The minutes of the March meeting of
the US Federal Reserve seem to confirm that core interest rates in the US are
on the way to a rise, but indications of the timing are as elusive as ever.
According to the minutes, some members want to see rates going up as early as this
coming June, others want to wait until the end of the year and yet more do not
want to see any rises at all until 2016.
The matter of core interest rate
rises in the US is firmly bound up with inflation expectations. The stronger
dollar and low energy prices are regarded by FOMC members as keeping the rate
of price rises suppressed. On the other hand, an improving trend in employment
(the recent weaker than expected Non-Farm payrolls single data point notwithstanding)
and prospects of growth in the global economy, which would lead to the US “importing”
inflation, are seen as drivers for it.
The bond market has apparently taken
the view that rate rises are some way off. The yield on treasuries has been softening
since the actual Fed meeting in March and there is little suggestion that the
minutes will have changed this tendency. In the meantime the US dollar shows few
signs of weakness, but this could reflect more on the fate of its global
counterparts than on the Greenback itself.
Through all of this the EURUSD pair
has recently decided to maintain a range-bound profile, between 1.10 on the
upside and 1.07 on the downside (see chart below). This has been so since the
last weeks of March and for the opening week of this month. The exchange rate
is still well below the 200 day Exponential Moving Average (EMA), which
reflects the dominant downtrend. Price only needs to proceed sideways in this manner
for long enough, so that the 200 day EMA comes down to meet it, for it to
conform to the principle of reversion-to-the-mean. And the definite feeling in
the market is for further declines.
Anti-climax
in the Kremlin
So far, the visit of Alexis Tsipras,
Greek PM, to Russia, has been characterised by what can only be described as
anti-climax. The Guardian newspaper of England is covering it well. It has so
far only been able, however, to report that the joint press conference with
Vladimir Putin and Mr. Tsipras was late starting and that Tsipras repeated his
refrain about sanctions against Russia being a ‘road to nowhere’. He seems to
have got little enough in return. A rumoured possible relaxation of the Russian
ban on Greek food imports, which has been put in place in retaliation for EU
sanctions against Russia over Ukraine, was in the event ruled out by the
Russian president, who said that he could not make any exceptions for any state
that was (remained?) a member of the EU.
Greece was lauded as a tourism
destination for Russians by the president, who also said he was puzzled as to
why there has been so much interest in the West in the Greek Prime Minister’s
visit. Is Vlad trying to tell us (and the Greeks) something?
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