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Forex Flash: South Korean Household debt to hit record high - Nomura

FXstreet.com (Barcelona) - Nomura economist Young Sun Kwon notes that Korea's household debt rose faster than income growth in 2012, suggesting that there has been no deleveraging in the household sector and that the policy rate is accommodative.

He begins by explaining that Korea's household debt-to-disposable income ratio hit a record high of 157% in 2012, from 155% in 2011, which is in stark contrast to the US, where the ratio fell further to 103% in 2012, from 111% in 2011. Since the 2008 global financial crisis, he notes that the US household debt-to-disposable income ratio has fallen by 24 percentage points (pp). In Korea the ratio grew 19pp over the same period.

Additionally, Young adds that on 1 April 2013, the Korean government announced measures to boost the property market, including property tax cuts, deregulation of mortgages, financial support to first-time homebuyers, and measure to reduce housing supply. He writes, “We expect Korean house prices to bounce back, supported by government efforts. Korea‟s household debt-to-disposable income ratio should rise further, making policy rates more accommodative. We acknowledge strong political pressure on the Bank of Korea to cut rates, but we still see a 55% likelihood of no more rate cuts through 2013.”

Forex Flash: European focus falls on ECB - BTMU

Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that in addition to the BoJ meeting, eyes will be focused on the upcoming ECB meeting too.
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Forex Flash: ECB could alter policy after bad enough data in April – TD Securities

TD Securities analysts said that the ECB’s dilemma is that the underlying premise of their policy is being questioned, as growth in the first half of 2013 has been a write-off as expected. “In fact, Eurozone hard data (IP, retail sales, international trade, etc.) published since mid-November has trended no better than in-line with expectations. The upside surprises we saw last autumn, as financial conditions improved, failed to be either as strong or as long as would be normal for the improvement in financial conditions that we saw”, wrote analyst Richard Kelly, adding that the ECB’s transmission mechanism was broken and it seems to have leaked out of the system.
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