While we expect government bond yields in most developed markets to fall back, we think that those in Japan will stabilise around their current levels. In turn, we anticipate that interest rate differentials will provide support to the yen. The yield of …
13th May 2024
The dissolution of Kuwait’s parliament for the fourth time in two years highlights political infighting that has held back the economy for years. While much remains uncertain, there is now a clear path for fiscal policy to be loosened and help to unlock …
Easing cycle delayed, cut pushed back to Q3 Romania’s central bank (NBR) left its policy rate on hold at 7.00% today, in contrast to consensus expectations for a cut but in line with our own forecast. With inflation pressures falling more slowly than …
This page has been updated with additional analysis since first publication. Inflation edging closer to RBI’s 4% target Headline consumer price inflation edged down in April to an 11-month low and, looking ahead, we think it will reach the RBI’s 4% …
High net migration has led to a big jump in demand for rental properties that has pushed up the cost of rent compared to the average salary. But comparing rents to average pay is not as accurate a guide to tenant affordability as it used to be. Our …
An increase in support for populist parties in European parliamentary elections in June will have little bearing on economic policy in the near term because the more centrist parties should still win a majority of seats. Nonetheless, rising populist …
The fiscal tightening steps announced by Turkey’s finance ministry today, which include a freeze on most public construction projects, will help to prevent the large budget deficit from widening even further this year and contribute to the rebalancing …
Capital flows into EM bonds and equities have fallen to their lowest in six months as investors have pared back expectations for Fed interest rate cuts. However, even with these moves, we remain more dovish than the market on the Fed and so believe there …
The US government’s reported plans to raise barriers on Chinese imports of green tech – including a potentially sharp rise in electric vehicle tariffs – could trigger a further ratcheting up of bilateral tensions around the issue of industrial …
Rebound in inflation set to be limited due to overcapacity PPI deflation eased and CPI inflation rose in March, but they remained relatively subdued compared with pre-pandemic norms. We think inflation will continue to edge up in the near term. But …
Credit downturn threatens the recovery Broad credit growth slowed sharply to its weakest pace on record last month. This threatens to derail the ongoing economic recovery and is likely to trigger additional policy easing. Increased fiscal support may help …
The blowout in the pipeline of unfinished houses during the pandemic will reverse by the end of this year. With building approvals very low, dwellings investment will therefore fall further. While this will only exacerbate the acute shortage of rental …
What’s missing from the China overcapacity row, that UK GDP data and an exclusive inflation briefing …
10th May 2024
The hawkish tone of Latin American central banks this week supports our view that loosening cycles in the region will proceed more gradually than many anticipate. But even so, we think most Latin American currencies will weaken by end-2024. This week’s …
The US dollar looks set to end the week broadly unchanged against most currencies, with its renewed strength against the yen being the key exception. Next week’s CPI data release out of the US could break the calm that has prevailed in FX markets over the …
Markets brace for April data dump After a quiet week for data this week, following April’s softer Employment Report, things will heat up again next week with April’s CPI report. CPI the new king of data releases CPI is now undoubtedly the most …
SA: coalition fears grab the headlines Electioneering in South Africa heated up this week as parties openly warned of the different scenarios that could come after this month’s polls. The scenario that is most worrying remains a left-wing coalition. The …
The strength of the April labour market data means we now expect the Bank of Canada to begin its loosening cycle in July, rather than June. Nonetheless, the sharp growth in labour supply and moderation in wage growth means we remain confident in our view …
Hungary straddling US-China divide Chinese President Xi’s visit to Hungary this week was the first by China’s head of state in 20 years and led to the establishment of an “all-weather partnership” between both countries. There are advantages to this …
We held an online Drop-In session last week to discuss geopolitical risk and the commodities price outlook. ( View a recording here .) This Update answers several of the questions that we received. Q1: What Middle East escalation scenario do you consider …
With less than a month to go until OPEC+ meets to decide upon its next policy move, rumours are heating up as to what its move will be. Last week, anonymous OPEC+ sources suggested that the 2.2 million bpd of voluntary cuts would be extended once again, …
Battery production rules aim to limit overcapacity There was a concerted effort this week, across state media and from Xi Jinping himself, to push back against foreign suggestions that China’s rising exports of “new energy” products reflect overcapacity …
Although Japan’s equities and currency have generally moved in tandem in recent weeks, we think the historical inverse relationship between the two will reassert itself before long. We expect a stronger yen to become a headwind for Japan’s equities in the …
After a prolonged period of weakness, the West Coast ports have seen an improvement in trade volumes recently. However, industrial demand in these markets remains very weak and growing headwinds – most notably the threat of greater tariffs on Chinese …
