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January 21, 2025

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President Trump: Filling in the Blanks
Paying Article

January 21, 2025 9:12 AM UTC

While the new executive orders from president Trump were focused on immigration and energy issues, the threat of 25% tariffs against Mexico and Canada by Feb 1 raises the stakes in North America negotiations in the coming weeks.  China tariff threats will likely become more concreate in Q1, though

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Rupee at Record Low: Can India Weather the Dollar Storm?
Freemium Article

January 21, 2025 5:03 AM UTC

The Indian rupee has slumped to an all-time low of 86 against the US dollar, underscoring the pressure on emerging market currencies as the dollar index surges to multi-month highs. For India, this currency depreciation signals potential disruptions in financial markets, with equities and bonds—no

January 20, 2025

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Brazil Risk Premia and EM Debt
Paying Article

January 20, 2025 8:15 AM UTC

Brazil debt market has two domestic crises rather than a spillover from the U.S. in the form of inflation and fiscal policy. Very restrictive BCB policy can help produce some disinflation and we forecast 4.1% for 2026, which some allow some rate cuts in H2. Brazil risk premium will likely be reduced

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BoJ Preview: 50% Hike, 100% Disappointment
Freemium Article

January 20, 2025 2:00 AM UTC

Market is currently pricing more than 50% the BoJ will hike in the January 23-24 meeting but it is unlikely to be the hawkish BoJ market participants want.

January 17, 2025

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China: 5% for 2024 but Still Imbalanced into 2025
Paying Article

January 17, 2025 2:15 PM UTC

  Though China hit the 2024 GDP growth target of 5.0%, monthly data shows the economy unbalanced.  Industrial production/exports and state investment support the economy, with residential property investment negative and consumption sluggish. With monetary policy ineffective, we see Yuan3-5trn fis

January 16, 2025

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Preview: Due January 31 - U.S. December Personal Income and Spending - Core PCE Prices to match Core CPI
Paying Article

January 16, 2025 2:32 PM UTC

December’s personal income and spending report will be largely old news at the time of the release, with Q4 totals due with the GDP report on January 30. Ahead of the GDP data we expect a 0.2% increase in core PCE prices, and 0.4% gains in both personal income and spending. 

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India CPI Review: CPI Cools but Target Not in Sight
Paying Article

January 16, 2025 2:27 PM UTC

India’s retail inflation eased to a four-month low of 5.22% in December 2024, driven by a seasonal decline in food prices, particularly vegetables and cereals. With inflation within the RBI’s target range, all eyes are on the upcoming monetary policy review for potential rate cuts.

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U.S. December Retail Sales - Trend still solid, Philly Fed surges in January
Paying Article

January 16, 2025 1:58 PM UTC

December retail sales with a 0.4% increase overall and ex auto, 0.3% ex autos and gasoline, are on the weak side of expectations but maintain respectable momentum, particularly in the control group which contributes to GDP, which rose by 0.7%. A strikingly strong January Philly Fed manufacturing ind

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ECB December Council Meeting Account Review: The ‘Last Mile’ Appears to Have Shortened Somewhat?
Freemium Article

January 16, 2025 1:27 PM UTC

As the account of the December 11-12 Council meeting noted, a fourth 25 bp discount rate cut was agreed but there appeared to be a minority wanting a 50 bp move. But this account also shows some confusion as to just what the advertised change in forward guidance (in which the ECB accepts that on-tar

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BOE QT: A Heavier Burden than Fed/ECB QT
Paying Article

January 16, 2025 11:05 AM UTC

BOE QT is 3.4% of GDP and means the 2025 total funding is 8% of GDP, which helps explain part of the current pressure on gilt yields (here).  This pace is unlikely to change before the BOE review in September 2025, but the QT is partial monetary tightening and will offset some of 125bps of BOE rate

January 15, 2025

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FOMC Preview for January 29: A Cautious Hold
Paying Article

January 15, 2025 8:10 PM UTC

The FOMC looks set to keep rates on hold at 4.25-4.5% at its January 29 meeting. The statement is unlikely to give much away but the message is likely to be one of cautious optimism on inflation, suggesting further easing is likely but dependent on incoming data. Policy uncertainty under the incomin

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U.S. December CPI - A modest comfort to the Fed, but early 2025 data will be crucial
Paying Article

January 15, 2025 2:04 PM UTC

While December’s headline CPI is in line with expectations with a 0.4% increase, the core rate ex food and energy is subdued at 0.2% following four straight gains of 0.3%, and a downside surprise is quite comfortable with the gain before rounding being 0.225%. Price data did however pick up in Jan

