While the US dollar has dropped back in the wake of today’s non-farm payrolls report, continuing its recent struggles, two other trends in currency markets are showing some signs of exhaustion. Most notably, the Chinese authorities have stepped up their …
7th July 2023
Survey data point to decent end to Q2 The batch of survey data for June from Brazil and Mexico released this week suggest that both economies gathered momentum at the end of Q2. In Brazil, having fallen back in May, the FGV confidence surveys generally …
The data this week showed big improvements in supply in both the labour and housing markets, which should give the Bank of Canada confidence that CPI inflation will continue to decline. We still expect the Bank to raise interest rates by 25bp next week to …
The 10-year Treasury yield climbed back above 4% this week, as markets interpreted the minutes of the mid-June FOMC meeting as hawkish and reacted to signs that, although labour market conditions may be easing, wage growth remains too high. Most …
The El Niño weather pattern is on its way and threatens to hit agricultural production across much of Africa over the coming months, curtailing GDP growth, pushing up inflation and dealing a fresh blow to fragile balance of payments positions. There’s …
Market-implied interest rate expectations have continued to rise this week as investors have concluded that in order to squeeze high inflation out of the system, the Bank of England will have to raise interest rates further, from 5.00% now to a peak of …
Russian ruble depreciation gathering pace The depreciation of the Russian ruble gathered pace this week amid a continued squeeze on Russia’s trade surplus and growing capital outflows. A weaker currency will support the fiscal position, but at the same …
Vegetable price spike a key upside risk to inflation We noted in our previous Weekly that the sharp rise in vegetable prices was posing an upside risk to the inflation outlook, particularly given the large weighting of food in India’s CPI basket. Since …
Weak activity data The latest data support our view that euro-zone GDP contracted in Q2, in contrast to the consensus view that it rose. In May, euro-zone retail sales were weak and industrial output in Germany edged down, while in June the euro-zone …
Inflation falls back further in June The latest inflation data from across the region paint an encouraging picture, with the headline rate falling back for every country that has so far published figures for June. (See Chart 1.) Falling food and energy …
Wage growth to climb higher in Australia The big news out of Australia this week was the RBA’s decision to skip a rate hike at its meeting on Tuesday. However, the decision to stay put was largely motivated by a desire to reassess the outlook with a new …
China to restrict germanium and gallium exports Retaliating against joint American-Dutch-Japanese efforts to limit Chinese access to American semiconductor technology, China announced on Monday that it will restrict exports of germanium and gallium. These …
Stronger RMB by year-end The PBOC’s Q2 Monetary Policy Report, published last Friday, included new language pledging to “prevent large fluctuations in the exchange rate”. Then, with the renminbi approaching 7.3/$ at the start of this week, the PBOC pushed …
Saudi and Russia add to bearish oil tone Saudi Arabia announced that it will extend its voluntary 1mn bpd oil output cut at least one more month, which came along with the news that Russia plans to cut exports by 500,000bpd too. The decision to roll over …
6th July 2023
There was plenty for the Bank of Canada to digest this week, with the data showing that core inflation fell in May even as GDP growth picked up strongly again. The resilience of economic activity makes us think that the Bank is still leaning toward …
30th June 2023
The apparent weakness of consumption growth and slowdown in core inflation in the second quarter leave us a bit more confident in our view that the Fed’s next rate hike will prove to be the last. We learned this week that GDP growth is now estimated to …
BCB: A parsimonious process The minutes to last week’s Brazilian central bank meeting made waves, revealing that a majority of Copom members expect to lower interest rates at the next meeting in August. We had thought the more cautious tone of the …
Putin cracking down following the rebellion The aborted uprising by Yevgeny Prigozhin against Russia’s military last weekend has prompted a forceful response by President Putin to reassert his authority. There’s much less certainty about the implications …
It’s been another tough week for the Bank of England. The week began with the Bank’s Chief Economist, Huw Pill, defending its inflation models in a letter to the UK Parliament’s Treasury Committee and ended with Monetary Policy Committee (MPC) member, …
PBOC surveys offer clues on propensity to spend… Yesterday, the People’s Bank (PBOC) published the latest results of its quarterly surveys, in which it polls 3,200 banks, 5,000 industrial enterprises and 20,000 households across 50 cities. These offer a …
Kenya: Thugge makes his mark Kenya’s central bank hiked interest rates by 100bp, to 10.50%, at an unscheduled meeting this week. The move was pinned on an increase in inflation in May, but more than anything it seems to be a strong attempt by new governor …
We are nudging up our peak ECB rate forecast in light of communications from ECB officials at Sintra and the latest economic data. We now see 25bp rate hikes in both July and September, taking the deposit rate to 4%. As a reminder, we were forecasting …
Agreement limits downside risks to economy The agreement of a loan deal between Pakistan and the IMF today should put the economy back on a more secure footing and limit the biggest downside risks. However, past experience suggests that the government …
Maybe the record-breaking temperatures in the UK in June drew comparisons with the weather typically seen in spaghetti westerns. Or perhaps we’re just bigger Clint Eastwood fans than we care to admit. Whatever the reason, we couldn’t help thinking that …
Price spikes won’t boost inflation yet Near-term inflation dynamics in India are largely driven by food prices, which account for almost half of the CPI basket. Concerns over a pick-up in food prices have been growing in recent days. The minutes of the …
