Interest rates are likely to continue lower on increasing fears Europe is facing defaults from Greece and increasing likelihood Greece will depart the EU. If Greece were to exit the EU it may set up a domino effect with Ireland, Portugal and Spain to follow. Europe’s attempt at severe austerity efforts to bring countries” fiscal spending under control has failed. In Germany over the weekend Angela Merkel’s party suffered another defeat in local elections, last weekend another local election went against her. Germany is the rock in Europe and voters are showing their resistance to any additional help from the country. In Greece over the weekend the attempt to form a coalition government has failed leading now to another general election. Most Greeks are rebelling against the austerity pledge Greek officials agreed on a few months ago.
This week after a week with little domestic economic data, there are a number of key data points on Tuesday, Wednesday and Thursday. April reports for the most part; Retail Sales, Consumer Price Index (CPI), Housing Starts and Permits, Industrial Production and Factory Use, the Philadelphia Federal Reserve May Index. The minutes from the 4/25 Federal Reserve Open Market Committee (FOMC) meeting will get a lot of focus, looking for clues about another possible QE. We expect the Federal Reserve will not initiate another QE but there are many analysts and economists thinking the Federal Reserve will ease one more time. If the Federal Reserve were to ease again it would likely have to happen at the next FOMC meeting in June, after that the Federal Reserve will likely refrain with elections coming in November.