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Mexico’s Plan: An Eye on Nearshoring and Displacing China in U.S.
Freemium Article

January 15, 2025 1:17 PM UTC

President Claudia Sheinbaum’s “Mexico Plan” targets USD 270 billion in investments, aiming to reduce poverty, boost sustainability, and expand Mexico’s economy. Key goals include nearshoring, increasing domestic production, and fostering U.S. trade relations. However, private investment stag

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U.S. Yields and an Equity Market Correction
Paying Article

January 15, 2025 8:15 AM UTC

Treasury yields look to have reached a level that the divergence in valuations means that equities are on the defensive. Unless U.S. Treasury yields come down then the S&P500 looks to be heading to 5400-5600 near-term.  This is most likely a correction given that the Fed is likely to still leave th

January 14, 2025

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U.S. Yields Drag Germany and France Higher
Paying Article

January 14, 2025 8:15 AM UTC

The EUR real exchange rate is well above the 2014 low, while ECB officials are guiding that more rate cuts are coming.  2yr German yields are unlikely to rise much further and will likely come back down in Q2 (here).  A January 30 ECB cut will likely build more easing expectations, though more of

January 13, 2025

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Cyberattacks and AI Misinformation: Market and Economic Fallout
Paying Article

January 13, 2025 8:10 AM UTC

   A major cyberattack is a tail risk, while a huge AI misinformation crisis is a modest crisis in our view.  Russia/China and Iran are less likely to launch a state sponsored cyberattack for geopolitical reasons and also uncertainty over president elect Donald Trump’s response.  A huge AI mis

January 10, 2025

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U.S. December Employment - Case for a January FOMC pause looks stronger still
Paying Article

January 10, 2025 2:00 PM UTC

December’s non-farm payroll with a 256k increase, 223k in the private sector, is significantly higher than expected and suggests the economy has significant momentum entering 2025, adding to an already strong case for a Fed pause in January. The unemployment rate slipped to 4.1% from 4.2% but a 0.

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U.S. Treasuries versus Bunds and Gilts
Freemium Article

January 10, 2025 8:10 AM UTC

·        UK Gilts have been dragged higher by rising Treasuries and market concerns that BOE rate cuts will be limited (here), while 10yr Bund yields have also been dragged higher by Treasuries concerns on Fed rate cuts/budget deficit and tariffs.  Multi quarter we see this as overdone. We

January 09, 2025

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Gilt Yields Rise on U.S. and Fiscal Slippage Concerns
Paying Article

January 9, 2025 9:40 AM UTC

·       10yr Gilts yields are rising on concerns of UK fiscal slippage, but also higher U.S. yields and funding pressures as GBP100bln of BOE QT adds to the budget deficit targeted at 4.5% of GDP in 2024/25.  Chancellor Reeves will likely recommit to the fiscal rules (ie further small correc

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The Growth-Inflation Tug of War: RBI’s 2025 Policy Outlook with a New Governor
Freemium Article

January 9, 2025 8:14 AM UTC

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is currently navigating a complex economic landscape marked by rising inflation and sluggish growth. The recent appointment of Sanjay Malhotra as the new RBI Governor adds another layer of intrigue to the central bank's policy directi

January 07, 2025

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Yuan Decline: Waiting to Offset Trump Tariffs?
Paying Article

January 7, 2025 8:35 AM UTC

China’s authorities are reluctant to see too quick a decline in the Yuan, as it could accelerate capital outflows and cause political unrest for the communist party.  Thus the preference remains for controlled declines in the Yuan with declines followed by periods of forced stabilization.  We do

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BoJ: New Year, Old Trick?
Freemium Article

January 7, 2025 12:00 AM UTC

USD/JPY is once again close to historical high. But are we seeing an imminent intervention?

January 06, 2025

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Markets 2025: A Tale of Two Halves
Paying Article

January 6, 2025 8:10 AM UTC

·  For financial markets, 2025 will likely be a game of two halves.  US exceptionalism will likely drive US equities to extend outperformance in H1, while the USD rises further as tariffs (threats and actual) escalate.  However, 10yr U.S. Treasury yields will likely push higher in H2, which can

January 03, 2025

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Waiting for China Fiscal Stimulus
Freemium Article

January 3, 2025 9:31 AM UTC

It is not clear why China’s authorities are slow in announcing fiscal policy measures, but it could be either acceptance of 5% GDP trajectory or just below or alternatively a desire to see the timing and scale of extra U.S. trade tariffs on China from the incoming Trump adminstration.  We see a t

January 02, 2025

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EM Government Debt: BRICS Divergence
Paying Article

