Policy Meetings In Focus
Over the weekend the IMF received pledges of “over $430 bn” from IMF member countries in a bid to bolster its crisisfighting resources. Although the G20 statement made it clear that the additional funds will not be ear-marked for any particular region, the intention is to have enough resources on standby to deal with any potential escalation in Europe. We doubt the euro will get much support from this news however given the final tally is very much in line with comments by IMF Managing Director Lagarde over the past week – remarks which the market didn’t react to at the time. There also appears to be an element of double-counting here given that Eurozone central banks had already announced their intention to contribute $200 bn back in December. Finally, investor attention is currently more focused on whether additional Eurozone countries will need external financing and whether the Eurozone’s own rescue facilities have the means to offer it. Both the pound and the euro gained ground on Friday, but this was largely a reaction to surprisinglystrong UK retail sales and a positive German IFO survey (the business climate component rose to an 8-month high). This week yen-watchers will focus their attention on Wednesday’s FOMC and Friday’s BoJ policy decisions. Our US economists believe it is too early for any directional change from the Fed, though the quarterly forecasts may be revised up by some of the hawkish members in a manner consistent with the less-dovish commentary seen of late. Our Japan economists expect a JPY 5 trn expansion to the BoJ’s asset purchase program. Today, China’s private-sector flash PMI has greater market-moving potential than Australia’s Q1 PPI estimate – last month’s weak flash PMI report undermined risk appetite for several days. Initial poll results based on an incomplete count suggest that Socialist Party candidate Hollande is on track to win the first round of the French Presidential elections with 28% of the vote. The second round will be held on May 6th.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank