The continued weakness of the renminbi and the yen against the US dollar despite the narrowing of interest rate differentials via-a-vis the US is something of a conundrum, but our sense remains that both currencies will rebound against the dollar later …
11th July 2024
Another fairly encouraging US CPI report seems unlikely to blow the buoyant S&P 500 far off course given the implications for Fed policy. Indeed, it strengthens the case for a rate cut in September. Our base case is that the economic backdrop will remain …
We anticipate the spread between 10-year Swiss and German government bond yields, which has widened significantly since 2022, will narrow only slightly over the next couple of years. The spread between 10-year Swiss and German government bond yields has …
Saudi Arabia’s GDP growth is likely to pick up, and markedly so in 2025. But that will be driven by rising oil output. We think that activity in the non-oil economy will slow. Indeed, there are signs in the low-profile data that this has already started …
A narrowing of the current account deficit and a decline in the share of government bonds held by non-residents means the rupiah is much less exposed to sudden shifts in global risk appetite than in the past. This should ensure that the currency performs …
CPI qualifies as ‘more good data’ The muted 0.1% m/m increase in core CPI in June strengthens the case for a September rate cut although, while a lot still depends on the PPI data due tomorrow, our initial estimate is that the core PCE deflator increased …
The downgrading of Sweden’s SBB to selective default last week is the latest development for a property market that has faced some of the most acute debt refinancing pressure in Europe. The saga will rumble on as large debt maturities loom, but the risk …
While the debate around China’s manufacturing overcapacity has centred around politically sensitive topics such as electric vehicles, its industrial metals sector is no exception. Whereas the focus of the broader macro debate revolves around market share, …
With shifting Japanese inflation dynamics likely to shrink the Bank of Japan’s opportunity to tighten policy in the coming months, we think its July meeting will end with a decision to raise interest rates for the second – and final – time this year. But …
On hold, central bank in no rush to cut rates Bank Negara Malaysia (BNM) left its overnight policy rate (OPR) on hold (at 3.00%) today, and the tone of the statement supports our view that rates will be left unchanged throughout 2024. The decision was …
Revival unlikely to materialise as soon as surveyors hope While demand continued to slip back in June, surveyors were optimistic it would soon pick up. Given elevated mortgage rates we suspect the market will disappoint those expectations in the near …
The Bank of Korea left its policy rate unchanged today at 3.5%, but dropped clear hints that interest rate cuts would be coming soon. With growth set to struggle and inflation likely to fall further, we are maintaining our view the central bank will cut …
This page has been updated with additional analysis since first publication. Economic recovery continues to strengthen The stronger-than-expected 0.4% m/m rise in GDP in May (consensus forecast 0.2%, CE forecast 0.3%) will be welcomed by the new …
Interest rates left unchanged, but easing likely before year-end The decision by the Bank of Korea to leave interest rates unchanged (at 3.5%) today came as no surprise, but of more interest will be the tone of Governor Rhee’s press conference and the …
Inflation strengthens, rate hike baked in later this month The rise in Russian inflation to 8.6% y/y in June, alongside weekly figures suggesting that an even larger rise is possible in July, seals the deal on an interest rate hike later this month. We …
10th July 2024
UK employment has faltered of late and, though growth is expected to improve, no return to the buoyancy of the recent past is in prospect. While headcount has become a weaker indicator of office floorspace needs, the jobs outlook reinforces our view of a …
It is not inevitable that the economic malaise of the past 20-30 years will continue over the next decade. Some of the cyclical forces that have lowered the UK’s economic growth rate will fade and new structural ones, such as Artificial Intelligence (AI), …
We think that corporate bonds will continue to underperform equities, as credit spreads are already low, economic growth moderates, and equities benefit more from enthusiasm about AI. After spiking in the first two weeks of June, credit spreads have …
At first sight, the latest CPI data out of Central and Eastern Europe (CEE) might seem to provide central banks reason for comfort. But a look under the surface paints a more worrying picture: underlying core price pressures in some countries have re …
Inflation increases again, Copom in no mood to restart easing The rise in Brazil’s headline inflation rate to 4.2% y/y in June was a little softer than expected but the recent weakness in the real and mounting fiscal concerns means that there is no chance …
Hydrogen could play a key role in reducing emissions in hard-to-abate sectors such as steelmaking and be a boon for countries and regions that are well placed to produce a surplus of renewable power. But hydrogen is not the best option in many …
Shipping costs have now risen far enough to start adding to global CPI inflation. However, so far, the boost to prices is probably only in the region of 0.1%, on average. What’s more, surging freight rates to some extent reflect a shift in demand towards …
Inflation falls despite bread price hikes Egypt’s headline inflation slowed from 28.1% y/y in May to 27.5% y/y in June, the lowest outturn since the start of 2023. And this came in spite of the baladi bread price hike. Increases to electricity and fuel …
This page has been updated with additional analysis since first publication. Inflation falls further than Norges Bank predicted The continued decline in inflation in Norway supports our view that Norges Bank will start cutting interest rates before the …
