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Mid-year, mid-cycle, mundane

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Friday is still the focus. The world economy is in a classic mid-cycle position. Growth is OK, inflation is normal, labor markets are strong and the chances of an imminent significant economic downturn are relatively low. It is central bank policy that holds the potential to excite, and thus we have to wait for Fed Chair Yellen's speech on Friday.
  • The German Ifo survey of business confidence is due, and in the absence of anything else of note will attract investor attention. German confidence data has arguably proved to be less unreliable than other economies' business confidence data, but this is hardly a glowing endorsement.
  • US President Trump announced an escalation of the US presence in Afghanistan. Indirectly, this might matter if the policy change impacted Trump's core support, or if it is a signal that the president is giving up on attempts at domestic leadership (requiring Congressional cooperation) in favor of foreign policy.
  • There has been some media chatter about a possible parallel currency in Italy (following comments from former Prime Minister Berlusconi). One of the oldest laws in economics is Gresham's Law – bad money drives out good – which explains why parallel currencies rarely succeed.