Banxico looks through peso volatility and cuts The Mexican peso was on a rollercoaster ride this week. It was one of the hardest hit EM currencies in the market rout, briefly breaching 20/$ (the weakest level in over a year) in early hour trading on …
9th August 2024
Global markets appear to have stabilised at the end of a week which began with a nasty bout of volatility. But is the selling in equities over or will fears about the US economy and an unwinding carry trade trigger more pain for investors? Deputy Chief …
It was no surprise to see the global commodity price index fall and rise alongside the contortions in equity markets this week. But commodity prices have not all been in the same boat ; whereas some have remained buoyant throughout, others were already …
Not as bad as it looks The second consecutive small fall in employment might seem to suggest that the labour market has taken a further turn for the worse, but it mainly reflected soft part-time employment among younger and older people. The jump in …
Rise in inflation will add to Copom’s hawkishness, but rate hike unlikely The rise in Brazil’s headline inflation rate to 4.5% y/y in July was mainly driven by a pick-up in underlying core services inflation which will do little to quell the hawkishness …
Domestic factors outweigh global turmoil Idiosyncratic factors seemed to play a bigger role than the recent global financial market turmoil in driving African markets this week. But while the fall in oil prices may be overdone, African producers should …
Heightened US recession worries have helped unwound some of the stretched positions in high-carry EM currencies, resulting in their exchange rates moving closer to their “fair values” (judging by our models). While our base case is still for a US soft …
The brief turmoil in global financial markets following the release of weaker-than-expected US payrolls data and a resurgence of concerns about a hard landing there has been the main event of the past week. We think three points are worth making about the …
US recession fears grip global markets ... The turmoil in global financial markets late last week and early this week has been followed by some stabilisation over the past few days, but the situation remains fluid and you can find all our analysis on the …
Food prices drive up inflation but domestic demand remains weak Consumer price inflation ticked up in July, but this was entirely due to a weather-related rise in food price inflation. Producer price deflation was unchanged. While a ramp-up in fiscal …
Our Asia team will be holding a Drop-In on Wednesday 14th August at 0830 ET/1330 BST to discuss the timing of Asian interest rate cuts and the impact of global markets volatility. Register here for the 20-minute online briefing. US growth …
Inflation in Norway has continued to fall more quickly than policymakers expected. But with the krone coming under renewed pressure recently, we think they will maintain a hawkish tone next week. At the last meeting, in June, Norges Bank left its policy …
Equity markets in East Asia suffered very sharp declines earlier this week, but have generally recovered partially since. We think the rebound has scope to go a lot further as recession fears in the US prove overblown and an AI-related bubble reflates, …
Easing cycle continues despite peso weakness Mexico’s central bank opted to reduce its policy rate by 25bp, to 10.75%, at today’s meeting and the statement generally retained the moderately dovish tone from the last one. We think further rate cuts are …
8th August 2024
Financial markets have generally now unwound about half of the big moves from late last week and early this week, helped by jobless claims data today soothing concerns over a US economic recession. In some cases, we expect these recoveries to continue; …
Recent safe haven flows into the franc may have prompted limited FX interventions by the SNB. But we think that the policy rate will remain its main policy tool, even for dampening the franc’s strength. Indeed, we now expect the SNB to cut its policy rate …
US recession risks yet to derail export outlook The recent batch of weaker-than-expected US data rattled global markets this week. But it hasn’t significantly altered China’s economic outlook. Admittedly, the risk of a US recession, which would hurt …
After an already-tough H1 for information sector jobs, we expect the second half of the year to see further cuts, which will be bad news for tech-heavy metros in the West. But a more diverse occupier base and much more pronounced return to the office in …
Even as most EM central banks outside of Asia started lowering interest rates a year ago, those within the region have kept their powder dry. That could be about to change. As growth slows, inflation returns to targets and currencies recover, the …
Sell-off’s hit to oil likely to be reversed Fears of a US recession have rattled global financial markets earlier in the week, and those in the Middle East weren’t spared. We think the spillover into the oil market has gone too far, though, and it raises …
Several organisations have estimated that a universal 10% tariff on US imports, as proposed by Donald Trump, would reduce euro-zone GDP by at least 1%. We think the hit would be much less than 0.5%. We commented previously on the impact that Donald …
Rise in inflation leaves Banxico decision on a knife edge The rise in Mexico’s headline inflation rate, to 5.6% y/y in July, alongside the weakness in the peso means that Banxico’s interest rate decision later today will be a very close call between a cut …
No rush to loosen policy Although the Reserve Bank of Australia left rates on hold at its meeting this Tuesday, its messaging was unequivocally hawkish. In her post-meeting press conference Governor Michele Bullock stated that the Board had seriously …
This report has been updated with additional analysis and a chart and table of key figures. Inflation falls despite subsidy cuts Egypt’s headline inflation slowed from 27.5% y/y in June to 25.7% y/y in July, its lowest rate since December 2022. And this …
