5 Dec 2014
Divergence between Central Banks favour USD - Rabobank
FXStreet (Guatemala) - Analysts at Rabobank explain the divergence between central banks.
Key Quotes:
“We expect a continued disconnect between falling US unemployment and stagnant wage growth, both highlighting an absence of demand pull inflation pressure and casting some doubt over the true extent of slack in the US labour market.”
“A clearly weakening data tone not just in Europe but globally (EM, and specifically, China being key in this regard) stands to further exert downward pressure on commodities thereby ensuring the US imports a notable degree of disinflationary pressure on the cost push side”.
“Crucially, these disinflationary pressures are further exacerbated by what we would argue is a de facto currency war that is being waged by numerous jurisdictions of which the BoJ is a prime example, as is now the ECB (the imperative of weakening the single currency is, in our view, the rationale behind the ECB targeted balance sheet expansion)?”
“As central banks across the globe add further stimulus (again ECB and BoJ are the most notable examples), some of this liquidity will certainly “leak” overseas (this forming part of the so-called portfolio effects which QE is designed to inspire). High yielding USTs look to benefit from just such a development”.
Key Quotes:
“We expect a continued disconnect between falling US unemployment and stagnant wage growth, both highlighting an absence of demand pull inflation pressure and casting some doubt over the true extent of slack in the US labour market.”
“A clearly weakening data tone not just in Europe but globally (EM, and specifically, China being key in this regard) stands to further exert downward pressure on commodities thereby ensuring the US imports a notable degree of disinflationary pressure on the cost push side”.
“Crucially, these disinflationary pressures are further exacerbated by what we would argue is a de facto currency war that is being waged by numerous jurisdictions of which the BoJ is a prime example, as is now the ECB (the imperative of weakening the single currency is, in our view, the rationale behind the ECB targeted balance sheet expansion)?”
“As central banks across the globe add further stimulus (again ECB and BoJ are the most notable examples), some of this liquidity will certainly “leak” overseas (this forming part of the so-called portfolio effects which QE is designed to inspire). High yielding USTs look to benefit from just such a development”.