| The Week Ahead - 22 - 27 agossto 2011 |
 With markets firmly back in “risk-off” mode, attention will focus on policymakers’ reactions, be they politicians or central bankers. Fed Chairman Ben Bernanke will give his headline speech at the Jackson Hole conference next Friday with financial markets listening as to how he feels support can be given to the economy. Bernanke may raise the prospect of further stimulus through quantitative easing. However, he previously argued that QE was a tool to fight deflation and this is at odds with core inflation likely pushing above 2.0% in the next few months. Other central bankers will also be speaking at this event, including ECB members with their views on bond buying and the potential for a policy reversal in the form of interest rate cuts in clear focus.Comments from politicians will also be closely followed. Last week’s Sarkozy-Merkel meeting was not expected to deliver much, but the tone of the press conference clearly dampened hopes that we could get a concerted agreement to solve the crisis anytime soon. Indeed, the common eurobond remains a pretty distant prospect based on their comments. President Obama has offered more hope of domestic help for the US, raising the prospect of an extension of tax cuts, offset by more aggressive spending cuts. Datawise, US GDP revisions are likely to show a slight downward move based on much weaker trade numbers, offset by slightly higher consumer spending and industrial output. University of Michigan sentiment and durable goods orders will remain under downward pressure. In Europe, the key data will be the German Ifo and Eurozone PMI numbers, which are likely to fall fairly sharply. The strong yen and weaker domestic demand could drive renewed deflation in consumer prices in Japan. In Turkey, the CBT’s rate decision will be a highlight after the 50 bps rate cut in the interim meeting on August 4th. We expect flat rates until year-end, followed by 50 bps in hikes in 4Q12. On the TRL side, the CBT will not touch TL RRRs until it sees the full impact of the last rate cut, in our view. July IP and CPI data are highlights from Asia ex-Japan. In Thailand, we have an MPC next week. The domestic market is probably set up for a rate hike and so an unchanged rate decision may cause a bull steepening of the Thaigb and IRS curves. The offshore market is less convinced, however. This is similar to the situation in Malaysia, with onshore betting on a hike and offshore not. For choice, given the risks are that we will not see a rate hike and given that I do not see a reason why offshore investors will disinvest, I have to think that Thaigbs will fare well near-term. |
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