The recent market turmoil didn’t move the needle for the MPC today: it continued to strike a hawkish tone as the majority of members voted to keep the repo rate unchanged at 6.50%. But with inflation set to fall back towards the RBI’s 4% target over the …
Financial stress should be short-lived The Topix and the yen have reversed some of the large moves seen earlier this week, but BoJ Deputy Governor Uchida still signalled that those developments have reduced the chances of further policy tightening in a …
RBI could ease policy by year-end The recent market turmoil didn’t move the needle for the MPC today: it continued to strike a hawkish tone as the majority of members voted to keep the repo rate unchanged at 6.50%. But with inflation set to fall back …
Increasing demand points to stronger price growth Tentative signs from July’s RICS survey add to the growing evidence that demand and prices are starting to pick up. And as lenders start to cut mortgage rates, further cuts in Bank Rate than financial …
The economy slowed sharply in Q2 and we expect below trend growth to persist over the rest of the year as tight monetary policy, slower growth in remittances and soft export demand weigh on activity in the Philippines. According to the data published …
At its last policy meeting, the Bank of England still sounded a long way from being assured that inflation and wage growth will continue to ease. As a result, we doubt the recent moves in global financial markets will be enough to persuade the Bank to cut …
7th August 2024
We suspect that the boost to euro-zone economic growth from interest rate cuts over the next year or two will be quite small. The ECB is likely to lower its policy rates only gradually and leave them well above pre-Covid levels. So borrowing costs in the …
With the economy now in a position of excess supply, we expect core inflation to continue to fall back to 2% by the middle of next year. With the Bank of Canada putting more emphasis on the downside risks to the economy, we expect the Bank to cut interest …
Protests that originated in Kenya have spread to neighbouring Uganda and as far afield as Nigeria. The common theme of a weak economic backdrop, endemic corruption and fiscal fears means the region is ripe for further unrest. Growth is likely to see a …
German industrial output rebounded in June and may well expand a bit over the coming year or so. But any recovery will be weak and the sector will remain in structural decline. German industrial output rose more than expected in June. Data released today …
UK Commercial Property Valuation Monitor (Q3 24) …
US recession fears mask growing Middle East risks Commodities have not been immune to the recent turmoil in financial markets, with the prices of most industrial metals, agricultural, and energy commodities extending their downward trends over the past …
The news that the economy may now be 2.6% bigger than its Q4 2019 pre-pandemic size, rather than 1.8%, suggests it is in better shape than we previously thought. But with the UK still suffering from balefully low productivity and labour force growth, …
Easing cycle continues, but space for further cuts is narrow Romania’s central bank (NBR) delivered another 25bp cut to its policy rate today, to 6.50%, but in spite of the slightly more dovish accompanying statement, we think that the space for further …
Sharp fall in mortgages rates should soon support activity July was a disappointing month for mortgage activity overall, with earlier high borrowing costs causing home purchase applications to slide by 5.4% m/m. All the attention, however, will be on the …
Market turmoil has not yet led to a tightening of financial conditions in the US and most other advanced economies. That’s because borrowing costs have fallen sharply as investors have grown to expect more rate cuts from the Fed. To recap, our financial …
The Q2 rise in euro-zone investment marks the start of the recovery, but one that will be weak and uneven across markets. Economic and political concerns means investment in Germany and France is likely to lag, while the faster pick-up to date in Italy …
Following another leg down in industrial metals prices, this time due to growing worries about a US recession and the broader financial market carnage, we still think that prices will fall further over the next few years. However, while attention has …
We’re not so sure the yen’s gains are done, even though it sagged earlier today. The yen has today continued to unwind Monday’s rally, with the latest headwind being some dovish comments from Bank of Japan’s (BoJ) Deputy Governor. Among other things, the …
Even though it’s difficult to identify what could have broken as a result of the recent rapid market moves, a stronger yen is a bigger threat to the health of Japan’s financial institutions than falling stock prices. The Topix has reversed half of the …
This page has been updated with additional analysis since first publication. Falling mortgage rates boost house prices After three months of stagnation, the bigger-than-expected rise in the Halifax house price index in July provides further evidence that …
We are in the minority of forecasters who expect the Reserve Bank of New Zealand to hand down a 25bp rate cut at its meeting next week. Moreover, with excess capacity in the economy rising rapidly, we think the Bank will embark on a more aggressive easing …
Exports to stay robust, helped by NEER depreciation Growth in export values slowed last month, but this was mainly due to lower export prices. Export volumes remained near record highs. We expect outbound shipments to stay strong for a while, not least …
This page has been updated with additional analysis since first publication. RBNZ will welcome continued loosening of the labour market Although employment growth in Q2 was stronger than most had anticipated, it didn’t keep the unemployment rate from …
Although the UK has clearly been caught up in the recent turmoil in global financial markets, we do not think a double-dip recession is on the cards. Nonetheless, the disorderly market reaction, if sustained, raises the downside risks to our GDP forecast …
6th August 2024
