DM Rates: QT adds to Budget Deficits Pressures

July 22, 2025 10:05 AM UTC

·        Heavy issuance due to the U.S. budget deficit, plus Fed rate cuts will help further yield curve steepening in H2 2025.  In EZ and UK, ECB and BOE QT is large and amplifies the amount of debt that the rest of the market has to absorb, which will also drives yield curve steepening al

Eurozone Flash GDP Preview (Jul 30): A Pause that Does Not Refresh?

July 22, 2025 9:13 AM UTC

For an economy that has seen repeated upside surprises and above trend growth of 1.5% in the year to Q1, GDP data do not seem to have had much impact is shaping, let alone dominating, ECB policy thinking. We think this will continue to be the case even where the looming Q2 data may show a modest con

2yr Germany and ECB Expectations

July 21, 2025 10:07 AM UTC

·       Money markets are putting too much weight on ECB communications and we feel that a softening labour market/financial conditions and more tariffs from the U.S. will be enough to shift the ECB to deliver two final 25bps cuts in H2 2025.  Though the 2yr Germany to ECB depo rate spread w

LDP Likely Lose Control of the Japan Upper House

July 21, 2025 2:00 AM UTC

Early exit pools suggest the ruling LDP coalition will likely lose majority

Trump’s and Fed Easing

July 18, 2025 9:34 AM UTC

•    Trump goal of substantially lower short-term rates could be achieved with a recession, but otherwise is unlikely even when Fed chair Powell is replaced.  The majority of voting FOMC members will make decisions based on economics not politics.  However, Trump fixation with lower rates an

Preview: Due July 31 - U.S. June Personal Income and Spending - Core PCE Prices to outpace Core CPI

July 17, 2025 2:48 PM UTC

June’s personal income and spending report will be largely old news at the time of the release, with Q2 totals due in the GDP report due the day before. Ahead of the GDP report we expect a stronger 0.3% increase in core PCE prices, with a weak 0.2% rise in personal income but a solid 0.5% rise in

U.S. June Retail Sales, Weekly Initial Claims, July Philly Fed - Economy regaining momentum in the tariff pause

July 17, 2025 1:06 PM UTC

The latest US data presents a picture of an economy regaining some momentum as tariff fears fade, at least temporarily. June retail sales with gains of 0.6% overall and ex auto and gas, with ex autos and the control group which contributes to GDP both up 0.5%, ended Q2 on a firm note. July’s Phill

Trump’s Tariffs and Markets

July 17, 2025 12:00 PM UTC

The assumption in financial markets is that some trade framework deals will be done by August 1; some countries will make enough progress to be given an extra 30 days and some countries could have higher tariffs implemented. This would be broadly consistent with the average 15% tariff that is widely

ECB Preview (Jul 24, Part Two): Policy Pause Despite Tighter Financial Conditions

July 16, 2025 1:07 PM UTC

The next ECB Council meeting decision on Jul 24 looms but (as we noted in the part one preview) markets (understandably) sees no further cut, at least at that juncture.  However, we think that the ECB will ultimately still have to ease further - two more 25 bp cuts in H2 - and would not even rule o

FOMC Preview for July 30: No change given uncertainty on tariffs and their consequences

July 15, 2025 6:15 PM UTC

The FOMC meets on July 30 and recent data suggests no reason to move rates from the current 4.25-4.50% level, though Q2 GDP data due on the morning on the decision will impact the wording of the statement. This meeting will not see an update to the dots leaving focus on Chairman Powell’s press con

U.S. June CPI - Tariff pass-through limited but not zero

July 15, 2025 12:58 PM UTC

June core CPI at 0.228% before rounding is on the low side of expectations and still shows a limited, though not zero, feed through from tariffs. Moderate gains in food and energy lifted overall CPI to a 0.3% increase, with the gain rounded up from 0.287%.  Trump will use this data to argue for Fed

ECB Preview (Jul 24, Part One): Labor Market Looking Softer than Council Thinking

July 15, 2025 8:45 AM UTC

The next ECB Council meeting decision on Jul 24 looms but where market (understandably) sees no further cut, at least at that juncture.  Indeed, the ECB may signal signs of economic resilience albeit noting that the added uncertainty emanating from the latest U.S. tariff threat warrants more circum

China: GDP Resilient in Q2, But

July 15, 2025 7:30 AM UTC

•    We do see H2 weakness relative to H1, as exports to the U.S. will slow again and the effects of the government consumption trade in programs fades.  However, H1 has been higher than our forecasts and thus we are revising 2025 GDP growth to 4.8% v 4.4% previously.  We keep 2026 GDP growt

India CPI Review: CPI at 2.1%: Increased Headroom for One More Cut

July 15, 2025 4:33 AM UTC

India’s retail inflation dropped to a six-year low of 2.82% in May, driven by easing food prices and supported by favourable base effects. While disinflation continues to create monetary space, RBI's next rate cut will be data driven. 

Tariffs: Seeking a Trigger for the TACO Trade

July 14, 2025 4:28 PM UTC

It has been fairly clear for some time that 10% represented a likely floor for the eventual Trump tariff regime. However, expectations that Trump would not be willing to go dramatically above that are being tested. A rate in the mid-teens still looks the most likely outcome, as the economic damage t

EU Blindsided by Latest Tariff Threat

July 14, 2025 6:56 AM UTC

Having announced over the weekend a 30% “reciprocal” tariff from August 1 on EU exports to the U.S., the EU seems to be a state of somewhat shock, wary that months of negotiations have failed, let alone succeeded in reducing the tariff threat from the original 20%.  In response, European Commis

India CPI Preview: Inflation Set to Ease Further in June

July 11, 2025 12:00 PM UTC

India’s retail inflation is likely to drop further in June to 2.7% y/r/yr supported by lower food prices and high base effects. This will allow RBI sufficient room to cut interest rates further in H2-2025. 

Eurozone: Damage Limitations on Tariffs, Uncertainty to add to Banks' Caution??

July 9, 2025 9:37 AM UTC

It remains unclear just how much of a movable feast the new U.S. tariff deadline of Aug 1 actually is.  Trade deals with the US were supposed to be agreed by today, or face the reciprocal tariffs as outlined in April. But that has now been deferred to, with US Treasury Secretary Bessent, hinting ac

RBA Review: Shows no urgency

July 8, 2025 6:34 AM UTC

The RBA meeting on July 8th hold rates at 3.85% and shows no urgency in cutting

Putting Names to the FOMC Dots

July 7, 2025 5:35 PM UTC

There are nineteen FOMC dots. Seven hawks expect no easing this year, and two expect only one 25bps move. Eight are on the median seeing two 25bps moves, while two doves are looking for three. While only two have clearly signaled what their personal dot is, reasonable estimates can be made to identi

China: Housing Still A Headwind

July 4, 2025 9:00 AM UTC

Last October, China’s government support package has helped turn residential property less negative and our baseline is that residential property will likely deduct around 0.75% from 2025 growth and 0.5% from 2026.  However, the risks for the economy could turnout worse than our baseline view on

U.S. June ISM Services - Hit from tariffs shows signs of fading

July 3, 2025 2:25 PM UTC

June’s ISM services index of 50.8 from 49.9 has rebounded above neutral after falling to 49.9 in May but is still quite subdued. Detail shows bounces from weakness in May in business activity and new orders but slippage in employment and delivery times restrained the composite.