The shares of the very biggest, ‘mega-cap’, firms have generally outperformed those of smaller ones by less in Europe than they have in the US on net so far this decade. We expect that to remain the case through the end of 2025, as bond yields drop back …
Confidence slump leaves us wondering what we may be missing The renewed slump in the University of Michigan consumer sentiment gauge to a six-month low of 67.4 in May, from 77.2, is hard to explain given that gasoline prices are now falling again, the …
With the Bank of England hinting on Thursday that it is close to cutting interest rates and that rates may need to fall further than investors expect, we have become a bit more confident in our view that, due to low inflation, rates will be cut from 5.25% …
Surge in employment suggests Bank will wait until July to cut The surge in employment in April shows that the fall in March was just a blip and suggests that the Bank of Canada is now more likely to wait until the July meeting to cut interest rates, …
Weak growth a concern for the central bank The central bank in the Philippines has left interest rates unchanged since a hike in October 2023. Another hold at its scheduled meeting on Thursday is almost certain. Instead, the main interest will be on the …
Sticking to Q3 call despite shifting consensus The latest poll from Bloomberg published this week show that the consensus is now expecting the RBI to begin its easing cycle in Q4. It is now forecasting 50bps of cuts by the end of the year, which would …
Sharp fall in services inflation points to another rate cut The fall in Brazilian inflation to 3.7% y/y last month and, more importantly, the sharp decline in underlying services inflation suggests that, despite the hawkish language in the Copom statement …
Mexico: more support for Pemex? One of the central views of the Update we published earlier this week on Mexico’s public finances was that limited fiscal room combined with presidential frontrunner Claudia Sheinbaum’s strong environmental credentials …
UK Commercial Property Valuation Monitor (Q1 24) …
This week brought more evidence that European central banks feel comfortable starting their easing cycles ahead of the Fed. As we had expected, the Riksbank cut its policy rate by 25bp, even after last week’s Fed meeting confirmed that it will take longer …
India's economic future …
Although the recent weakness in exports from China suggest that a sharp rebound in global goods trade probably isn’t on the cards, we still expect global trade to rise this year after a very weak 2023. And while conflict in the Red Sea has caused some …
This page has been updated with additional analysis since first publication. Strong GDP data probably won’t prevent BoE rate cuts The 0.6% q/q rise in GDP in Q1 confirmed that the recession ended at the start of this year and suggests the economy has been …
Production shutdowns now over If we’re right and the GDP data due next week show a 0.6% q/q drop in output, that would mark the second fall in just three quarters. The recent weakness largely reflects a slump in industrial output at the start of the …
A tricky balancing act At its meeting this Tuesday, the Reserve Bank of Australia continued to leave rates on hold, contrary to our expectations that the Bank would feel compelled to take out some additional insurance in the form of a 25bp hike. To be …
Easing cycle paused, rate cuts to be more gradual than most anticipate Mexico’s central bank paused its easing cycle at today’s meeting and, while we expect interest rate cuts to resume soon, we think that monetary conditions will be kept tighter than …
9th May 2024
The scale of the economic impact of the floods that have affected much of the southern state of Rio Grande do Sul will depend on how long it takes for the waters to recede and for reconstruction efforts to get underway. Given the region’s importance to …
Policymakers at the Bank of England (BoE) are edging closer to easing policy, and we still think they will cut Bank Rate by more than widely anticipated. In turn, we expect this will weigh on Gilt yields and sterling. The muted market reaction to the Bank …
Although the monetary easing cycle in Brazil is entering a much slower phase, we think the Brazilian real will remain under pressure against the dollar over the coming quarters. Emerging market (EM) currencies have generally struggled against the …
Private sector savings surged in Israel during the pandemic and jumped again last year amid the war in Gaza. We estimate that those built up due to the war are equivalent to around 3.0% of GDP and could be used to fund consumption, particularly if …
Rates on hold, small chance of a cut in 2024 Poland’s central bank (NBP) left its policy rate on hold as expected at 5.75% today and we don’t expect any change for some time. Still, there is now a growing possibility of an interest rate cut before the end …
Lawmakers' current efforts to restrict institutional buying of single-family homes won't put downward pressure on house prices if enacted, as their market share is minimal. Investors ramped up buying of homes in 2021-22, a trend that has raised concerns …
We’ll be discussing the outlook for Bank of England policy in a 20-minute online briefing at 3pm today. (Register here .) While leaving interest rates at 5.25% today as widely expected, the Bank of England gave the impression that it is close to cutting …
Canada Chart Pack (May 2024) …
Inflation rises, Banxico to pause later today The rise in Mexico’s headline inflation rate, to 4.7% y/y in April, was mainly due to a fresh jump in agricultural inflation which masked a fall in core inflation. Still, there’s nothing in the data which …
Mexico election 2024 …
