As the ECB carries out their QE program to buy government & corporate bonds, money would have to flow to other instruments. These instruments can take in the form of physical assets, dividend paying stocks, high yields etc.
** European equities pay high dividends, Yield on SPDR Euro Stoxx50 ETF is 5.91%
** Main laggards in European equities includes Spain & Italy
Notice how the volume increases in 2015 after QE has been implemented and as government bond yields decrease, activity picks up in other areas such as equities.
Great thread. Looking forward to learning more about fundamentals and how they affect various markets.
Things I'm watching -
AUD
RBA is expecting to decrease interest rates: additional decline to labor market due to transition from resource based economy to service based, employment growth has been in predominantly part time jobs, low wage growth, stagnant household income growth, increasing home price pressures due to domestic demand. Is/has Australia's economy peaking/peaked and is now on a decline?
CAD
BOC is expecting to decrease interest rates by end of 2016: economy is adjusting to low commodity prices, transitioning from a resource based economy to service based, weak US demand for exports, real GDP expected to increase however revised down, downward revisions to investments and exports, inflation expected to reach 2% in 2017. How long will Canada's economy continue to decline? Will it bounce as soon as US demand picks up?
GBP
BOE expects interest rates to decrease by end of 2016: implemented a QE like program buying corporate and government bonds, likely to see weak GDP growth in next quarter.
USD
FED expects to raise interest rates by end of 2016: waiting on positive labor market data, waiting on positive inflation data, hawkish comments made by multiple members.
Due to these central bank points I am watching AUDUSD and GBPUSD for short opportunites, and USDCAD for long opportunities for the rest of the year and into 2017.
