India cuts outlook again.

India's growth will decelerate this FY to 5% from 6.2% last year, the statistics ministry has said in a forecast that is lower than a recent finance ministry outlook of +5.8%. The slowdown is due to continued weakness in manufacturing and farm output, with the economy being hampered by a lack of reform, wide fiscal and current account deficits, and high inflation.

Ireland's hopes rise for debt refinancing.

A reluctant ECB is close to agreeing a refinancing of Ireland's debt after the country's parliament authorized emergency legislation to dissolve the former Anglo Irish and Irish Nationwide banks, now merged into IBRC, and sell their remaining assets of up to €14B to a bad bank. Dublin wants to lengthen the payment schedule of a €31B promissory note that helped support the failed banks.

BOE leaves policy unchanged.

The Bank of England has again left its monetary policy unchanged, with its benchmark rate staying at 0.5% and its QE program dormant. Next up very soon is the ECB. Meanwhile, future BOE Governor Mark Carney has been testifying before the U.K. parliament. "The bar for (policy) alteration is very high," he said, suggesting that the policy doves' dream of GDP targeting isn't such a sure thing.

Legendary investor Warren Buffett may well have fallen short of following the adage 'Practice what you preach'. Indeed, Buffett is renowned for the investment gems that he doles out annually in the Berkshire Hathaway annual reports. One such was the importance of sticking within one's circle of competence. This means that investors should invest only in those businesses that they understand and stay away from those that they do not. But it now seems that he may have forgotten his own advice. And this has become apparent with none other than his investment in the credit ratings agency Moody's.

A few years ago, Buffett admitted in a Congressional hearing that he didn't know much about credit rating agency Moody's or the credit ratings market in general. Yet, as of September 30, 2012, Berskhire owns 13% stake in it. And the value of this investment has plunged. Berkshire is likely to have lost around US$ 291 m on the same. It is no secret that credit rating agencies have come under fire for their role in the run up to the global financial crisis. Moody's rival S&P in particular is being investigated for allegedly inflating its mortgage bond ratings. Moody's may not necessarily face the same problem. But we wonder why Buffett would choose to invest in a sector which is notorious for problems relating to conflict of interest.

Source: The Economist

By how much do you think the Indian currency is undervalued vis-a-vis the US dollar? 10% may be. Or about 20% maximum. What if we tell you that as per a popular metric, the undervaluation is as high as around 60%? Hard to believe, isn't it? But that's what the Big Mac index seems to be indicating. In fact, as per the index, India has the most undervalued currency amongst the major economies of the world. The index, that forms its exchange rate based on the price of a standard McDonald burger in each country, is of the view that an exchange rate of Rs 20.4 to the dollar will buy you the same burger in US that you buy in India. Of course, this exchange rate cannot be fully relied upon but what is also true is that on purchasing power parity basis, India does punch above its weight in the economic pecking order.

Euro Rallies To Highest Level Since 2011.

Recent data has been showing that Europe's economy may be improving and this has helped to boost the Euro.

As a result, by Friday the Euro had reached it's highest level as against the Dollar since November 2011.

A gauge of manufacturing in the Euro region in January had risen the most in nearly a year.

The ECB's balance sheet was reported to have fallen to 2.93 trillion Euros ($4trillion) in the week ended 25th January. This was its lowest level in a year and the central bank has refrained from purchasing any sovereign debt for 45 consecutive weeks.

Banks had also managed to repay 137.2 billion Euros of emergency three year loans to the ECB, with a further 3.5 billion Euros expected to be returned this week.

Although an ECB meeting is scheduled for Thursday, most economists predict that the Central bank won't raise its 0.75% benchmark rate.

As things stand, the Euro's recent gains have been quite dramatic, with regular data in quick succession, indicating that Europe's economy seems to be stabilizing, and I foresee that, in the short to medium term, the Euro will continue to strengthen.

Earlier today, the Euro fetched $1.3623 while the Yen rose 0.4% to 126.21 per Euro and gained 0.1% to 92.65 per Dollar.

The Yen had declined recently against the Dollar for 12 straight weeks, its longest consecutive decline since 1971.

Japan's Prime Minister, Shinzo Abe, is set to pick a new central bank governor to boost monetary stimulus and this has seen the Yen take a tumble of late.

The Aussie rallied against most of its peers, having climbed 0.2% to $1.0428 and touched 96.79 Yen, its highest level to the Yen since August 2008, ahead of the Reserve Bank of Austria's (RBA) meet on Tuesday.

Most economists expect that borrowing costs will remain unchanged and for inflation targets to remain in a range between 2 to 3%.

Strengthening economic growth and rates staying on hold should be positive for the Aussie.

 

Deficit to drop to below $1T this year - CBO.

The deficit will fall to below $1T in 2013 for the first time since 2008, the CBO forecasts. Assuming that automatic cuts take effect in March, the deficit will drop to $845B in this year and then $616B in 2014. However, debt will continue to accumulate, taking the overall burden to $20T by 2023 and annual interest payments to above $850B. The CBO also predicts that GDP growth will slow to 1.4% in 2013 before accelerating to 3.4% next year.