Should Euro-Area Exporters Worry About a Weaker Yen?

Darren Williams (pictured) and Guy Bruten As the yen continues to plummet, exporters around the world are growing concerned that Japanese rivals may gain a competitive advantage. But our analysis suggests that the euro-area economy may not be quite as vulnerable as widely perceived. 

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Rising Asset Prices Sharpen US Policy Challenge

As the housing market wakes up and the stock market rallies, strong gains in asset prices are improving US household wealth and helping to reduce the federal deficit. This is a great boost for confidence, but it also sharpens the challenge facing US fiscal and monetary authorities.

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Likely Rate Cut from the European Central Bank Will Be No Magic Wand

Disappointing April data suggest that the ECB is set to cut the refinancing rate at Thursday’s Council meeting. This is likely to have limited economic impact but  could encourage expectations of more creative policy action later, helping to take some upward pressure off the euro.

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China’s Uncertainties Won’t Stop Renminbi’s Rise

Recent data releases and the transition to new political leadership have created some uncertainty about China’s short-term economic outlook. While positive growth surprises are unlikely in 2013, we still think nothing can stop the long-term appreciation of China’s currency, the renminbi (RMB).

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Cyprus Averts Disaster, but the Price is High

The European Union’s last-minute deal with Cyprus has headed off bankruptcy for now, but comes at a heavy price for uninsured bank depositors. Meanwhile, the move to impose losses on private creditors and growing complacency among policymakers could be storing up trouble for the future.

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Little Cyprus Sparks Big Contagion Fears

The situation in Cyprus is still very fluid and very serious—perhaps more so than in Greece last year. While the country may be too small to have a meaningful direct impact on the rest of the euro area, the big issue for markets is the potential for contagion to more systemically important countries.

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UK Budget: No Fiscal Consolidation, but Looser Money Ahead

We expect little change in UK fiscal policy in Wednesday’s budget. Instead the Chancellor George Osborne may try to nudge the Bank of England towards more aggressive monetary easing, putting further pressure on the pound.

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Shadow Banking Darkens China Policy Outlook

Chinese government measures to cool the property market last week could be the start of a broader tightening campaign. The “shadow banking” industry might be next in line for action.

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US Manufacturing Restores Competitive Vigor

The US manufacturing sector has repeatedly figured out how to reinvent itself when faced with competitive threats. In recent years, American companies have become much leaner, regaining an edge in global markets that should lead to a bigger role in economic growth.

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Fed Must Tune in to Changing US Economy

With each passing month, more questions are being asked about the sluggish US economic recovery. Why has growth been subdued since the recession ended in mid-2009? What’s changed in the economy? How long can loose monetary policies persist before promoting more inflation or creating a new bubble?

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