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10 Mar 2014
Flash: Clarity on US / China outlooks -BAML
FXStreet (Guatemala) - David Woo, FX & Rates Strategist at Bank of America Merrill Lynch noted that financial markets appear desperate for some clarity on the US and Chinese growth outlook and explained that Since January, US and Chinese data have been generally disappointing.
Key Quotes
"However, in both cases there are mitigating circumstances. While we believe poor weather has been a major culprit behind the US soft patch, the Chinese New Year is thought to have distorted Chinese data. Given the US weather is set to improve in March and the Chinese New Year is now more than a month behind us, it is safe to assume that investors will be reading much more into the March data."
"There is much at stake. If US and Chinese data both begin to improve, global fixed income, especially US Treasuries, could be looking at a rout in 2Q14. The US-China relative growth momentum will matter too, especially for FX crosses like AUD/CAD and BRL/MXN (Chart of the Day)."
"With respect to the US, the February non-farm payroll has strengthened our view that data is set to improve in March. The number of people out of work due to the weather jumped above 600k, more than in January and December combined and the highest reading since Jan 2011 (886k)."
"If there is anything we can learn from 2011 is that February job growth that year was 100k high than in January. Our new Extreme Winter Weather Index (EWW) identifies this winter as the third most severe since 1960. Following similarly severe winters over the past 50 years the median difference between 2Q and 1Q GDP growth was 4.5ppt."
Key Quotes
"However, in both cases there are mitigating circumstances. While we believe poor weather has been a major culprit behind the US soft patch, the Chinese New Year is thought to have distorted Chinese data. Given the US weather is set to improve in March and the Chinese New Year is now more than a month behind us, it is safe to assume that investors will be reading much more into the March data."
"There is much at stake. If US and Chinese data both begin to improve, global fixed income, especially US Treasuries, could be looking at a rout in 2Q14. The US-China relative growth momentum will matter too, especially for FX crosses like AUD/CAD and BRL/MXN (Chart of the Day)."
"With respect to the US, the February non-farm payroll has strengthened our view that data is set to improve in March. The number of people out of work due to the weather jumped above 600k, more than in January and December combined and the highest reading since Jan 2011 (886k)."
"If there is anything we can learn from 2011 is that February job growth that year was 100k high than in January. Our new Extreme Winter Weather Index (EWW) identifies this winter as the third most severe since 1960. Following similarly severe winters over the past 50 years the median difference between 2Q and 1Q GDP growth was 4.5ppt."