The world's second-largest economy is sputtering, with factory activity lagging, deflationary pressures mounting, and the call for stimulus growing louder,
With activity remaining solid and inflation coming in just a little stickier than the Fed would like, we do not see the need for super-sized or accelerated (once per meeting rather than once per quarter) rate cuts.”
Even if the U.S. is to avoid recession, Europe might not,
The euro zone economic recovery is struggling to gain momentum,
Monetary policy should remain focused on bringing inflation back to our target in a timely manner,
I think quarterly cuts serve us well and the data just don't support picking up this pace,
This would weaken price pressures quicker than we now forecast, so I think the risk of returning to below-target inflation is real,
The Swiss franc is back as a funding currency,
There is more two-way risk now in the yen than there has been for quite some time,
The main risk is that when yields move lower in a risk-off environment, yield differentials compress and the Swiss franc can rally,
Considering the central banks, you can see how there may be more sentiment for some carry players to prefer the franc over the yen,
Any carry trade is inherently risky and this is particularly true for those funded with safe-haven currencies,
The SNB will likely guard against currency appreciation through intervention or rate cuts as required,
The ultimate success of this carry trade might still be dependent on how quickly it can be closed in a risk-off scenario,
Should the U.S. economy add 150,000 jobs or more and the unemployment rate ease to 4.2 per cent or below, it would increase confidence that the economy is on target for a soft landing,
The pair would need to see a sustained break above resistance at 152.00 to negate the downside risks,
The risks going into this crucial release seem highly asymmetric as a solid report is very unlikely to derail the September cut,
However, the path after is less clear with financial markets currently pricing around 1-1/2 cuts over the remaining two meetings of the year,
Buckle up and ensure extra protection is in place,
Fall (autumn) comes with falls – especially with markets pricing in so much for Fed cuts and people chasing the ‘Goldilocks’ scenario out there,