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Weekly Economic Insight - 24 June 2019

Macro Highlights - 6/26/2019

Highlights of the week

Economist insights: The Fed adopts a downwards bias, eurozone PMIs are up but the ECB’s tone is even more accommodative, US housing market data shows an improvement

US Federal Reserve

  • The Fed fears that trade tensions should intensify further and stands ready to act if the meeting between Donald Trump and Xi Jinping, during the next G20 summit, fails
  • As it expresses greater prudence, but is still confident about the outlook of the US economy...
  • …the Fed could, in the case of an - even partial - agreement between the US and China, wait until October 2019, when it will resume its net Treasury purchases, before lowering its key rate, if necessary

Eurozone

  • The composite PMI was up once again in May and, at 52.1, reached a seven-month high, which supports our scenario of a slight acceleration in GDP in the eurozone
  • However, despite the slightly more favourable trend of the surveys in the past few months, Mr Draghi once again made his tone more dovish, by indicating the possibility of new monetary easing…
  • … as the ECB, like the Fed, is worried about the trade tensions. In the case of a China-US agreement, even a partial one, there would be less urgency to implement new measures

United States

  • While residential investment showed a y-o-y decline of -3.3% in Q1 2019, housing market activity could strengthen slightly…
  • … as, notably, 30-year mortgage rates have dropped sharply, applications for new mortgages have rebounded and new home sales have reaccelerated
  • In addition to these drivers, structural factors, such as the low supply of existing homes, the growing number of new households and their relatively low indebtedness come into play

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