In today’s briefing:
- Hong Kong Dollar Carry Trade and Its Influence on Hong Kong Market
- EUR-flation Watch: Hands down, I was wrong..
- Macro Nugget: Trillions of USDs waiting to be unleashed
- Policy Watch – How well is Russia doing?
- UK Housing Shock Has Blown Over Again
- CX Daily: China Overhauls Company Law
Hong Kong Dollar Carry Trade and Its Influence on Hong Kong Market
- Hong Kong Dollar (HKD) Carry Trade (CT) is an good leading indicator of the directional trend of the Hong Kong Market
- Recently the HKD CT has been trending to a less positive/flat position
- Hong Kong Aggregate Balance will no longer provide cushion against HIBOR rising due to the HKD peg system
EUR-flation Watch: Hands down, I was wrong..
- We had hoped for a soft European inflation report in February, but we have to admit that we were off.
- End of discussion.
- Rents, energy-tariffs / network-prices and a few wage heavy service categories continue to keep February inflation numbers elevated, albeit substantially lower than in 2023, and our nowcasts suffer a bit from changes in lead/lags on especially wage heavy categories.
Macro Nugget: Trillions of USDs waiting to be unleashed
- If we look at M2 trends (narrow money + time deposit / MMFs and similar assets), the broad USD measure remains a staggering 18% above trend with M2 nominally trending almost 4 trillion USDs above a long-term trajectory.
- The similar trend in EURs is much less extraordinary with M2 currently 7% above trend, which translates to a little more than 1 trillion EURs nominally.
- There is still a large excess of USDs in the systemSo where are those excess USDs parked?
Policy Watch – How well is Russia doing?
- In a few short weeks, Vladimir Putin will be announced the winner of the Russian Presidential election.
- As a formality, Russian voters will head to the polls between March 15th and 17th, but the result is predetermined: the man behind the ongoing invasion of Ukraine will lead Russia for the next six years in an unprecedented third term as President.
- But with sanctions mounting against the Russian economy – the latest of which were announced just this Friday by President Biden – how long can Putin sustain military aggression in Ukraine?
UK Housing Shock Has Blown Over Again
- Interest rate spikes in 2022 and 2023 rattled the housing market, but prompt reversals in market rates dissipated the shocks before they were adequately felt.
- UK mortgage rates are back to their lows from last spring, and approvals for new loans are higher than then. Lending values are set to turn positive again soon.
- The risk to economic activity and RPI inflation increasingly appears to have blown over, with housing depreciation troughing and MIPs unlikely to turn negative soon.
CX Daily: China Overhauls Company Law
- Law / In Depth: China overhauls Company Law
- Foreign companies /Foreign firms slow expansion plans in China, survey finds
- Bonds /In Depth: Behind the suicide of leading figure in shady fundraising practice
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