Tailwind from weaker yen won’t be sustained The recent surge in the Topix to a post-1990 high has prompted many commentators to declare that Japan has finally overcome years of stagnation. There’s certainly little evidence for that in the broader …
The monthly inflation indicator released on Wednesday showed a plunge in headline inflation, but as it happens that fall was driven precisely by the two categories that the ABS strips out from its new measure of inflation excluding volatile items. …
Egypt’s path to largest MENA economy by 2050 In an Emerging Markets Update published this week, we highlighted which EMs will rise up the global league table. Within MENA, Egypt’s economy will take Saudi Arabia’s crown as the region’s largest economy by …
28th June 2023
Recent data fan Bank of Canada's fears The latest Summary of Deliberations gave no hint about whether the Bank of Canada will raise interest rates again at the July meeting but, with little progress yet on any of the key factors that the Bank is watching, …
23rd June 2023
The US dollar has rebounded a bit this week on renewed signs that a global slowdown is underway and a growing sense that, like the Fed, most other central banks are also at, or near, the end of their tightening cycles. Although the summer doldrums are …
BRL rally for real? The Brazilian real’s recent rich vein of form has continued this week, with the currency appreciating by a further 1.5% against the dollar, to 4.8/$. Several factors have supported this, including improvements in Brazil’s trade balance …
It’s been an extremely tough week for the Bank of England and its Governor, Andrew Bailey. Wednesday’s CPI release revealed the second shocking surge in core inflation in a row and appeared to confirm our view that the inflation problem is bigger in the …
Indian manufacturing to benefit by leaning to US The sweeping agreements on trade and defence announced during Narendra Modi’s state visit to the US this week underline that India’s government and firms increasingly see their interests as favouring …
In a quiet week for economic data, the biggest news was further evidence of a turnaround in housing activity, with housing starts jumping by 22% m/m in May to their highest level in a year. The sheer scale of that move did look a little suspicious and …
A cut, a hold .... and an underwhelming hike The three central bank meetings that took place across the region this week all produced different outcomes, and policymakers’ communications suggest interest rates in these countries will continue to move in …
Zambia secures deal with official creditors This week saw Zambia edge closer to getting a debt restructuring over the line, but an agreement with official creditors suggested that there remain sticking points when it comes to negotiations with China. …
Inflation continues to fall Inflation in Malaysia fell back for a ninth consecutive month in May according to figures published today. At 2.8% y/y, inflation is now well below last August’s peak of 4.7%. We expect price pressures to ease further over the …
This week, we published our latest Europe Economic Outlook . Three key points are worth highlighting. First, the euro-zone economy is likely to remain in recession for the rest of 2023. Admittedly, this year’s fall in gas prices will support demand and …
Support measures could take time to draw up Hopes for more policy easing intensified last week after the surprise cut to the PBOC’s reverse repo rate and the release of weak activity data for May. Late last Friday, the State Council said that it was …
Labour market will cool In a speech earlier this week, Deputy RBA Governor Michele Bullock noted that employment was above what the Board would consider to be consistent with its 2-3% inflation target. Indeed, jobs data released last week showed that the …
Strength in inflation not prompting a rethink A Reuters survey published before last week’s Bank of Japan meeting showed that two-thirds of analysts polled expected the Bank to scale back policy easing this year, with 43% predicting it would happen as …
Egypt: fiscal policy on right path, but not yet for EGP The key message from the briefing that we attended with Egypt’s Finance Minister Mohamed Maait in London last Friday was the government’s commitment to tight fiscal policy and that a devaluation is …
22nd June 2023
The US dollar has fallen for a third week in a row, with the DXY closing in on its weakest level so far this year. But, although it is increasingly challenged by the current “risk-on” environment, we are sticking to the view that the greenback will …
16th June 2023
This week’s plunge in the Nigerian naira marked the latest positive step by President Bola Tinubu as he seeks to overhaul the economy, but there are still plenty of reasons to be cautious that this policy shift marks a clean break from the Buhari-era. A …
Brazil: shifting towards rate cuts? Expectations for interest rate cuts in Brazil have grown in light of recent developments, but, for now, we’re sticking with our view that Copom will hold off on lowering interest rates until November. The arguments in …
PiS adding further fuel to the inflation fire The Polish government set out plans this week to increase the national minimum wage by around 20% again next year. With the labour market still very tight and further pre-election fiscal stimulus likely to be …
Households feeling the pinch from higher rates Heavily indebted households are still being sheltered from the full impact of the surge in interest rates over the past 18 months, but their finances look ever-more perilous. The household debt to …
The Fed put its rate hiking cycle on pause this week but, in a hawkish shift, its new projections showed the median fed funds rate rising to 5.6% by year-end, which is consistent with 50bp of additional tightening. We agree that the Fed will push ahead …
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . The title of last week’s UK Economics Weekly was “Why …
More ground to cover The message from the ECB yesterday was decidedly hawkish. The Bank raised rates and more or less promised another hike in July, while the substantial upward revision to its inflation forecasts implied that further tightening could …
