The week ahead 2/18

EU Slowdown:
British unemployment stayed at 4% today with claimant counts being revised lower than expected. Construction output in the EU was not as upbeat, coming in lower than estimates. Thursday will see the EU PMI numbers come out which have been slowing down to the 50 range over the past 6 months (a number below 50 denotes a contraction). As Germany is flirting with a technical recession and Brexit looming, it will be important to see how the EU is affected by these trends. Some countries are better prepared for a slowdown (US) or have the ability to take decisive action fiscally and monetarily (UK), the Eurozone could struggle with the sense of unity and political will to counteract a slowdown.

US monetary policy:
As mentioned, the Fed has been raising rates in the past and now stands in a holding pattern to monitor the slowing growth around the globe. On Wednesday the FOMC minutes should shed some light on the recent trend towards monitoring the impact of past rate increases. An important measure is the change (if any) on the balance sheet reduction program. After buying up $4.5 trillion of assets during the financial crisis to boost liquidity, the Fed has been reducing the amount of assets it holds by about $40bln a month. A change in the level that the Fed sets as neutral will be important to the stability of debt levels and the Dollar.