David Powell (London, UK) is a Senior Economist at Bloomberg LP based in London where he writes the daily Bloomberg Brief on economic developments in Europe, as well as publish a weekly Bloomberg Currency Chart Book with analysis of foreign-exchange market, forecast macroeconomic variables for the euro-area and G-10 exchange rates, present views on the European economy and currencies to Bloomberg clients around the globe, write real-time analysis of European economic indicators for Bloomberg First Word, and discuss economic and financial market developments on Bloomberg TV. Prior to this David was a G-10 Currency Strategist, Vice President at Bank of America — Merrill Lynch where he forecasted G-10 FX rates with primary responsibility for Norway, Sweden, Switzerland, and the UK, presented the views of the currency strategy team to the European client base and internally, developed trade recommendations based on fundamental and technical analysis, contributed analytical pieces to the weekly and monthly publications of the global FX strategy group, wrote morning commentary on the currency markets and verbally delivered to the trading floor and analysed high frequency economic data for the FX traders and sales force. He holds a master's degree from the London School of Economics, where he wrote his dissertation on the creation of monetary union in Europe, and a bachelor's degree from New York University.

CHAPTER 1

Introduction 1

CHAPTER 2

Gross Domestic Product 5

The Expenditure Approach 5

The Output Method 10

The Income Method 11

GNP vs. GDP 11

Release Schedule 12

Trend Growth 15

The Business Cycle 16

Monetary Conditions Index 19

Effects of Monetary Policy on GDP 19

Effects of the Exchange Rate on GDP 21

Exchange-Rate Defl ators 23

CHAPTER 3

Coincident Indicators 27

PMI Surveys 27

Industrial Production 31

CHAPTER 4

Leading Indicators 35

Financial Conditions Index 35

The U.S. Business Cycle 38

ZEW Survey 39

Ifo Survey 41

M1 Money Supply Growth 52

CHAPTER 5

Inflation Measures 57

Consumer Price Index 57

Producer Price Index 63

Labor Costs 65

Money Supply 68

Inflation Expectations 76

CHAPTER 6

The European Central Bank 83

Traffic Light System 86

Mandate 88

Two-Pillar Strategy 90

Monetary Policy Implementation 91

Intervention in the Currency Markets 93

Taylor Rule 95

CHAPTER 7

Other Institutions 101

Council of the European Union 101

European Parliament 102

European Commission 102

Ecofin 103

Eurogroup 103

European Council 104

CHAPTER 8

Euro Crisis 105

Origins 105

Optimal Currency Area Th eory 109

Fiscal Consolidation 111

Quantitative and Qualitative Easing 112

Government Bond Purchases 115

Measures of National Solvency 117

Target2 Balances 121

Resolution 123

Departure from the Euro Area 127

Tools for Analyzing Debt Sustainability 127

CHAPTER 9

Germany 133

Labor Market 133

Political Institutions 137

Political Parties 139

CHAPTER 10

France 143

CHAPTER 11

United Kingdom 145

The Bank of England 145

Quantitative Easing 153

GDP 155

Inflation Measures 157

House Prices 158

Political Institutions 164

CHAPTER 12

Switzerland 167

The Swiss National Bank 167

KOF Leading Indicator 168

CHAPTER 13

Sweden 171

CHAPTER 14

Norway 175

Bibliography 179

Index 197

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