Friday, June 25, 2010

China drops peg – will it be appreciated $CNY

G20 meeting with focus on financial regulation. US Congress compromise on financial regulation. ISM may be turning, but the declines from here will be very gradual. We look for strong nonfarm payrolls data, reinforcing the belief in a full recovery in the US economy with healthy job growth. Roll over of ECB EUR442bn 12m LTRO. Riksbank meeting. We expect a 25bp hike. Danish currency reserve: will the growth continue? Global Update US housing market data has been very, very weak, but durable goods orders point to strong capex ahead. PMI and Ifo in Euroland held up well. However, the indices may be topping at the moment, pointing to a slower pace of improvements in growth. The People's Bank of China (PBoC) last weekend announced that it will abandon the de-facto USD peg that has been in place since mid-2008. Instead it will return to a managed float targeting a basket of currencies. This will largely be a return to the exchange rate system from before the financial crisis. The UK has announced a tough austere emergency budget. The UK crisis budget is comforting but relies on some very optimistic assumptions. The Chancellor sees the debt burden peaking at 70% in three years' time. Focus We have estimated the impact of the fiscal tightening that has already been put forward in the euro area for the coming years. This is projected to dampen euro areagrowth by 1.0 percentage points in 2011 and less in the subsequent years.
China drops peg – will it be appreciated

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