ECB President Mario Draghi moved the markets, with bonds and stocks rallying and the EUR weakening, following comments he made at the central-banking conference in Jackson Hole on August 22nd that imply the ECB is contemplating quantitative easing as a means to avoid deflation. Draghi warned that bets by investors on prices have “exhibited significant declines”. Draghi has stated previously that deterioration in the outlook for medium term inflation would be grounds for broad-based asset purchases (quantitative easing). Medium term inflation expectations in the euro region have slowed to .3%, far from the ECB’s 2.0% target. With respect to the inflation outlook, Draghi commented that “the Governing Council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term.” Separately, global central bankers led by Fed Chair Janet Yellen agreed that labor markets need to further recover before they can withstand higher interest rates.
• The USD hit 11 month highs against the EUR on speculation the Fed will raise rates in 2015 while the ECB signaled it may undertake additional measures to support growth.
• Israel unexpectedly cut interest rates for the second month in a row in an attempt to bolster an economy rocked by slowing exports and a war in Gaza. The ILS weaken post cut.
• BOJ head Kuroda stated that he is prepared to ease monetary policy in Japan for “sometime” into the future and until the Bank’s 2% inflation target is maintained in a sustainable manner.
• German’s business confidence, as measured by Ifo, dropped for the fourth month in a row.
• Singapore’s inflation fell to 1.2% Y/Y from 1.8%, lower than expected
08/26 USD: Durable Orders (July)
08/26 USD: S&P Case-Shiller Home Price Index (June/Q2)
08/27 EUR: German Retail Sales (July)
08/27 USD: MBA Mortgage Market Index
08/28 EUR: Economic, Consumer, Industrial, Services Confidence Reports (Aug.)
08/28 USD: 2Q GDP Report, 2nd Revision
08/29 EUR: CPI (Aug.); Unemployment Rate (July)
08/29 CAD: GDP (Q2)
09/01 JPY: Capital Spending (Q2 Y/Y)
09/01 GBP: Money Supply (July)
2 Year 0.492
3 Year 0.969
5 Year 1.661
10 Year 2.393
30 Year 3.146
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