We have revised up our forecast for the euro against the US dollar, as we expect that conditions driving the euro’s appreciation will persist over the next few years despite near-term headwinds. The euro has appreciated more than 10% against the greenback …
20th November 2020
With the benefit of hindsight, the stamp duty holiday was not necessary to get the housing market moving again. And the end of the holiday in March will insert a cliff edge in demand at the exact moment we expect employment and incomes to be suffering …
At its December meeting, the ECB is very likely to announce additional TLTRO operations and it may well make their terms even more favourable for banks. In this Update , we review the ways that the ECB could alter TLTROs so that they provide greater and …
The surge in the price of cocoa this week has come as a number of large risks hang over the supply outlook. But if these risks fail to materialise, we expect prices to fall back over the coming months . The price of cocoa soared by close to 25% this week …
Commercial banks left the Loan Prime Rate (LPR) on hold today, after the PBOC moved to mitigate the impact of corporate bond defaults on interbank liquidity. With growth now back to its pre-virus path and attention turning to financial risks, we think the …
The recovery in oil demand across Emerging Asia has been highly uneven. Oil consumption in China is already back to pre-virus levels, and we think it will rise further in the year ahead. But consumption elsewhere is unlikely to return to pre-virus levels …
19th November 2020
Argentina’s central bank (BCRA) is running out of FX reserves to prop up the peso and it may soon devalue the currency. Even so, it would take an overhaul of the monetary policy setup, probably under the guise of a new IMF agreement, to prevent a more …
A striking development in the past few months is how well housing markets in developed markets have generally been doing. We expect this to peter out next year, although in most cases house price falls will be avoided. In the meantime, the strength of …
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today, but the close decision underlines lingering concerns about a weak recovery and subdued inflation. Even if the Reserve Bank refrains from further rate cuts over the coming …
After underperforming the MSCI USA Index for most of 2020, the MSCI Japan Index has started to outperform it in recent days. Provided COVID-19 is brought under control in most major economies, we think that this trend will continue over next couple of …
The decision by Turkey’s central bank to hike its one-week repo rate by 475bp, to 15.00%, and pledge to provide all funding through this facility appears to have done enough to convince investors that there really is a positive shift in policymaking …
The high-frequency data suggest the targeted restrictions imposed last month have not weighed much on broader activity, but worsening COVID-19 outbreaks raise the risk that “circuit breaker” lockdowns will be imposed. This would greatly increase the …
Bank Indonesia (BI) cut its main policy rate today by 25bps to 3.75%, and further gradual easing is likely provided the currency continues to perform well against the US dollar. Of the 26 economists polled by Bloomberg, 14 expected rates to remain …
The central bank in the Philippines (BSP) cut its key policy rate today for the first time since June, and the weakness of the recovery means further easing is likely. Today’s 25bp cut takes the policy rate to just 2.0% - a fresh all-time low. The BSP has …
Rising rental vacancy rates in large cities have not been accompanied by a surge in first-time buyers (FTBs). Indeed, 2020 saw the lowest share of FTBs since 1987. That implies many of those rental households who left large cities are either renting in …
18th November 2020
Ongoing policy stimulus in China should continue to boost investment and industrial output in the coming months. However, we expect economic activity to gradually slow by end-2021 which is why we think that prices will start to ease back next year . …
Policymakers across the region have drawn down foreign exchange reserves this year in order to prop up currency pegs and, in the Gulf countries at least, this can be sustained for some time to come. Even in Bahrain and Oman, financial support from their …
The expiry of the remaining enhanced unemployment insurance programs at the end of the year would hit the incomes of the unemployed but would be unlikely to deal a major blow to the economy. With another stimulus deal possible early next year, it is the …
Relatively few EMs have signed large-scale advance purchase arrangements with pharmaceutical companies and the roll-out of vaccines is, in large part, likely to be slower than in DMs. This Update answers five questions on vaccine distribution in EMs and …
South Africa’s hard activity data for September point to a lacklustre economic recovery in Q3 but this is unlikely to prompt the Reserve Bank to deliver further monetary stimulus at tomorrow’s MPC meeting – we expect the policy rate to be left unchanged …
A widespread rollout of an effective vaccine next year should allow a fairly swift return to normality for Spain’s hard-hit tourism sector and would transform the short-term economic outlook. We currently forecast the economy to grow by 4.5% next year, …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at an all-time low of just 0.5% came as no surprise. Given the poor outlook for the economy, rates are likely to remain very low for a long time to come. The recent strength of the …
