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8 Oct 2013
Flash: Dented but not broken –BAML
FXstreet.com (London) - Research teams at Bank of America Merrill Lynch offer a snap shot at events taking place affecting some of the G10's.
Key Quotes:
:Global: dented, but not broken The global impact of the US government shutdown will likely be modest, but risks are skewed to the downside".
"United States: breaking bad
We have changed our call: our base case is now for either a two week shutdown or for more than one shutdown. With weak growth momentum and more damage from Washington, we are lowering 3Q growth to 1.7% and 4Q to 2.0%. We are also pushing Fed tapering to Jan 2014".
"Euro area: ECB's turn to kick the can down the road
The ECB was not as dovish as the market expected. We expect it to remain on hold, with an LTRO only if liquidity conditions worsen at the end of the year".
"Japan: consumption tax hike vs economic measures
In our view, the package of measures will boost GDP growth by 0.6-0.7ppt in FY2014, enough to considerably but not entirely offset the negative impact of the consumptions tax hike".
"UK: forward guidance games
We assess how the BoE may have incentives to set out forward guidance now, but renege on it later".
"Australia: growth - get used to the slow lane
A period of strong investment growth, particularly in the resources sector, has been a key driver of growth over many years. It currently looks likely that as this significantly higher than average level of investment wanes that an extended period of below trend growth will characterize coming years".
Key Quotes:
:Global: dented, but not broken The global impact of the US government shutdown will likely be modest, but risks are skewed to the downside".
"United States: breaking bad
We have changed our call: our base case is now for either a two week shutdown or for more than one shutdown. With weak growth momentum and more damage from Washington, we are lowering 3Q growth to 1.7% and 4Q to 2.0%. We are also pushing Fed tapering to Jan 2014".
"Euro area: ECB's turn to kick the can down the road
The ECB was not as dovish as the market expected. We expect it to remain on hold, with an LTRO only if liquidity conditions worsen at the end of the year".
"Japan: consumption tax hike vs economic measures
In our view, the package of measures will boost GDP growth by 0.6-0.7ppt in FY2014, enough to considerably but not entirely offset the negative impact of the consumptions tax hike".
"UK: forward guidance games
We assess how the BoE may have incentives to set out forward guidance now, but renege on it later".
"Australia: growth - get used to the slow lane
A period of strong investment growth, particularly in the resources sector, has been a key driver of growth over many years. It currently looks likely that as this significantly higher than average level of investment wanes that an extended period of below trend growth will characterize coming years".