• FED keeps rate in last meeting, suggesting econ activity has slowed with household spending moderating. Minutes of the meeting suggested a June hike in interest rates is feasible and raised short term rates;
  • Even though GDP Q1 grew only by a 0.5% annualized rate, Retail Sales grew by 1.3% from March to April with Housing Starts growing by a 6.6% annualized rate in the same period;
  • With the Core CPI in the last two months above 2% the numbers raised expectations of an interest rate hike sooner. With Brexit in the air we do not expect a rate hike in June but one or two 0.25% hikes are likely in the second semester. It will be data dependent;
  • Better econ numbers led to a small USD valuation;
  • GDP is now expected to grow around 1.5% in the current year;



  • New bank loans contracted by 59% in April, with imports falling 11.5% and even exports falling by 1.8%. Retail sales, Industrial Production and Fixed Investments all grew less than expected in the month;
  • Capital outflows more contained with sales of FOREX by Chinese banks reduced by 50% in April to $3.22 billion;
  • Total debt outstanding at 240% of GDP is still a major concern in the long term but unlikely to be addressed in the short term;
  • The economy is definitely contracting and growth in the year may be reduced to slightly less than 6.5%



  • Even though GDP Q1 grew by 0.6%, it is still much dependent on the ECB. Retail Sales and Industrial Production are still in negative territory;
  • Lending to corporations and households is picking up and will be stimulated by corporate bond buying by the ECB starting in June;
  • Deflation was back in April but the Euro seems quite stable after much of the short positions were closed. The more stable Euro helps growth;
  • Europe is struggling but GDP should grow about 1.5% in the current year.