Chart of the Day
The ECB was fairly dovish yesterday, and most economists think it will continue buying assets well after the Fed has tapered QE. That means the ECB’s balance sheet will continue to rise – it is already equivalent to 68% of the region’s government debt, far more than in the US where the Fed’s balance sheet is only equivalent to 22% of the overall public debt load.
Macro
US initial jobless claims surprisingly rose to 419,000 last week.
The US conference board leading indicator appears to be turning down.
Eurozone consumer confidence remains above the long-run average after it improved in June.
Markets
The ECB’s policy announcement sent the euro down against most currencies.
The euro’s recent weakness has partly been due to broad USD strength – the GBP has also depreciated against the USD lately.
While the euro has weakened against the USD, it has been rising against the more cyclical currencies.
Are credit trends in China a sign the EUR will fall further against the USD?
It might be down significantly since its peak, but if you bought lumber at the recent low, you’d be up 30% in the past few days.
The Baltic Dry Index has fallen by 2.6% in the past week, potentially a sign that overall freight rates are topping out.
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