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Mainly monetary matters

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The Fed's Beige Book did not really say anything spectacular about the US economy ("it's OK" sums up the sentiment). However there were reports of political risk starting to weigh on business decisions. Political risk may also weaken the value of sentiment data through its distorting effect.
  • There has been some speculation that China may intervene to support its currency – a reverse of the more traditional intervention to weaken that we came to expect from China. This reflects the shifting pattern of global capital flows – reduced inflow into China changes currency dynamics.
  • Japan's economy is apparently doing better than expected – second quarter GDP was revised up on stronger government spending. This does remind us of the risks of relying on single data releases. Most developed economies have seen their growth revised up in recent years.
  • The ECB meets, with the Financial Times reporting the Germans are unhappy with talk of policy easing (German unhappiness may not be considered "news"). Most expect some kind of extension of quantitative policy rather than an abrupt conclusion next year, but this may not be announced yet.