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Wait and see

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Anglo-Saxon policy makers seem to be in "wait and see" mode. The Reserve Bank of Australia acknowledged global market volatility, but also noted domestic economic resilience. Fischer of the Fed is focused on whether market volatility impacts the real economy.
  • European unemployment data is due out – it is domestic demand that leads our European growth forecasts (trade is a mild negative for us this year), so the health of the labour market matters.
  • Euro area producer price inflation is also due – important as this is generally a better representation of corporate pricing power than is consumer price inflation (and thus a better indicator of the real cost of capital). Export prices tend to exceed domestic prices.
  • US politics starts to emerge with the Iowa caucus results out. However, markets are only likely to become excited when it is plausible to start comparing economic policies – and it is too soon for that.