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We think that China’s “tech” equities could resume their rally, but that they’re unlikely to see anything like the gains their developed market peers have. China’s tech sectors fared better than most of its equities today, falling only a little amid a …
11th June 2024
French President Emmanuel Macron’s decision to call for snap elections has triggered a negative reaction in markets, not only in France but also in the rest of the EU. Even though the far-right National Rally has abandoned its most extreme economic …
10th June 2024
Another strong reading on the US labour market has reversed much of the recent drop in US interest rate expectations but we continue to think Treasury yield are headed lower later this year. Today’s US non-farm payrolls report for May came in at a …
7th June 2024
The strong nonfarm payrolls report released earlier today broke the recent streak of downward data surprises out of the US and has renewed strength in the dollar. Even so, the greenback looks set to end the week only somewhat stronger against most …
Elections in South Africa, India, and Mexico have generated sizeable reactions in their financial markets over the past week or so, highlighting the potential for electoral surprises to generate short-term volatility. This Update takes stock of the …
While euro-zone inflation data has recently surprised to the upside, which was reflected in the hawkish tone of today’s ECB meeting , we still think the 10-year Bund yield will fall faster than the 10-year Treasury yield by end-2024. Although today’s 25bp …
6th June 2024
Although the gap between 10-year Treasur y and Canadian Government Bond (CGBs) yields has reached the highest level in at least three decades today, we think it will widen even further in the next couple of years . The 10-year CGB yield has fallen ~15bp …
5th June 2024
The US stock market has been pulled in different directions by economic data since last week. But we suspect that the general trend in the next year or so will be up, as equities benefit from at least moderate economic growth, looser monetary policy, and, …
4th June 2024
Elections in South Africa, India, and Mexico have generated sizeable reactions in financial markets. Those moves may not last – often the immediate reaction to political events proves overdone – but they highlight the potential for electoral surprises to …
3rd June 2024
Having lagged behind other emerging market (EM) currencies for most of the post-pandemic period, the Polish zloty has lead the pack over the past six months. While we think that most of this rally has now run its course, we expect the zloty to stay …
The US dollar has eased back a bit further against other G10 currencies this week as another round of slightly softer US inflation data dampened the recent rebound in US interest rate expectations. By contrast, today’s upside surprise in euro-zone …
31st May 2024
The fall in Treasury yields over the past two days has failed to lift equities, partly because of waning AI hype weighing on the market. That’s a contrast to much of the past year or so, when the opposite has been true. If both of these forces combine in …
The US dollar has fallen back across the board in May as expected interest rate differentials have shifted against the US vis-à-vis many other economies, and risk sentiment has recovered. Overall, the greenback remains caught in something of a crosswind. …
The early results from South Africa’s general election suggest that the African National Congress (ANC) will fall short of securing a majority, and may be forced into forming a coalition with the centre-right Democratic Alliance (DA), or either (or both) …
30th May 2024
We expect the 10-year Bund yield to fall by the end of the year as the ECB loosens policy more than investors are currently discounting. Judging by the initial fall in 10-year Bund yield this morning, German state-level inflation data released earlier in …
29th May 2024
The yield of 10-year Japanese government bonds (JGBs) is now almost where we forecast it to be at the end of the year. Admittedly, we doubt that the Bank of Japan (BoJ) will tighten policy as quickly as investors think in the next two years. But we …
28th May 2024
The dollar looks set to end the week broadly unchanged against most currencies, halting its slide over the past couple of weeks. Bond yields in the US rebounded this week, partly due to the Fed minutes published on Wednesday but have also risen in other …
24th May 2024
We doubt yesterday’s drop in the US equity market will prove a harbinger of further weakness to come – indeed, stocks have already rebounded today. But the unusual combination of a sizeable drop in the overall index even as one of its largest constituents …
We think the kiwi and the aussie strength will continue over the next couple of years as we expect they will be among the last developed economies to start an easing cycle. The aussie and the kiwi have been among the best performing G10 currencies since …
While the prospect of the Labour Party returning to government in the UK for the first time in 14 years might raise a few eyebrows in the financial markets, we wouldn’t put much store by the fact that some of its times in office since first forming a …
23rd May 2024
While stronger-than-expected inflation data from the UK have led us to push back a bit our forecast for the start of the Bank of England’s easing cycle, we still project many more rate cuts than most anticipate. This feeds into our view that Gilt yields …
22nd May 2024
Despite the hawkish rhetoric from central bankers over the last few days, we still expect long-dated government bond yields in most developed markets (DM) to fall over the next year or so. 10-year government bond yields across DMs have generally been …
21st May 2024
The US dollar has been on the back foot amid the renewed rally in “risky” assets. While we think US stocks will soon re-establish the lead among global equities, we doubt US equity outperformance would benefit the dollar much. After reaching a …