The recent rise in public spending and fall in revenues has sent the Indonesian government’s budget deficit veering towards the constitutional 3% of GDP limit. And it’s unclear how the president-elect will be able to enact his ambitious welfare plans …
Exports from Taiwan, Korea and Vietnam have surged over the past 18 months, thanks to strong demand for AI-related products and friendshoring. In contrast, shipments from the rest of the region have struggled. We expect this divergence to continue over …
RBNZ strikes some dovish notes Although it left the Official Cash Rate unchanged at 5.50%, the RBNZ sounded rather dovish in its commentary. The Committee’s messaging gives us greater confidence that the Bank will commence its easing cycle in November. …
This page has been updated with additional analysis since first publication. Persistent overcapacity will keep inflation low Consumer price inflation edged down in June. Producer price deflation eased but this was entirely due to base effects. We still …
While there are tentative signs that Japan’s economy is becoming more dynamic, this has yet to produce significant improvements in aggregate productivity. We still think that a more meaningful pick-up in productivity growth will only happen towards the …
The legacy of the post-pandemic industrial construction boom is now being felt in rising supply across most markets. With the demand outlook stabilising, we think the evolution of supply will shape rental trends in the near term and that markets like …
9th July 2024
In the wake of the political tumult in France contrasting with newfound stability in the UK, the outlook for the exchange rate between the euro and sterling has come into spotlight. We think that yield differentials will play a much more important role …
The latest data suggest that the recovery in euro-zone activity will continue – notwithstanding the uncertainty created by France’s snap election. The euro-zone labour market is tight, with unemployment at a record low and wage growth picking up in Q1. …
Turkey’s economy has maintained strong external price competitiveness since the pandemic (mirrored by rapid export growth). But measures of competitiveness have shown a noticeable decline in the past year and will deteriorate further against a backdrop of …
Powell leaves all options open Fed Chair Jerome Powell’s opening statement for his congressional testimony today offers few clues about the potential timing of interest rate cuts, with the key line that the Fed is still looking for “more good data” to …
We’ve reassessed our expectations for the start of Bank of England rate cuts in light of the latest UK CPI and employment data. Our UK team was online shortly after the latter report to brief clients on our latest forecasts and to answer their questions …
Inflation rise doesn’t rule out August rate cut The larger-than-expected rise in Mexico’s headline inflation rate, to 5.0% y/y in June, was mainly due to a surge in agricultural inflation; core inflation edged down last month. While there’s still a lot of …
Much of the strength of India’s external position over recent years can be explained by robust growth in its services exports, in particular its business process outsourcing (BPO) sector. The near-term outlook for the sector is bright. But the sector also …
The results of France’s parliamentary elections mean it should avoid the large, unfunded fiscal expansion that two of the three major political groups were advocating. But it also means France is very unlikely to be able to reduce the deficit as required …
8th July 2024
The budget deal struck by the governing coalition in Germany reduces the risk of the country being forced into early elections. But it does little to address Germany’s structural problems, in part because of the strict cap on borrowing imposed by the …
The surprising results of the French legislative elections have not triggered much of a market reaction. While investors appear to have been relieved by the far-right National Rally (RN)’s failure to be in a position to govern, the strong showing of the …
Brazil’s President Lula has renewed his attacks on the central bank and high interest rates in recent weeks, raising fears that there could be more political influence on monetary policy from next year after he has appointed three new Copom members. …
This page has been updated with additional analysis since first publication. Rates on hold amid elevated risks Israel’s central bank (BoI) left its policy rate on hold at 4.50% as expected today and interest rates are likely to remain on hold for the time …
The slower adjustment to past rises in interest rates and sharper hit to office demand mean US property is set to underperform European property over the next five years. But unlike equities, we think US economic outperformance will translate into …
Rise in inflation makes pause in easing cycle likely The fourth consecutive increase in Chilean inflation, to 4.2% y/y, in June means that interest rates are likely to be left unchanged at 5.75% at the central bank’s meeting at the end of the month. We …
Elections in the UK and France over the past few days have produced radically different outcomes, with the centre-left Labour Party securing a landslide victory in the UK, but the vote in France ending in a hung parliament with a three-way split between …
A La Niña could bring with it favourable growing conditions for crops in South East Asia, and help to put downward pressure on food prices across the region. It adds to the reasons to think the upcoming rate-cutting cycle in the region will be more …
The Monthly Household Spending Indicator is often revised several months later so the plunge in spending in May won’t deter the Reserve Bank of Australia from hiking rates next month if inflation remains hot. According to the Monthly Household Spending …
Regular earnings growth will approach 3% While base pay will probably be revised down somewhat in the final estimate, the preliminary estimate showed it rising the most in three decades and we expect it to accelerate a bit further over coming months. The …
