• ECB governor Nowotny says recent “stream of good news” means he “would not see many arguments now for a rate cut.”
  • Indian Finance Minister Palaniappan Chidambaram and Reserve Bank Governor Duvvuri Subbarao held a press conference. They said that India has no intention of imposing capital controls (i.e. further capital controls — they have already imposed them on domestic residents). They have two policy goals — growth and control of inflation — and effectively only one policy lever in central bank rates. The policy of increasing short-term rates while buying ten-year bonds to flatten the yield curve makes no sense, and is sending ambiguous signals to the market. That is why INR continues to fall.
  • Brazil has launched a $60bn currency intervention programme. There will be $500m a day of currency swap sales to support BRL between Mondays and Thursdays, and $1bn sold on the spot market on Fridays. The purpose of this is apparently to “reduce volatility”. But the government also talked about a stronger USD being good for Brazilian exports. That suggests that the purpose of this programme is merely to prevent a precipitous decline, in order to mitigate the short-term costs of a currency adjustment. It strikes me that it might be cheaper, and more effective, to make a strong commitment to a crawling currency floor for BRL.


  • Initial claims 336k d.e. and rose.
  • US flash PMI 53.9, d.e. and rose a little. New orders were strong at 56.5, increasing a little from the previous month. New export orders slowed slightly to 52 from 52.5.
  • China FDI increased 7.1% YTD/Y Jul. YTD/Y is a slightly strange basis on which to present figures. This was the strongest number since early 2012, although rather below the double-digit rates seen in 2010 and 2011.

Coming Up:

  • UK second estimate of Q2 GDP.
  • US new home sales.
  • US durable goods orders (Monday)