The interest rate dynamics have been favorable and the indicators have been better than expected over the last four or five weeks. |
The M&A inflows have already been significant and I think there is potential for a lot more to come because the UK equity market is among the largest, relative to GDP, and among the cheapest at the moment. |
The market is building in a risk premium because of the uncertainty surrounding the election -- once we get that out of the way, all other things being equal, the euro will probably bounce. |
The market is increasingly seeing a risk that the Fed pauses in its rate cycle -- not only that but also the peak in the interest cycle will be considerably lower. |
The market seems to be taking a relatively long-term view of commodity prices, and the weakness we've seen in both oil and natural gas is very much a short-term phenomenon. |
The retail sales report makes it more likely at the margin to cause rate cuts. The balance of risks is that the next BOE rates move is lower, which would be negative for sterling. |
The risk is that the deficit is rather worse than the market is looking for and if that's the case it may swing the focus back to structural dollar negatives and away from the interest rate focus. |
The signal that the Fed seemed to be sending yesterday is that they don't know where rates are going beyond March, hence the references to data-watching. |
The yen did gain on the inflation numbers initially. It then took out some key levels and we saw a massive bout of short-covering in dollar/yen. |
The yen has gained on the vote of confidence in the Japanese economy, and that rates may start to rise sooner than expected. |
There is a limit to the negative effect on the yen of the capital outflows that have been driving it down for the last two months, |
There is a limit to the negative effect on the yen of the capital outflows that have been driving it down for the last two months. |
This flies in the face of mounting evidence that things are looking up for Germany, so the market seems to have shrugged it off and is looking through it. |
This left orders in the fourth quarter up an impressive 4.1% quarter-on-quarter and points to strong capital spending in the early months of 2006, which will likely make the Bank of Japan that much more confident that the time is approaching to start removing its ultra-easy monetary policy. |
Trade with Europe is being hit by the strength of sterling and the weakness of the euro, |