Expect nothing

Posted by: Paul Donovan

29 Jan 2020
  • The US Federal Reserve meets. It will not do anything. It would take a dramatic change in the state of the labor market or the consumer outlook to persuade the Fed to ease policy. The repo market-inspired liquidity injections might be worth a comment. The liquidity is probably not leaking into the economy or markets – there is a passing resemblance to the Y2K liquidity injections.
  • US capital goods orders data yesterday showed that investment spending is still subdued. Companies remain uncertain about what policy shifts the next entry on the Trump Twitter Feed might bring. Even when global supply chains have shifted to evade trade taxes, the shifts have generally not required investment.
  • The consumer remains pretty firm globally. Spanish retail sales data and sentiment opinion polls from France and Germany are due.
  • Fed Chair Powell will probably be asked about the impact of the coronavirus on the US economy. This is impossible to answer in anything other than the vaguest of ways. Fear of the virus is a critical economic transmission mechanism. Google Trends would suggest that globally and in the US, there is less fear than for past virus outbreaks. Singapore and Hong Kong show greater concern on this measure.

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