Ovish Fed Speakers Continue To Push Assets Higher

Published 03/05/2013, 04:47 AM
The divergence between fundamental data and asset prices continues onwards with Asian shares higher overnight as the favourite to succeed Ben Bernanke as Fed Chair spoke of her continuing support for monetary stimulus. Janet Yellen sounded possibly more dovish than Bernanke did last week with USD weaker as a result. In a speech last night she emphasised that she “did not see any costs that would cause me to advocate a curtailment of our purchase program” and that she “view the balance of risks as still calling for a highly accommodative monetary policy”.

Equity markets are also leaning higher in Europe this morning despite the obvious fears over the services sectors in the Eurozone and, disappointingly, here in the UK as well. Services PMIs are expected to show further contraction in all Eurozone nations apart from Ireland and Germany. Normally this is where we would say that the UK services sector is also expected to see growth in the month of February but with the most recent PMIs from the manufacturing and construction sector being so supremely disappointing there are no guarantees.

Figures released earlier this morning have been encouraging however, with the British Retail Consortium confirming that sales rose by 2.7% in February against a 1.0% expectation. This has helped extend the slight relief rally that sterling has been going through in the past 24hrs following its calamitous start to 2013.

A busy week of central bank news has started tamely overnight with the Reserve Bank of Australia stood pat on interest rates with AUD rising as a result. In the accompanying statement Governor Stevens emphasised that the “easier conditions are having some of the expected effects” following 125bps of cuts in the past 12 months. AUD is still expected to fall through parity against the USD within the next quarter.
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