Overseas Headlines – June 19, 2017



Tight U.S. labour market should push inflation higher: Fed’s Dudley

U.S. inflation is a bit low but should rise alongside wages as the labour market continues to improve, allowing the Federal Reserve to continue gradually tightening U.S. monetary policy, New York Fed President William Dudley said on Monday. “This is actually a pretty good place to be” with unemployment at 4.3 percent and inflation at about 1.5 percent, Dudley, an influential policymaker and close ally of Fed Chair Janet Yellen, told a chamber of commerce in Plattsburg, New York. “We are pretty close to full employment. Inflation is a little lower than what we would like, but we think that if the labour market continues to tighten, wages will gradually pick up and with that, inflation will gradually get back to 2 percent.”




Euro Outlook Clears as Funds Turn Bullish First Time in 3 Years

With political risks in the euro area receding, investors are becoming more confident in buying Europe’s shared currency. CFTC data showed last week that leveraged funds increased their euro positions to “net long” in the week ended June 13 for the first time in more than three years. The euro is the top-performing Group-of-10 currency versus the dollar this year, climbing more than 6 percent and set for its biggest annual increase since 2007.  J.P. Morgan Asset Management has increased its exposure to the euro and European equity markets in the past few months, while Western Asset Global Mgmt Ltd., which has been underweight the shared currency since 2011, began buying it in December and boosted its position through April. Robeco Groep NV, which oversees 150 billion euros ($168 billion) of assets, said last week it opened a new long position in the shared currency versus the pound. Emmanuel Macron’s victory in French parliamentary elections, an agreement between Greece and its creditors to release new loans and the defeat of the anti-establishment party Five Star Movement in the local vote in Italy are making investors more confident on the outlook for the shared currency.




China’s month-on-month home price growth remains robust in May

Home prices levelled off in China’s biggest cities in May but continued to climb nationwide, indicating demand remains resilient despite a series of government measures to keep the market from overheating. Firm price gains highlight the challenge Chinese authorities face in calming a frothy market without disrupting the economy, in which real estate is a major driver of growth. Economists say the pace of price growth across different market tiers clearly shows a passing of the baton from the centre to the regions. They also fret over still-rising prices against an already high base, saying upward price pressure remains. “While a moderation in price growth in first- and second-tier cities shows the curbs had some effects, we must note that prices are still rising with new unit prices at record high levels,” said Sam Xie, head of research at property services provider CBRE China.