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18 Dec 2015
US current account deficit grows while Mexico raises interest rates – Deutsche Bank
FXStreet (Delhi) – David Plank, Macro strategist at Deutsche Bank, notes that Mexico raised rates by 0.25% for the first time since 2008.
Key Quotes
“This highlights the flexibility that a tightening Fed gives to other central banks. But it does not follow that we will see lots of rate increases across the EM world. For instance, our Asian strategists argue that Asian central banks will not be able to keep up with even a gradual Fed and front-end rate differentials will narrow. The only central bank they think could hike rates is the Philippines. Elsewhere, rates in China, Taiwan, Korea, and Thailand could be very close to, or even below, US rates by end-2016. In their view the market appears underpriced for this divergence.”
“In terms of the US data, the current account deficit for Q3 was larger than expected, the Philly Fed index was weaker and jobless claims were close to market. While the headline Philly Fed was down, returning to negative territory, the employment and shipment components rose. The 6 month outlook dropped more than 20pts and is at its lowest level since November 2012.”
“The German IFO dropped a little, to 108.7 from 109 previously. Our European economists aren’t reading too much into what are small changes and see the IFO as consistent with ‘hefty’ quarterly growth. Other monthly indicators are weaker, however, so they are sticking with a forecast of 0.3% for German Q4 growth. They expect the moderate disconnect between hard and soft indicators that has appeared over the last 1-2 quarters to continue for now.”
“UK retail sales were very strong in November. Sales ex auto fuel were up 1.7%mom/3.9%yoy – well ahead of expectations. When fuel is included sales are up 5%yoy.”
Key Quotes
“This highlights the flexibility that a tightening Fed gives to other central banks. But it does not follow that we will see lots of rate increases across the EM world. For instance, our Asian strategists argue that Asian central banks will not be able to keep up with even a gradual Fed and front-end rate differentials will narrow. The only central bank they think could hike rates is the Philippines. Elsewhere, rates in China, Taiwan, Korea, and Thailand could be very close to, or even below, US rates by end-2016. In their view the market appears underpriced for this divergence.”
“In terms of the US data, the current account deficit for Q3 was larger than expected, the Philly Fed index was weaker and jobless claims were close to market. While the headline Philly Fed was down, returning to negative territory, the employment and shipment components rose. The 6 month outlook dropped more than 20pts and is at its lowest level since November 2012.”
“The German IFO dropped a little, to 108.7 from 109 previously. Our European economists aren’t reading too much into what are small changes and see the IFO as consistent with ‘hefty’ quarterly growth. Other monthly indicators are weaker, however, so they are sticking with a forecast of 0.3% for German Q4 growth. They expect the moderate disconnect between hard and soft indicators that has appeared over the last 1-2 quarters to continue for now.”
“UK retail sales were very strong in November. Sales ex auto fuel were up 1.7%mom/3.9%yoy – well ahead of expectations. When fuel is included sales are up 5%yoy.”