Â·Policymakers remain sceptical: upswing not yet sustainable
Â·Asian stock markets under pressure
Â·Sentiment indicators are improving continuously
EUR-USD is continuing to consolidate sideways: whereas last
week, the euro was boosted by positive growth surprises, at the beginning of
this week, markets started to wonder whether the growth euphoria had perhaps
been exaggerated, particularly in equity markets. This put some stock markets,
especially in the Far East, under severe pressure. As a result, the euro started the week
on a weaker footing at around 1.41 against the dollar. The yen benefited from
The minutes of the Bank of England meeting also suggested
that the global economy could be in worse shape than had been assumed up to
now: three of the committee members had wanted toextend the asset-buying
programme by a larger amount. The pound fell sharply against the dollar initially,
but rallied again later. Towards the end of the week, cable was virtually
unchanged again at around 1.65.
On the Continent, scepticism was also voiced as to whether
the green shoots of economic revival were sustainable. Bundesbank president Axel Weber stuck his
neck out with a cautious assessment: in his view, economic recovery in Germany was not yet sustainable, but was largely a result of the
expansive fiscal policy. He therefore warned against ending these measures
prematurely. According to Mr Weber, monetary policy will remain expansive until
it becomes evident that the economic recovery is sustainable and until the
financial market situation is sufficiently stable. Given the high level of
spare capacity, Mr Weber did not see any inflationary risks, however. These
remarks, which were quite moderate for a former hawk, suggest that the ECB will
not change its monetary policy for some time to come. This is important for
market players, particularly in view of the governing council meeting at the
beginning of September, when the staff growth projections will probably be revised up, due to the
recent more upbeat figures.
The latest macroeconomic data have signaled improvement in
August: in the US, the purchasing manager indices for the New York region and Philadelphia rose significantly, and in Europe, the ZEW
economic sentiment went up too. In the latter, there was a noticeable
improvement in both expectations and the assessment of the current situation.
This was confirmed at the end of the week by the European purchasing manager indices.
The euro was boosted again by the favourable data and strengthening equity
markets, and rose to around 1.43.
Next week the focus will be on data from the euro area. The
Ifo index, released on Wednesday, will probably be of greatest interest to the
forex markets. We are not expecting the Ifo business climate to rise quite as
sharply as the ZEW; it could thus be on the disappointing side. The M3 figures
on Thursday are also more likely to suggest that the economic situation in the
eurozone is still tense: we are expecting all the growth rates of credit
aggregates to be in negative territory, which could trigger fresh discussion about
a possible credit crunch. The sentiment indicators from the euro area, however,
will probably have risen further. Thus the euro is set to continue moving
sideways next week, albeit with some fluctuation.
Uwe Angenendt +49 69 718-3648
Grabbe / Klaus NÃ¤fken
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