20th May 2024
The US dollar has eased back in the wake of somewhat better news on US inflation this week, which has seen US interest rate expectations fall back a bit further. Between this week’s inflation news, the recent softening of activity figures (including this …
17th May 2024
New measures to support China’s property sector have brought more cheer to Chinese equities. But, while we continue to think they will fare well in the coming months, we ultimately expect them to lose ground to stocks elsewhere over the next year or so. …
Although the “big-tech” sectors have been out of favour compared to others so far this quarter, we expect them to regain the lead before long and help the US stock market outperform those elsewhere. The S&P 500 reached a new all-time high yesterday, and …
16th May 2024
For much of the past year, the dollar has strengthened against emerging market (EM) currencies even as EM sovereign dollar bond spreads have narrowed. One way or another, that is unlikely to last. One relatively unusual feature of the strengthening of the …
This interactive dashboard allows you to explore our exchange rate forecasts through to end-2026. If you have subscriber access to the data underlying this dashboard, you can download it via the menu options in the top right of each chart or table. If you …
Despite the rand’s recent outperformance, we think risks around the upcoming election in South Africa, among other factors, will cause renewed weakness in the currency before long. Since US Treasury yields peaked in late April – falling further after the …
Better news on US inflation over the past couple of days has provided further relief for bond and equity markets, and supports our forecast that Treasury yields will fall back a bit more over the coming months while the equity market scales new highs. …
15th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
Even if interest in ‘meme’ stocks rebounds following a renewed surge in GameStop’s share price, some of the telltale signs that a bubble in the broader stock market may be entering its final stages – such as excessive leverage – are absent. This suggests …
14th May 2024
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 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 …
10th May 2024
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 …
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 …
9th May 2024
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 …
We expect Japanese government bond (JGB) yields to rise a bit and the yen to come off the boil later this year, creating a headwind for equities there. The 10-year JGB yield has jumped 4bp and the TOPIX has dipped over 1% today following comments by Bank …
8th May 2024
The near-relentless narrowing in US credit spreads over the past year or so has left them at their lowest levels since late 2021. This echoes similarly upbeat pricing in the stock market. But, while we think that equities still have plenty of room to …
7th May 2024
An eventful week in financial markets is ending with the dollar down, but mounting a comeback in the wake of today’s worryingly weak US non-manufacturing ISM survey . Between the earlier softer-than-expected US non-farm payrolls , the cautious message …
3rd May 2024
Today’s favourable reaction in the US stock market to April's softer-than-expected Employment Report has coincided with renewed hopes of interest rate cuts, judging by the initial plunge in the 2-year Treasury yield towards 4.7%. (See Chart 1.) …
Despite the correction in equity markets over the past month, risk premia generally remain low across financial markets. While we expect this to continue as an AI-driven bubble inflates in equity markets, this Update explores four areas that could …
This week’s FOMC meeting supports our view that bond yields will fall back a bit further this year. Overall, financial markets took yesterday’s FOMC meeting and the following press conference as fairly dovish . Arguably, the key point in Chair Powell’s …
2nd May 2024
Chinese policymakers won’t risk reliving the turmoil of 2015 by engineering a sudden devaluation of the renminbi . They may allow the currency to weaken gradually over the coming years to help industry deal with oversupply or to offset the impact of new …
1st May 2024
We doubt the recent rise in US bond yields will continue much further, or significantly undermine the prospects of US equities. The 10-year Treasury yield has fallen back a bit today ahead of the FOMC’s policy announcement, as the US Treasury’s Quarterly …
We think that the recent weakness in the Mexican peso was partly a symptom of stretched positioning. Given that risk premia still appear unusually low and the outlook for the “carry trade” is gradually worsening, we think that the peso will depreciate …
30th April 2024
The US dollar has made further gains against most major currencies over the past month or so. Interest rate expectations have continued to pick up in the US and in most places outside Asia, weighing particularly on that region's currencies (prompting …
While we expect Chinese bonds and equities to make more gains in the near term, w e think the outlook further ahead is not as bright for the latter. Chinese government bonds have been quite volatile in recent days. The 10-year yield recorded on Friday one …
Japan’s apparent intervention in support of the beleaguered yen may buy some time for the currency to stabilise, but is unlikely to lead to sustained turnaround until US interest rate expectations start to fall back. While Ministry of Finance (MoF) …
29th April 2024
The US dollar is ending the week a touch softer against most currencies despite another set of hotter-than-expected US inflation figures. But the main story in currency markets this week is the ongoing drop in the Japanese yen, which hit a new low for the …
26th April 2024
