Euro takes a nose dive (video)

On Monday night (18 May), senior European Central Bank policymaker Benoît Coeuré told a room full of bankers and hedge-fund managers in London that the ECB will speed up its asset-buying programme before a summer lull.
 
Mr Coeuré’s remarks have caused some controversy. Investors were upset that he spoke only to a select audience, rather than in a more public forum, and that his comments weren’t widely publicised until yesterday (19 May).
 
The news sent the euro sharply lower yesterday and it stayed under pressure because of the lack of progress made on Greece’s bailout. Mrs Merkel and Mr Hollande are pushing for a solution with renewed urgency: Greece’s next repayment instalment is due to the International Monetary Fund on 5 June, and that seems to be seen as an absolute deadline for a deal.

 
Economists to the UK: Enjoy deflation while it lasts
 
The UK’s Consumer Prices Index (CPI) data came in lower than expected, at -0.1% against an expectation of 0.0%. Negative inflation (or “deflation”) has finally arrived in the UK for the first time since records began – the last time the UK experienced it was in 1960.
 
Although deflation is considered extremely dangerous for a nation’s economy, most analysts and economists agree that the UK’s non-existent price pressures aren’t here to stay. Like George Osborne, their message to us as consumers is that we should enjoy deflation while we can.
 
According to Bank of England Governor Mark Carney, this isn’t the “bad”, harmful deflation caused by weak spending and falling incomes. Rather, this is the deflation you get when food and oil prices are more affordable.
 
The CPI result will probably confirm the Bank of England’s view that interest rates should remain low for the time being. The Bank of England’s minutes (out today, 20 May) will likely show unanimity on the decision to keep interest rates unchanged, and this could push down the pound. 

 
US finds shelter in housing sector
 
The market will look closely at today’s Federal Open Market Committee meeting to figure out where the Federal Reserve now stands on rate rises.
 
Yesterday’s US housing starts provided some much-needed relief to investors. The news from the housing sector was better than expected, as US home building surged in April to its highest level since before the recession. Housing starts rose 20.2% – the highest reading since November 2007.

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