Currency Rebalancing Games
Out of the AAA central banks, Norges, the RBA and BoC all meet this week. Concerns about housing markets and the general economic weakness of their main export markets aside, investors will be keen to see assess their respective views on the currency and just how much it serves as a headwind right now to their own economies. Although a strong currency is sometimes welcomed as a tightening measure for housing and deterrence for future capital inflows, the disinflationary impulse and impact on competitiveness cannot be ignored. The former is now a key component in policy decisions, the latter a trickier one as broaching the topic tends to lead toward a slippery slope towards currency war talk.
Read the full report: UBS