Category Archives:

monetary policy

A life less easy for the ECB

Back in 2017, the economic outlook was increasingly rosy for the Eurozone. After years of ultra-loose monetary policy, a synchronised global recovery was in train. The Eurozone economy expanded apace, regularly surprising to the upside, unemployment continued to fall, the banking system had partially recapitalised and funding costs for corporates and sovereigns alike remained low on any measure…

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An update on Argentina

Argentinian assets have been under material pressure in recent days.  I thought it would be useful to write my thoughts on the recent moves and implications for markets going forward.

Over the past two months, the Argentinian peso had become overvalued in real terms following large inflows from foreign investors in 2017. These capital flows caused the nominal exchange rate to depreciate by much…

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The reversal of Operation Twist and ramifications for the yield curve

The flattening of the yield curve is carefully watched by investors as it is traditionally a good indicator of an economic slowdown. However, we always need to question conventional wisdom, and one thing we can say about the great financial crisis, and the great financial recovery, is that the actions central banks have taken to meet their mandates has been quite different this time.

The Fed ha…

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Here are some of the scariest charts in finance to celebrate Halloween

Investment markets have been remarkably resilient over the course of 2017. Sure, the geopolitical environment has thrown up a few frightening days which saw markets sell-off but on the whole volatility has been muted and most asset classes have generated solid total returns. That said, any horror movie fan will tell you that the scariest part of a horror film happens when things are relatively …

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European Central Banks: it’s not just the ECB meeting on Thursday

While the market gears up for the much anticipated European Central Bank meeting on Thursday, there are two other European central banks due to meet earlier in the day; Sweden and Norway.

I was in Washington a couple of weeks ago for the World Bank and IMF conferences, which was a great opportunity to hear from policy makers and economists. It served as a timely reminder that the European centr…

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Is it time for the Bank of England to target nominal GDP?

In December 2012, the then Governor of the Bank of Canada, Mark Carney, gave a speech entitled “Guidance” to the CFA Society of Toronto. Less than two weeks earlier, the UK Chancellor of the Exchequer, George Osborne, had announced that Carney would be the 120th Governor of the Bank of England (BoE). As this was Carney’s first public engagement since the announcement, traders and market economi…

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UK CPI continues to overshoot the target

CPI now 2.9% up from 2.6% last month, above expectations and overshooting the Bank of England forecast

UK CPI is now within a hair’s breadth of requiring a letter to the Chancellor. RPI increased to 3.9% from 3.6%, which was also above expectations. The increased fuel prices were expected this month, but August is also a high inflation month given transport price hikes that take place as people head away for their holidays, and as clothing and footwear prices are hiked with the new season’s coll…

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Financial conditions suggest the case for more hawkish Fed than inflation dynamics would suggest

Guest contributor – Jean-Paul Jaegers, CFA, CQF (Senior Investment Strategist, Prudential Portfolio Management Group)

A lot has been written on the recent softness in US inflation data, as headline inflation pulled back, with a similar trend in core inflation. Admittedly, a number of unusual factors have partly been a driver behind this, although more importantly there is quite some persistence…

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Is it time for the Bank of England to sell corporate bonds back to the market?

On August 4th last year, the Bank of England announced a series of easing measures in response to the Brexit referendum results. They were very concerned regarding a potential slowdown and collapse in both the economy and corporate confidence and so implemented a variety of measures; reducing interest rates, increasing liquidity lines for banks, and reintroducing their gilt and corporate bond p…

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Five years on from “whatever it takes”

Today marks five years on from Mario Draghi’s now famous ‘whatever it takes’ remarks, widely credited with sparking a reversal in the Eurozone’s fortunes.

Below are five charts offering some insights into the European Central Bank’s successes and failures in the ensuing period, as well as some of the challenges that remain.

  1. Funding costs in the periphery

Five years ago, funding costs for the …

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