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Fri Sep 13, 2019 11:53 am
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Central banks or economic data .. Who moves markets this week?
Economy News Baghdad
From time to time, there is a week of disclosing many data that will be of great importance to the markets, but they do not interest markets because investors and traders only care about the amount of liquidity pumped by central banks.
This week could see such developments, which could lead to continued frustration for those who focus on the economic fundamentals, according to an analysis published by the Bloomberg OPINION economist Mohammed Al-Erian.
The flow of moving data is set to begin on Tuesday with the release of China Composite Manufacturing PMI data.
These figures will illustrate the pressures facing China's economy, which is intensifying a tug-of-war between the urgency of greater stimulus measures and the long-term need to steer the engines of economic growth.
The message from China's composite PMI is also likely to be contrasted with forecasted economic data in the US: the jobs report to be released on Friday.
The report is expected to show a steady increase in recruitment and wage increases will remain above 3 percent, underscoring the message given by the preliminary reading of second-quarter GDP growth data last week that the US consumer remains an important and reliable engine for the economy.
The differences in the two countries' data highlight the continuing difference between the more important economies in terms of regulation.
This has pushed the US dollar higher, and has caused a tough US approach to trade policy.
As trade negotiations resume in Beijing on Tuesday, the United States is expected to continue to highlight its superiority and advantage in the conflict.
But the best that could result from those discussions could be a longer truce that would prevent further tariffs and corporate restrictions in China.
With little prospect of a breakthrough in the negotiations or a collapse of the talks, the Federal Reserve is likely to announce on Wednesday a cut in interest rates by 25 basis points (0.25 percent).
The US central bank may keep the door open for further cautious action in the coming months, adding to the marked shift in monetary policy over the past eight months.
The Fed's decision will be a disappointment to market expectations for a 50 basis point cut in interest rates for further price rises that are holding record levels and driving interest rates at already low levels to the downside.
The Fed's decision would also confuse traditional groups that favor the Fed's policy decisions on rational economic rationales.
As European Central Bank President Mario Draghi unintentionally revealed at his press conference last Thursday, policymakers are far from consistent, and many are uncomfortable with the idea that markets are pushing them to take action that is not sufficiently supported by data and political conviction.
For a good reason, it is increasingly recognized that a prudent approach to central banks constantly puts the future of financial stability at risk, and that their short-term stimulus measures are less effective in promoting real economic growth (excluding the effect of inflation) and nominal (including all variables).
This week will also witness a meeting of the Bank of England monetary policy committee in the face of a more complex economic and political environment.
On the one hand, the outlook for direct investment and economic growth is further uncertain because of the high probability of implementing the difficult brix as Joris Johnson takes over as UK prime minister.
On the other hand, with the pound weakening, the Bank of England can not rule out the possibility of an acceleration of inflation in the short term.
No matter what data is revealed in this busy week, two contradictions are likely to continue.
Europe: Key data released and monetary policy meetings will fail to raise the exceptional uncertainty in the global economy.
Second, markets will ignore the contradictory signals because they are confident that central banks will continue to isolate the market from economic reality.
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