By Alfonso Esparza
The tale of two recoveries continues in Europe. The British economy continues to outpace the Bank of England’s forecast. Governor Carney did not offer any further guidance and the market continues to lose faith on a central banker that continues to get the English economy wrong. Carney might be right to be cautious as some of the recovery could be on shaky ground, but the fact is that compared to continental Europe the UK recovery story is strong.
France is the poster child for a struggling economy. Employment and manufacturing are weak. Prime Minister just got involved in a infidelity scandal which won’t help matters domestically. Spain and Italy continue to tout success in stopping the contraction but admitting the road to growth is a long one.
The EUR/USD had a lot of built in expectation around December’s NFP. Bernanke sparked a dollar rally by starting the bond-buying taper in December as what was his last FOMC. The EUR bounced back after a disappointing NFP which is not great news for European exporters that have been squeezed by the strength of the currency. Employment was a key indicator for the Fed, but people leaving the work force has improved the indicator, but not the overall health of the US economy.