January 2, 2025 8:05 AM UTC

   Brazil and South Africa suffer from debt servicing costs outstripping nominal GDP, which will remain a concern unless a consistent primary budget surplus is seen – though S Africa enjoys a much longer than average term to maturity than Brazil.  India and Indonesia, in contrast, enjoy nominal

December 31, 2024

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U.S. 10yr Yields Fiscal Worries
Paying Article

December 31, 2024 8:15 AM UTC

•    As 2025 progresses the budget bill is likely to cement prospects of an 8-9% budget deficit in the U.S. for years to come.  This will likely hurt Treasuries most just before the budget deficit expands quarterly Treasury issuance in Q4 2025/Q1 2026.  Worse we have a non-consensus call of

December 20, 2024

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U.S. November Core PCE Prices significantly softer than Core CPI
Paying Article

December 20, 2024 1:59 PM UTC

November PCE prices at 0.1% overall and core has sharply underperformed gains of 0.3% in both overall and core CPI, easing some of the inflationary concerns generated by two straight gains of 0.3% in September and October core PCE prices. Gains of 0.3% in personal income and 0.4% in spending are als

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Bank Indonesia Holds Rate to Support IDR
Paying Article

December 20, 2024 12:06 PM UTC

Bank Indonesia held its key interest rate at 6% in its December meeting. The decision to hold rates steady is primarily influenced by the need to stabilize the Indonesian rupiah. Inflation remains within target, and GDP growth forecasts are steady. Future rate cuts depend on US Federal Reserve actio

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EMFX Outlook: Hit From Tariffs, Before Divergence
Paying Article

December 20, 2024 10:00 AM UTC

·        EM currencies on a spot basis will remain on the defensive in H1 2025, as we see the U.S. threatening and then introducing tariffs on China imports – 30% against the current average of 20%. China’s response will likely include a Yuan (CNY) depreciation to the 7.65 area on USD/CN

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DM FX Outlook: USD to edge lower despite high yields
Paying Article

December 20, 2024 8:28 AM UTC

·       Bottom Line: Recent strong US data has bolstered the USD, with the Trump election victory also supportive due to expectations of tax cuts and tariffs which are seen leading to less Fed easing than previously expected. While we still see the USD weakening through 2025 as Fed easing red

December 19, 2024

Preview: Due December 20 - U.S. November Personal Income and Spending - Core PCE Prices to underperform Core CPI
Paying Article

December 19, 2024 2:30 PM UTC

We expect November to see a 0.2% increase in the core PCE price index, underperforming a 0.3% core CPI as is usually the case but was not so in September and October. We expect 0.5% increases in personal income and spending. 

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DM Rates Outlook: Policy and Spread Divergence
Paying Article

December 19, 2024 12:07 PM UTC

•    2yr U.S. Treasury yields can decline initially as the Fed finishes easing (Figure 1), but as the sense grows that the rate cut cycle is stopping, we see the 2yr swinging to a small premium versus the Fed Funds rate – as the market debates the risks of a future tightening cycle.  For 10y

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Outlook Overview: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics
Paying Article

December 19, 2024 9:25 AM UTC

·        The U.S. economy momentum remains reasonable before President elect Trump’s policies impact in 2025 and 2026.  While high uncertainty exists on the scale and timing of policies, the strategic bias is clear – sizeable tax cuts that will boost the budget deficit; tariffs (threats

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U.S. Outlook: Healthy Economy Facing Policy Risks
Paying Article

December 19, 2024 8:01 AM UTC

•    The U.S. economy, consumer spending in particular, has continued to show surprising resilience, and is growing at a pace probably in excess of long-run potential near 2.0%. Inflation has fallen significantly from its highs, with core PCE inflation now running slightly below 3.0%, but rema

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BoJ Review: A nothing burger
Paying Article

December 19, 2024 7:13 AM UTC

The BoJ keep rate unchanged in the Dec 19 meeting at 0.25% with no forward guidance

December 18, 2024

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Fed: Policy Easing Slowing
Paying Article

December 18, 2024 8:35 PM UTC

The FOMC statement, FOMC medians and Powell during the Q/A left the impression that Fed easing will slow down into H1 2025. We now see two 25bps cuts in March and June 2025 driven by a Fed’s desire to avoid too much labor market slack occurring, but then pausing for the remainder of 2025 at a 3.75

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Equities Outlook: U.S. Exceptionalism v Valuations
Paying Article

December 18, 2024 10:05 AM UTC

·        The glory days of exceptionalism for U.S. equities will likely extend in Q1 2025 to bring the S&P500 to 6200-6300. The problem is that valuations have now become stretched with S&P500 ex magnificent 7 on a forward P/E of 19 and valuations out of line with real bond yields (Figure 1)

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Chartbook: Quarterly Forecasts FX/Rates/Equities For Q1 2025
Paying Article

December 18, 2024 9:44 AM UTC

Our latest quarterly Forecasts FX/Rates/Equities/Commodities for Q1 2025 are now available, see resources at the end.  

