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Forex Forum Archive for 05/04/2013
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Mtl JP 15:07 GMT May 4, 2013
The latest week has seen some significant developments which came mainly out of central bank meetings. The ECB at long last finally is acknowledging that it has a major unemployment problem on its hands and that although it can support the economy by monetary actions, that its tools are unlikely to be terribly effective. Europe's economic problems are mainly structural and would likely be best addressed via fiscal policies. However, most economies have structual budgetary problems as well. On the monetary side, many had thought that ECB President Draghi Thursday had been hinting at the possibility of negative interest rates to coax banks to promote private sector borrowing. Early on Friday, ECB member Nowotny very clearly stated that this interpretation of Draghi had been incorrect. Later that day, Nowotny expressed surprise at the market's reaction to his comments on negative interest rates. Clearly he got a call from Draghi or a messenger of the ECB President. The significance of Nowotny's clarification was that it confirmed that the initial market assessment of Draghi had been correct. There has also been a lot of chatter that the ECB would not mind a weaker EUR
The Fed decision on Wednesday was down the middle, indicating that future policy decisions will be data dependent. On Friday the headline monthly U.S. employment report (after revisions) was stronger than expected. The data gave U.S. markets a lift, even though some of the underlying data were a bit troubling. Trade in the USD remains conflicted, but many feel ultimately it will trade higher. PMI data in the U.S. and overseas were mostly on the soft side.
Monday of next week sees holidays in Japan and the U.K. Following European PMI data on Monday, the calendar is not terribly eventful. For additional key items and more detail (dates, times, data estimates), be sure to visit the Global-View.com Economic Calendar and the Forex Forum as key items are released.
-- John M. Bland, www.global-view.com