Morning Commentary:Not Thinking About Thinking

Foreign Exchange - Morning Commentary
Not Thinking About Thinking
Share this story:
David Atkinson
David Atkinson
Foreign Exchange Sales Manager
This is how Fed Chair Jay Powell put it yesterday at the Fed’s post-FOMC press conference regarding the committee’s attitude on raising interest rates:  it ain’t happening anytime soon.  In fact, the dot plot consensus has rates on the floor through 2022.  So much for anyone looking to put savings to work.

The Fed will also continue to employ its programs to support the economy, which it sees as struggling for a long time.  The Fed started out the year thinking that GDP would be at +2.0% for Q4 of this year.  Now it expects a drop of -6.5%.  It expects a rebound of 5.0% in 2021 and further growth of 3.5% in 2022, but by the time we get there, the Fed projects that the US economy will be only +1.6% above pre-virus level.  In addition, unemployment is expected to still be in the 5.5% range by the end of 2022.

This is in line with what we discussed yesterday regarding the ECB’s forecast of a -8.7% plunge in Eurozone GDP for this year, followed by a recovery of +5.2% next year and +3.3% in 2022.  The OECD expects a global GDP drop of -6.0% this year, which could be worse if Covid comes back with a vengeance.

Bizarrely enough, the bad news for the US, though widely expected, gave a boost to the US dollar 1-2% against many counterparts, with the Japanese yen and Swiss franc notable exceptions.  These currencies are safe havens like the USD and tend to do well is risk-off environments.

Initial jobless claims came in today at 1.54 million, in line with expectations but reminding us that horrifying economic data almost feels numb to us by now after being punched in the gut enough times.  There was a little inflation in PPI – a +0.4% rise versus the +0.1% expected, which is actually a good thing in that it indicates at least some life in the economy at the producer level.  We’ll see if this makes it through to the consumer level.

Tomorrow’s Global Perspectives video will flesh out the US dollar dynamics a bit more in the context of world trade, and how this bleeds over into economic class and inequality. 
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2020 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?