CNBC Asia - The Rundown, May 2015

Who Wins with a Weaker Dollar?

René Nourse reports her insight on the weaker U.S. Dollar on CNBC Asia’s The Rundown, hosted by Pauline Chiou and Adam Bakhtiar.  

René Nourse: I was looking at the dollar and it appears to have peaked in March, so we’ve seen a pretty nice decline that will translate into some good numbers in the second half of the year, because multinationals have gotten spanked pretty badly in the first quarter of this year, and the fourth quarter of last year as well.

So now with the dollar taking a little bit of a drop, I don’t think it will go into a steep decline, but it certainly is going to lend and translate itself into some pretty good numbers here in the markets. And, it will also translate well into financials here in the U.S.

Pauline Chiou: It sounds like you are saying that you expect this rally to have long legs. But let’s look at some of the data that has come out recently. Retail sales have been pretty flat, job numbers are okay and the wage gains still not ticking up high enough. In your view, is the economy strong enough or well on its way to sustain some sort of interest rate hike in September or December?

René Nourse:  That’s a good question and there’s a lot more noise around that then what everyone is focusing on because it will have a very global rippling effect. That aside, it doesn’t seem that there is enough push yet to create the motivation for the Feds to move. I certainly was never in the camp that though they would move in June. September maybe, but I think it’s more likely towards the end of the year before we do that.

But on the flip side we did get some good employment numbers. Unemployment is down; it ticked down another notch. We are starting to see some wage growth across lower paying jobs and we definitely needed to lower that gap, because there was too much of a divide between lower paid workers and those in more technically skilled jobs, so that’s starting to percolate a bit.

Now for the retail sales, the markets were up to day despite the fact that we had flat sales. There was some very strong numbers that came out of some specific sectors in the retail market. Online sales did well, home improvement did well and even though auto sales were down, they’re still up significantly from where they were over a year ago.

Adam Bakhtiar: René, I’m just curious: how are you reading the tea leaves in terms of the polarization and market expectation about exactly what is going to happen with the short term interest rates? If you look at the bond tantrum, it’s telling you a completely different picture or message than what the consume market is. So how do you trade that?

René Nourse: You can’t really trade that. I’m still in the camp that we’re going to be lower longer, because there is not enough of a push yet to push the Feds to begin to do that. And that along with the fact that we are starting to see a decline in the value of the dollar. They have to tread this road very carefully because it is a global decision, so I’m looking at maybe much later in the year or maybe the first quarter of next year before we start to see any changes.