Swiss franc seems set to fall further Swiss inflation came in below expectations in February (see here ), but the period of deflation is likely to end soon. As elsewhere, the latest manufacturing PMI pointed to rising price pressures from disruption and …
5th March 2021
This week, pressure on bond yields, inflation and national health services continued to build. Daily Covid-19 infections are rising again in Italy and France, and the number of people in intensive care with Covid is increasing in both countries. (See here …
CBRT: hiking again Events this week make another interest rate hike by the Turkish central bank highly likely – we now expect a 100bp rise in the one-week repo rate (to 18.0%) at the meeting on 18 th March. Two factors lie behind this shift. The first was …
In this week’s Budget, the Chancellor, Rishi Sunak, appears to have pulled off the feat of solving some of the fiscal challenges without significantly risking the economic recovery. (See here .) His decision to wait until October before turning off the …
Korea keeps fiscal taps running Korea today announced that it was stepping up its support for the economy with a new supplementary budget worth 15trn won (around 0.8% of GDP). The stimulus comes mostly in the form of relief measures for businesses which …
Tokyo caution won’t prevent strong end to Q1 The 2.9% m/m drop in the consumption activity index (CAI) last month was a bit larger than we had anticipated, but revised data show that spending reached a fresh virus-era-high in December despite soaring …
RBA responding half-heartedly to soaring yields Bond yields declined at the beginning of the week as the RBA on Monday stepped up its purchases of longer-dated bonds for the first time since the launch of quantitative easing in November. The Bank bought …
Upgrading our forecast for GDP growth in 2021 India’s financial markets have not been immune from the turbulence in global markets over the past couple of weeks, but the latest economic data have been largely positive. GDP data for Q4 2020 (Q3 of FY20/21) …
The National People’s Congress will convene today and reveal the government targets and priorities for 2021, along with the annual budget and 14 th Five-Year Plan. We will publish an Update with our initial analysis once the key details have been made …
OPEC+ meeting unlikely to spring a surprise The OPEC+ meeting later today could see the group opt to roll over its production cuts into April (rather than easing quotas) which would push back the recovery in GDP growth in the Gulf’s oil producers a …
4th March 2021
South Africa: reading behind budget lines Finance Minister Tito Mboweni appears to have put rose-tinted glasses on when he delivered South Africa’s budget this week. We noted that, despite repeatedly claiming that the 2021 blueprint was not an austerity …
26th February 2021
Banxico: slim chance of additional easing Mexico has been one of the hardest hit EMs during the recent rout in global bond markets. The 10-year local currency government bond yield has jumped by almost 60bp to 6.30% this week. Meanwhile, the peso has …
A spike in government bond yields and subsequent sell-off in equity markets caused the broad-based rally in commodity prices to go into reverse late in the week . That said, most industrial commodity prices still managed to end the week higher. …
The surge in yields this week occurred despite another signal from the Bank of Canada that it plans to keep interest rates at rock-bottom levels for a long time. This has led to suggestions that the Bank could engage in yield curve control, but we think …
Pressure growing for another rate hike in Turkey The Turkish lira has been among the hardest hit EM currencies this week and, while concerns that the shift in policymaking is unravelling are probably overdone, there’s a growing risk that the CBRT will be …
The National People’s Congress that starts on Friday is the stage on which the government sets out its economic plans. There are a few things to focus on. Withdrawal of fiscal support The budget presentation (also on Friday) is likely to confirm that the …
Fed Chair Jerome Powell’s testimony to Congress – together with similarly-dovish speeches from key Board members this week – underlined the Fed’s new commitment to the full employment side of its mandate. That may not have convinced investors, but we …
Financial market sell-off continues The sell-off in Asian financial markets gathered pace today, with equities and currencies both falling. The drops were triggered by the rise in government bond yields in the US on the back of concerns that President …
Not immune to the bond market rout As elsewhere, the sell-off in the bond market hit the headlines in Switzerland and the Nordics this week. In keeping with the trend over the past year or so, the Norwegian 10-year yield has tracked that in the US higher, …
ECB tries to quash bond yield increases Euro-zone sovereign bond yields continued to rise this week in line with those elsewhere, as investors reassess the global inflation outlook and related prospects for monetary policy. While inflation has risen in …
The roadmap out of the current COVID-19 lockdown announced by the Prime Minister on Monday was similar to the assumptions we had already built into our economic forecasts. As such, it didn’t reroute our forecast that the recovery will be faster and fuller …
10-year yields reaching highest level since 2016 The 10-year JGB yield rose to 0.18% today, the highest it has been since the launch of negative interest rates in January 2016. (See Chart 1.) One explanation is that the Bank of Japan is widely expected to …
Should the RBI target core inflation? Under current law, India’s government issues the RBI with an inflation target every five years. The current target of 4% headline CPI inflation, with a “tolerance band” of 2-6%, runs until the end of next month. We’ve …
Bond yields soaring to two-year high The key market theme this month has been the surge in long-term government bond yields. While that rise is partly driven by worries that another large stimulus package in the US will lift inflation, yields have risen …
Efforts to revive Iran nuclear deal begin The Biden administration has taken the first steps to try to revive the Iran nuclear deal and, while there remain major hurdles, this could put downward pressure on oil prices. This is unlikely to be a major …
25th February 2021