Given that Japan doesn’t have existing free trade agreements with either China or Korea, it is set to benefit more than other participants from the recently signed RCEP deal. However, tariffs will only be lowered gradually so the impact on GDP growth will …
The news about effective vaccines has improved the global economic outlook and we think that most restrictions on activity in advanced economies will be removed by around Q2 next year. But distribution to many EMs including large parts of Latin America, …
17th November 2020
There is still a lot of uncertainty about the rollout of a COVID-19 vaccine in Europe, but it now seems likely that it will be delivered to those most vulnerable to the disease by Q2 next year, which would help to reduce the risk of damaging runs on …
Growth in narrow measures of the money supply has continued to edge higher as demand and saving deposits continue to accumulate but, with growth in broader measures of money and bank lending dropping back, there is little threat of that pushing inflation …
Hungary’s central bank left its key interest rates unchanged today but the recent appreciation of the forint and signs that disinflationary forces have picked up has given the central bank scope to reduce the interest rate on its one-week deposit back to …
History suggests that large falls in employment can lead to big falls in house prices. The furlough scheme, mortgage holidays, and a moratorium on possessions have insulated the housing market from the effects of this crisis so far. But after that support …
The COVID pandemic will leave a profound economic legacy. But unlike previous crises, this will not necessarily manifest itself in much weaker rates of long-term economic growth. Instead, the economic legacy of the pandemic will be felt in changes to …
Moscow offices rents were under pressure even before the onset of COVID-19 and a further steep decline is expected this year. Domestic economic factors will be more supportive in 2021, but this is unlikely to deliver much more than marginal growth over …
Daily mobility data suggest that, compared to “normal”, the current lockdowns will cause GDP to fall less than half as far as in April. Mobility has fallen most sharply in France and has held up best in Germany. The official data only run up until …
The rebound in investment in India appears to have been stronger than anticipated over the past few months and we are revising up our estimates of Q3 GDP growth as a result. But the recovery faces several headwinds, meaning that investment will remain …
Recent extensions to job retention schemes and hopes of a vaccine appear to have improved the outlook for labour markets. But there is still a risk that governments scale back support too quickly and it is almost inevitable that further job losses are to …
16th November 2020
Our measures of labour market slack suggest that the official unemployment rate is significantly understating how much spare capacity there is at the moment and will probably continue to do so for a long time. This supports our view that even with a …
India recorded its largest monthly goods trade deficit since the start of the pandemic in October as the export recovery came to an abrupt halt. Looking ahead, unlike much of Asia, India will not benefit much from strong global demand for electronics and …
Mobility data up to 8 th November suggest that the recovery in developed and emerging Europe has already gone into reverse and that recoveries in other parts of the world are losing steam. To recap, our proprietary Mobility Trackers* gauge economic …
13th November 2020
The Central Bank of Egypt (CBE) unexpectedly moved to cut interest rates for a second consecutive meeting on Thursday evening and, with inflation set to remain weak, we think that the easing cycle has further to run over the next twelve months or so. The …
The communications accompanying the Mexican central bank’s decision to leave its policy rate unchanged at 4.25% suggest that there may still be scope for one more cut in the easing cycle. While it’s touch and go, we think it’s most likely that there will …
12th November 2020
Talks to establish the world’s biggest free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP), are finally expected to conclude at the weekend. While a deal would provide a boost to sentiment, the direct economic benefits would be …
Third quarter data make it look increasingly likely that our year-end price forecasts will prove to be too negative. However, with the UK still on course for a capital value fall of close to 10% this year, this doesn’t necessarily mean that the US or …
Strong demand from China together with constrained production should support the price of natural rubber through the first half of next year. That said, we think that prices will start to fall back by end-21 . After dropping in the first half of the year …
The recent tightening of virus containment measures across the region will push back the economic recovery well into 2021 and means that policy support will need to be stepped up before, as seems likely, an effective vaccine is distributed next year. But …
