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China, capital and the dollar

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Newswire reports suggest that China has been examining ways of controlling capital outflows, and perhaps encouraging Chinese companies to sell US dollars and repatriate money. This reflects the realities of changes in global capital flows today, but could also be taken as a rebuke for US protectionist rhetoric.
  • Euro area headline consumer price inflation is expected to come in at 1% yoy. The divergence of inflation within the Euro area continues, reflecting underlying economic divergence. German inflation was significantly stronger than expected yesterday, but French inflation was weaker than expected.
  • The UK BRC shop price measure showed that prices on the UK high street continued to fall in December. The UK is one of the few developed economies where inflation risks being lower than expected, if the impact of the weaker currency is felt more in profit margins than in retail prices.
  • Minutes from the December US Federal Reserve meeting are due. These are not a perfect guide to Fed debates, but they are far better than relying on the "dot plot" forecasts. With US inflation pressures building, any debate about whether the Fed risks being too slow to act on policy tightening will be interesting.