Fundamental Analysis
EUR
"We have to act so that growth becomes more robust and job creation more abundant"
- Francois Hollande, President of France
French President Francois Hollande declared "a state of economic emergency" to combat persistently high unemployment rate and increase his chances of re-election next year. Hollande pledged to redefine the nation's business model, unveiling a 2-billion euro plan to boost employment. Hollande's proposals include deregulation aimed at an encouraging companies to take on new workers, a bonus of 2,000 euros to small firms that hire young people, as well as training schemes for half a million people. Hollande's Socialist government has struggled to underpin French growth or lower chronic unemployment, which has remained around 10% for years. Since 2012, when Hollande assumed leadership, more than 600,000 people have joined the ranks of the unemployed. France recovered from three-year long stagnation last year, with economic growth of more than 1%, which appeared to insufficient to absorb young graduates seeking to enter the job market. Meanwhile, Italy, the Euro zone's third biggest economy, posted a trade surplus with the rest of the world of 4.409 billion euros in November, compared with 3.422 billion euros a year ago. The Italian economy is likely to grow 1.5% this year, driven by domestic demand, according to the European Commission.
GBP
"A given level of growth might be consistent with substantially lower interest rates than in the past. This environment might persist for years, even decades"
- Gertjan Vlieghe, BoE's policymaker
The Bank of England newest rate-setter Gertjan Vlieghe hinted that interest rates may remain lower for longer or even be cut if a slowdown in Britain's economy intensifies. Vlieghe, who joined the central bank's Monetary Policy Committee in September, said that he wants to see more clues that economic growth is holding solid and inflationary pressures are mounting, before voting for a rise in borrowing costs. Vlieghe's comments are likely to strengthen expectations in financial markets that the Bank of England will not immediately follow the Fed and raise short-term interest rates from record lows. Investors doubt the UK central bank will hike its key rate from 0.5% until mid-2017. In his comments, Vlieghe said pay growth appeared to have stalled, adding that he was not confident that annual inflation is moving towards the central bank's 2% target. Vlieghe said that heavy debt loads, ageing populations and rising inequality meant that interest rates in many developed economies should stay lower now than they were in the past to support growth.
BoE's Governor Mark Carney is due to address rate expectations in a speech later in the day. In July last year, he said decision on whether to hike rates would become clear around the turn of the year.
CNY
"Regardless of whether Q4 growth was 6.8% or 6.9%, we do not expect full-year GDP to change the evolving narrative about the weak state of global demand"
- PRC Macro Advisors
China's economy grew at the slowest pace in 25 years in 2015, increasing pressure on Beijing to act to address concerns of prolonged slowdown in the world's second biggest economy. In 2015, the Chinese economy expanded at a 6.9% pace, compared with officials' expectations for a 7% growth and down from 7.3% in 2014. In the final quarter of the year, GDP increased 6.8%, compared with September quarter's growth of 6.9%. To combat slowing growth, the Chinese government has unleashed a slew of easing measures, including interest rate and reserve requirement ration cuts from the PBoC. However, given a sluggish property sector, analysts predict further aggressive actions from officials, particularly in light of the Chinese economy's transition from a manufacturing-based export-reliant model to a more services oriented consumption. Moreover, the world's second biggest economy saw a difficult start to the current year, which included markets closure on two occasions as steep declines of more than 7% triggered market circuit breakers and a halt to trading, sparking jitters through global markets.
The International Monetary Fund expects a growth rate of 6.3% for China for both 2016 and 2017, compared with the previous growth forecast of 6.7%.