Abnormally cold temperatures in the US, particularly Texas, have forced a significant share of US oil wells and refineries offline this week. Oil prices initially surged on the back of this disruption, but they have since retraced most of their gains. In …
19th February 2021
SA budget the first test of austerity commitment All eyes will be on Finance Minister Tito Mboweni when he delivers South Africa’s budget speech next Wednesday for any changes in the government’s fiscal consolidation plans. The poor public finances leave …
Tex-Mex blackouts hits industry The energy crisis in Texas has had a major knock-on effect on Mexico, although the economy should be able to make up some lost ground. Natural gas is used to generate about 60% of Mexico’s electricity supply and the country …
Oil and the ruble: a broken friendship? The threat of Western sanctions on Russia is clouding the near-term outlook, but the recent sharp increase in oil prices suggests that fiscal policy may become a bit more supportive this year and that there’s scope …
The government signalled its commitment to its new immigration target this week, but disruption from the pandemic will probably prevent immigration from picking up meaningfully until at least the end of 2021. It is not often that the bi-weekly Express …
Spring Festival spending subdued During the last sexagenary cycle of China’s lunisolar calendar, Years of the Ox were by some way the weakest for GDP. (See Chart 1.) 2021 will be different. The suppression of output during last year’s lockdown means that …
Economic activity seems to have responded strongly to the latest round of fiscal stimulus passed in mid-December and the drop in coronavirus case numbers, which has allowed for the easing of containment measures in many states. But there are also signs …
The 8.2% m/m fall in retail sales confirmed that January’s lockdown hit retailers much harder than November’s lockdown, when sales fell by “only” 4.0% m/m. But it still wasn’t anywhere near as large as the 18.0% m/m drop in the first lockdown in April …
Borrowing costs on the rise Sovereign bond yields throughout the euro-zone rose sharply this week, raising questions about the outlook for growth and inflation. Ten-year German and Italian bond yields, for example, rose by 15bp and 20bp respectively. …
Norges Bank set to blink first In case you missed it, we changed our view on the Norges Bank this week. Having previously forecast the key interest rate to remain on hold into 2023, we now expect the Bank to be the first advanced central bank to begin …
The Asian century We recently launched our new service, The Long Run , which includes detailed forecasts out to 2050 for 58 economies. They reveal a non-consensus view that China will not be the biggest economy in 2050. But Asia nonetheless dominates. …
Investment recovering, but headwinds remain The breakdown of the industrial production data for December showed a continued rebound in output of capital goods. On past form, this recovery suggests that our initial estimate that investment contracted by …
Short lockdowns unlikely to disrupt recovery Brief, localised lockdowns are increasingly becoming the norm in Australia and New Zealand as officials seek to contain outbreaks, particularly given concerns about more infectious strains of the virus. But the …
The 3.0% q/q jump in GDP in Q4 was stronger than most had anticipated. And while it still left output 2.9% below the peak reached ahead of 2019’s sales tax hike, other economic data released this week are consistent with our view that the economy will …
Saudi’s “Programme HQ” not convincing Saudi Arabia this week formally adopted a carrot and stick approach to entice more foreign firms to set up in the Kingdom, but the plan is ambiguous in many areas and does not appear to support some of the …
18th February 2021
The price of Brent crude oil breached the $60 per barrel mark this week for the first time in over a year, in a continuation of its strong performance since COVID-19 vaccines were announced in November. Given our upbeat oil demand outlook for H2 2021, we …
12th February 2021
Brazil’s central bank gains independence The Brazilian Chamber of Deputies’ approval of a bill to grant the central bank (BCB) formal independence this week could, over the longer term, help to reduce inflation and lower longer-term bond yields. (For more …
The housing market has largely shrugged off the latest phase of the coronavirus restrictions. If anything, the data imply there are upside risks to our already above-consensus forecasts for house prices this year. Admittedly, the 7.5% m/m drop in home …
AstraZeneca vaccines in Africa: to jab or not to jab? Disappointing news from an AstraZeneca trial will further complicate vaccination campaigns across Sub-Saharan Africa. But heavy reliance on this jab is limiting policymakers’ alternative options. The …
Slow vaccine rollout may delay regional recovery The incredibly slow start to vaccination programmes across the region presents a growing downside risk to our forecast that the region will enjoy a strong economic recovery from Q2 . The latest data suggest …
The possibility that international travel restrictions could remain in place this summer implies that the rapid vaccine rollout won’t be enough to ensure a swift return to normality for the hard-hit tourism sector. But this is unlikely to put a huge dent …
Attention shifts from repo rate to asset purchases As expected, the Riksbank left its repo rate and other policy settings unchanged on Wednesday morning. (See here .) The Bank was justifiably upbeat about near-term prospects for the economy given the …
With fiscal negotiations taking a backseat to the impeachment trial in the Senate, a dovish Powell speech took the limelight this week, together with signs that virus restrictions will continue to be lifted. Dovish Powell Fed Chair Jerome Powell’s use of …
New government in Italy The decision by the Five Star Movement to support Mario Draghi means that the coalition will have a huge majority and that no single party could collapse the government by pulling out. This should also make it easier to approve …
Oil at $60pb and the implications for the Gulf Oil prices hit their highest level in over a year this week and, if this is sustained as we expect, the Gulf countries will benefit as oil output is raised and officials hold back from further harsh …
11th February 2021
