.8%, respectively, with youth unemployment at an intolerable 57.4 and 59.2%.

How are we to explain these differences? The United States was, after all, the epicenter of the world financial crisis and recession in 2008. But US policy-makers responded to the recession with different policies. Most important was monetary policy: the Federal Reserve lowered short-term interest rates to about zero in 2008 and has kept them there since. The Fed also signalled its intention to keep these interest rates at these levels for a long time. And venturing into uncharted territory, the Fed engaged in three rounds of “quantitative easing”, or more than $2tn of money creation. This enabled the Fed to stimulate the recovery by lowering long-term interest rates, including the crucial home mortgage interest rate, which helped recovery in the housing market. After some stimulus in both areas, the eurozone governments also engaged in more and earlier budget tightening than the United States did; and the International Monetary Fund (IMF) has shown a clear relationship (Figure 6) between this fiscal tightening and reduced GDP growth.

Now the question is why our European brothers and sisters have been so unfortunate as to be subjected to much more brutal economic policy than what we have experienced in the United States. While there are many nuances, there are also some simple but critically important reasons. Most vital is the accountability, or lack thereof, of the people and institutions making the decisions. In Europe you have the so-called “troika” – the European Central Bank (ECB), the European Commission, and (more recently recruited) the IMF. These are much less accountable to eurozone residents – especially but not limited to those of the most victimized countries (Spain, Greece, Portugal, Ireland, and Italy) – than even the relatively unaccountable Federal Reserve and US Congress and executive branch are to Americans.


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January 14, 2014

UK Graduates Hiring Highest Since 2007

Major employers plan to recruit around 1,200 extra U.K. graduates this year, sending recruitment in the country to a seven-year high, according to a report out on Monday.

Following a survey of 100 leading public and private and non-governmental organizations, High Fliers Research found that graduate recruitment would rise by 8.7 percent in 2014, the biggest annual gain in four years. Companies surveyed include FTSE 100 and Dow mainstays such as General Electric, Microsoft, JPMorgan Chase, BAE Systems, Barclays and Tesco.

“This very significant increase in graduate vacancies at Britain’s top employers means the job prospects for graduates leaving university this year are the best they’ve been since the start of the recession seven years ago,” said Martin Birchall, the managing director of High Flier Research, which specializes in student and graduate recruitment research.


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December 17, 2013

ZEW Analyst Says Improved US Outlook Drove German Confidence

An improved outlook for the U.S. economy drove a sharp increase in German analyst and investor sentiment in December, economists at Germany’s ZEW economic institute said on Tuesday, adding that the recession in the euro zone was through the worst.

“The better situation in the United States, and the better outlook for the United States, it’s these international connections (that helped improve the sentiment),” ZEW economist Michael Schroeder told reporters.

Fellow ZEW economist Marcus Kappler said it was “fair to say that the recession is bottoming out … in the euro zone” and that there could be room for more economic growth in Germany than the 1.5 percent some are forecasting for next year.

via Reuters

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France at Risk of Recession

France may be sliding back into recession after activity in its key manufacturing and services industries shrank for the second month running in December.

Markit’s “flash” purchasing managers’ index estimate for France fell to a seven-month low, with activity in both sectors contracting.

The weak figures provided fresh evidence of the gulf that has opened up between the French and German economies, and underlined fears that Europe’s second-largest economy is holding back the eurozone recovery.

The Times

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November 8, 2013

EUR/USD – Sharp Drops As ECB Lowers Rates

EUR/USD slid sharply on Thursday, as the ECB surprised the markets and cut interest rates by 0.25%, to 0.25%. The euro reacted sharply to the news, dropping over 100 points on the day. The pair has stabilized on Friday, trading just above the 1.34 line. In economic news, French releases disappointed, as Industrial Production declined and the trade deficit widened. However, Germany’s trade surplus surged to its highest levels in almost six years. Over in the US, all eyes are on Non-Farm Employment Change, with the markets bracing for a weak reading. There are two other key events out of the US on Friday – the Unemployment Rate and Preliminary UoM Consumer Sentiment. The week wraps up with Federal Reserve head Bernard Bernanke addressing an IMF event in Washington.

The ECB surprised the markets on Thursday when it reduced its benchmark interest rates by 0.25%, to a record low rate of 0.25%. The marginal rate was cut to 0.75% from 1.0%, while the deposit rate was left at unchanged at 0.0%. Following the decision, ECB head Mario Draghi stated that inflation in the Eurozone remains very low and that this would likely continue in the coming months. He added that futher monetary easing remained an option until economic conditions improved. The markets had expected the ECB to hold rates at 0.50%, but the combination of weak growth and inflation well below the ECB’s target of 2% led to the ECB cutting rates for the first time since April.

