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Week Ahead: more horse-trading in US and EU
More politics and policy with US fiscal cliff talks, the Bank of Japan in the spotlight and the troika's struggle to make a deal on Greek finances.
Expect plenty more political negotiations in the week ahead with developments in Japan, the US and more capers in the eurozone.
The Bank of Japan will be dragged into the spotlight on Monday after the release on Sunday night of the minutes of its latest policy meeting. The minutes will be closely read by economists and investors to gain some idea of how the bank hopes to revive the economy.
The bank’s actions are becoming increasingly political as the country needs to inject inflation into its economy and politicians are stepping up pressure on the bank to take action.
In the US the Congress will meet again to discuss its budget and how to lessen the impact of the fiscal cliff impasses. Investors can expect a few more weeks of horse-trading between politicians before an agreement is reached and uncertainty could create more volatility in markets as we edge closer to the deadline.
Politics took centre stage in Europe again last week after leaders failed to reach any agreement on the EU budget. France was also catapulted into the limelight again as Moody’s downgraded the country’s credit rating from AAA to Aa1.
Efforts to strike a deal between the troika and Greece to unlock €44 billion in aid for the country failed for the second week in a row. As the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission refused to take haircuts, or write downs, on Greek bonds in exchange for a privatisation programme and more radical budget cuts.
Officials from the IMF, EU and ECB will meet with Greek prime minister, Antonis Samaras, again on Monday when it’s hoped they will reach some resolution on Greece’s finances. It’s expected the IMF will make concessions on increasing Greece’s target debt-to-GDP ratio from 120% to 124%.
In Spain over the weekend regional elections in Catalonia were seen as less likely to cause much upset for Spanish prime minister, Mariano Rajoy. Lower Spanish bond prices have bought the country some time and helped Rajoy avoid seeking a bailout.
Revised GDP figures will be released in the UK on Tuesday as well as US data on core durable goods orders and consumer confidence. New home sales figures in the US on Wednesday are forecast to be lower than at the end of October.
A sea of data is set to be released on Thursday with the publication of preliminary quarterly GDP figures, unemployment claims, and pending home sales in the US. Governor of the Bank of England, Mervyn King, is also due to talk at the release of the Financial Stability Report on the outlook for the country’s economy and financial system.
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