ECB: What is Next?

Despite the unstable economic environment, the worst might be over in the United States and in Europe. As a result, rates should remain on hold for some time and then climb again along with the economic expansion. The U.S. dollar is moving away from the lows of the past days, but the medium term trend remains bearish for now.
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U.S.: The economic picture improving The economic picture is improving in the United States, as both housing and consumes appear to be designing a bottom at current levels. With about half USD 300 billion of long Treasuries and USD 1.45 trillion of Agency debt still to be bought out, the Federal Reserve will keep rates steady for now. However, rates should then rise, once the economy growth will become more incisive. During his testimony on Capitol Hill, Mr. Bernanke anticipated an increase in unemployment and announced that the Fed is holding less U.S. Treasures than before the financial crisis started. In effect, the job market remains weak, although the pace of decline is slowing. In May, non-farm payroll slid by 345,000 (-500,000 expected) versus April’s fall of 504,000 and March’s -652,000. The decline was broad-based with the auto industry registering about 20% of the losses. The unemployment rate is now 9.4% from 8.9% in April. Personal income increased 0.5% month on month in April, while personal spending declined 0.1%. On a yearly basis, personal income is up 0.7% and personal spending is down 1.5%.