Better-than-expected new home sales and durable goods orders this week have reminded the market that not all US data is negatively impacted by harsh winter weather, notes CIBC World Markets in a note by Andrew Grantham, an economist at CIBC.
“There is a clear relationship between cold winters and sluggish trends in housing starts and retail sales. There is also a suggestion (albeit less clear than for starts and retail sales) that payrolls can be adversely impacted by cold February temperatures, such as those seen this year. But for the ISM there is little correlation, making us more confident of a rebound following January’s surprisingly low reading,” CIBC argues.
“While US data and the greenback won’t fully warm up until the spring, there will be enough pockets of good news in the meantime to keep the Fed on the taper trail and prevent near-term US$ weakness,” CIBC projects.
Meanwhile CIBC argues that the EUR support from inflows into the Euro Area will likely start to fade over the coming months.
“Over the past year or so, investors looking for better yields have been able to find it in Eurozone peripheral debt. The first few brave souls profi ted very well. But then the idea went global, and as a result the spread between peripheral bond yields and bunds is now not that much higher than it was before the Eurozone crisis escalated,” CIBC notes.
“Investors looking for yield will have to look elsewhere. As a result, inflows into Eurozone bonds will likely tail off, leaving the euro more vulnerable to downside pressure,” CIBC projects.