December 17, 2024

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Preview: Due December 20 - U.S. November Personal Income and Spending - Core PCE Prices to underperform Core CPI
Paying Article

December 17, 2024 4:27 PM UTC

We expect November to see a 0.2% increase in the core PCE price index, underperforming a 0.3% core CPI as is usually the case but was not so in September and October. We expect 0.5% increases in personal income and spending. 

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U.S. November Retail Sales - Mixed detail but trend still strong
Paying Article

December 17, 2024 1:47 PM UTC

November retail sales with a 0.7% increase are stronger than expected overall but the 0.2% gains in the core rates both ex autos and ex autos and gasoline are weaker than expected, though an as expected 0.4% rise in the control group suggests a healthy contribution to GDP.  Revisions are marginally

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China Outlook: Construction and Trade Headwinds v Policy Stimulus
Paying Article

December 17, 2024 11:00 AM UTC

  We do see a package of stimulative fiscal policy measures for 2025 including Yuan1-3trn infrastructure spending; Yuan1trn funds to buy completed homes for affordable housing and Yuan1trn capital injection to the big six state banks. Some modest measures for low-income households and to boost soci

December 16, 2024

Chartbook: Chart USD Index DXY: Pressuring range highs - gains to remain limited
Paying Article

December 16, 2024 2:32 PM UTC

The anticipated break below support at the 99.58 year low of July 2023 and congestion around 100.00 has not been seen

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China Data: Retail Sales Disappoints
Paying Article

December 16, 2024 7:34 AM UTC

China November Retail sales disappointed with a low +3.0% Yr/Yr rise, due to broad based weakness outside of autos and home appliances – the latter boosted by trade in programs, which will likely be extended into 2025.  The data underlines the imbalance between demand and supply, which argues for

December 12, 2024

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ECB Review: Clearly Flagging An End to Policy Restriction
Paying Article

December 12, 2024 3:02 PM UTC

A fourth 25 bp discount rate cut at this latest Council meeting, to 3%, was also the third in a row. But this meeting was important for the (as we expected) change in forward guidance in which the ECB accepts that on-target inflation is likely to be durable enough so that it no longer has to pursue

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BCB Review: Shock 100bps Hike
Freemium Article

December 12, 2024 10:12 AM UTC

The Brazilian Central Bank raised the policy rate by 100bps to 12.25%, with plans for two more 100bps hikes, reaching 14.25% by early 2025—the highest in 18 years. The decision reflects fiscal concerns, inflation risks, and a 10% depreciation of the Real. The BCB aims to curb inflation and protect

December 11, 2024

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FOMC Preview for December 18: A Cautious 25bps Easing
Paying Article

December 11, 2024 7:47 PM UTC

The FOMC meets on December 18 and we expect a 25bps easing to a 4.25-4.5% range. Fed commentary has generally suggested that rates are moving lower while cautioning against assuming easing at any meeting is a done deal. Absence of major surprises in recent employment and CPI data probably clears the

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U.S. November CPI - A little higher than the Fed would like, but a cautious December easing still expected
Paying Article

December 11, 2024 1:56 PM UTC

November CPI is in line with expectations at +0.3% both overall and ex food and energy, with both up by 0.31% before rounding. Core CPI with four straight 0.3% gains is still a little high for comfort but the data is probably subdued enough to allow the FOMC to deliver a 25bps easing next week, thou

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China Response to Trump Tariffs: Yuan Depreciation and Fiscal Policy Easing
Paying Article

December 11, 2024 8:03 AM UTC

A U.S./China trade war looks highly likely in H1 2025.  We would feel that Trump will threaten and then introduce across the board tariff of around 30% on all China imports versus an average of around 20% currently.  China will likely respond with targeted tariffs and more restriction on rare eart

December 10, 2024

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EM Europe and CIS: Select Country Risk Ratings
Paying Article

December 10, 2024 11:00 AM UTC

We provide country risk reviews for EM Europe/CIS countries including Russia and Turikye. 

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RBA Review: Closer, but not yet
Freemium Article

December 10, 2024 5:16 AM UTC

The RBA meeting on December 10th kept rates on hold at 4.35%