US employment numbers will be in the spotlight on Friday, with the release of Non-Farm Payrolls and the Unemployment Rate. NFP, a critical event which could move EUR/USD, is expected to fall to 121 thousand in October. However, it should be noted that the government shutdown in October resulted in some workers being removed from payrolls, which would explain the low October forecast. On Thursday, Unemployment Claims looked solid, coming in at 336 thousand, matching the forecast. An unexpectedly strong NFP release would likely fuel speculation of a possible QE tapering in December.

The French economy continues to disappoint, as Industrial Production declined 0.5%, well off the estimate of a 0.4% gain. This marked the fourth decline for the manufacturing indicator in five releases. The trade surplus widened to -5.8 billion euros in October, a four-month high. This was well off the forecast of -4.7 billion. To add oil to the fire, the Standard and Poor’s credit rating agency downgraded France’s sovereign rating one notch, from AA+ to AA. In October, S&P stated that although France had emerged from the recession, long-term growth prospects were “mired in risks and uncertainties”. However, the outlook has improved from negative to stable, meaning that another downgrade is unlikely in the next two years.

Germany is the Eurozone’s largest economy, so the Eurozone and the euro are sensitive to German releases. This week’s data has been a mixed bag, making it difficult to predict in which direction the German economy is headed. Factory Orders jumped 3.3% in October, bouncing back from a decline of 0.3% in September. This was well above the estimate of 0.6%. However, Industrial Production failed to keep pace, posting a decline of 0.9%, compared to a strong 1.4% the month before. The estimate stood at 0.2%. The week ended on a strong note, as Trade Balance widened to 18.8 billion, up from 15.6 billion the month before. It was the highest reading since December 2007.

November 1, 2013

Week in FX Europe – Expensive EUR ‘Puts,’ Dovish ECB Gives Us A Lower EUR

Telegraphed, orderly and one direction – investors will take it. In fact they will take anything with a pulse that capable of breaking the confines’ of range trading.

The 17-member single currency for too long has been floundering, waiting for investors to be either fundamentally or technically vindicated. The market seeks extended momentum one-way or another to allow them to get more involved – a basic ingredient that has been missing in the forex space this quarter.

The surprised upbeat assessment delivered by the Fed mid-week on the US economy has weighed on the “non-taper” psyche of investors, very much hurting dollar bears. The Fed commencing a December taper is not ruled out just yet – it may however be after next weeks NFP report.

Is the EUR oversold? The market had been expecting to get a clearer picture from US policy makers. This week’s dollar gains were suppose to be seen as consolidative in nature and mostly on the back of month-end requirement, however, a three “big fig move” goes beyond that.

Is this deep EUR loss a signal that this is more than a corrective move in the dollar? Investors are required to sit through more “dirty” data over the coming weeks. It’s true, the EUR does face strong resistance at 1.3835 areas – peaking at its two-year high last week and has since fallen to trade below 1.3500 as we close out the week. The problem for the EUR is that there is ample room for it to fall much further as the heavy does of “pro-Euro positions” built up this year are beginning to unwind.

In the options market, the rising prices for EUR “puts” suggest that the single currency downfall could gather further momentum. Coupled with a less than dovish Fed and an ECB only getting more dovish against the recent spate of disappointing data suggests that the EUR could be persuaded to peek below 1.3350 sometime soon.

Remember to circle November 7th – The ECB has room to cut rates -25bps to +0.25%.

  • UK Retail Sales Slowdowns in October -
  • German Banks Set To Pass Stress Tests -
  • French PM Upholds 75 Percent Tax for Soccer Clubs -
  • UK Manufacturing Shows Solid Growth in October -
  • Barclays and RBS Suspend Currency Traders As Part of Manipulation Probe -
  • Inflation in Europe Falls to Four-Year Low -
  • European Unemployment Rise Puts Pressure on Central Bank -
  • Italian Jobless Rate Rises to 12.5 Percent -
  • ECB’s Nowotny Says Europe Will Avoid Cliff -
  • ECB Draghi Still Seeking Liquidity Tools -
  • Financial Transaction Tax Backed By Germany -
  • Spanish Recession Ends After 0.1 Percent GDP Growth -
  • Italy’s Political Instability Continues to Threaten Europe -
  • European Banks Hold 1.3 Trillion Bad Loans -
  • ECB’s Asmussen Wants US Style Banking Regulation in Europe -


* AUD Reserve Bank of Australia Rate Decision
* NZD Unemployment Rate
* AUD Employment Change
* AUD Unemployment Rate
* GBP Bank of England Rate Decision
* EUR European Central Bank Rate Decision
* USD Gross Domestic Product
* USD Personal Consumption
* USD Change in Non-farm Payrolls
* USD Unemployment Rate
* CAD Unemployment Rate
* CAD Net Change in Employment
* USD U. of Michigan Confidence
* CNY Consumer Price Index

The post Week in FX Europe – Expensive EUR ‘Puts,’ Dovish ECB Gives Us A Lower EUR appeared first on MarketPulse.

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