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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 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 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 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 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
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 13, 2025 2:28 PM UTC
Brazil’s CPI grew by 0.52% in December, ending 2024 at 4.8%, above the Central Bank’s target range (1.5%–4.5%). Key drivers included food (+1.2% m/m) and household spending (+0.7%). Core inflation rose for the fourth consecutive month, reaching 4.3% Y/Y. Elevated inflation is expected in early
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
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 26, 2024 3:14 PM UTC
Bottom Line: Central Bank of Turkiye (CBRT) lowered its key policy rate by 250 bps to 47.5% on December 26 which was the first rate cut in around two years, but said it would remain cautious about future cuts. In its press release, CBRT cited a flat underlying trend of inflation in November and sugg
January 15, 2025 7:47 AM UTC
Amid current bond market ructions, which some are suggesting reflects stagflation worries, we think that looming December UK CPI data may help dispel some of the inflation aspect of those concerns. Indeed, with markets are looking for the headline rate to stay at November’s 2.6% outcome, the act
January 10, 2025 11:55 AM UTC
Amid current bond market ructions, which some are suggesting reflects stagflation worries, we think that looming December UK CPI data may help dispel some of the inflation aspect of those concerns. Admittedly, markets are looking for the headline rate to nudge up a notch, although we look for a st
January 8, 2025 3:06 PM UTC
Bottom Line: After Central Bank of Turkiye (CBRT) lowered its key policy rate by 250 bps to 47.5% on December 26, which was the first rate cut in around two years, we believe the rate cuts will continue in 2025 following inflation fighting drive in 2024 while our end year key rate prediction remains
January 8, 2025 8:30 AM UTC
We see a transactional approach on trade, with tariff threats translating into actual tariffs on China initially and Trump rather than Congress having control on tariffs. On the budget, we see scope for more tax cuts than expanding the lapsing parts of the 2017 tax cuts and expenditure cuts bein
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.
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
January 3, 2025 11:34 AM UTC
Bottom line: Inflation fell more than expected to 44.4% annually in November supported by benign food prices and relative TRY stability. We envisage that inflation will continue to decelerate in Q1 2025 by moderate slowdown in domestic demand and credit growth, and will likely be helped by lower-t
December 24, 2024 8:30 AM UTC
The U.S. economy’s momentum remains reasonable before the impact of President-elect Trump’s policies in 2025 and 2026. While high uncertainty exists on the scale and timing of policy, the strategic bias is clear – sizeable tax cuts that will boost the budget deficit; tariffs (threats
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
January 10, 2025 4:51 PM UTC
Hard for USD/JPY to extend higher from current levels
US equities and yields struggling to rise further in concert
EUR/USD downside also limited as yield spreads move in EUR’s favour
GBP has more potential downside with expectations of BoE cuts too conservative
January 10, 2025 3:20 PM UTC
The last set of GDP data add to questions about the UK’s economy’s apparent solidity, if not strength, as seen in sizeable q/q gains in the first two quarters of the year of 0.7% and 0.5% respectively. As we envisaged, October saw a second successive m/m drop of 0.1%, well below expectations,
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
January 16, 2025 4:38 AM UTC
Asia Session
The Australian labor market stayed strong and see another 55.3k employment gains, with both the unemployment and participation rate ticked up by 0.1%. While most gains are in part time job, a rotation from the November report, it does not take out the strength of such report. However, th
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
January 14, 2025 10:10 AM UTC
US PPI unlikely to have much impact
USD risks now look to be mainly on the downside with good news largely priced in
Yield spreads and valuation suggest parity in EUR/USD unlikely to be threatened
AUD looks particularly underappreciated
January 13, 2025 1:54 PM UTC
We expect Canadian CPI to slip to 1.7% yr/yr from 1.9%, the fall largely due to a temporary supse4cuion of the Goods and Services Tax that will run from Mid-December through Mid-February. Bank of Canada Governor Tiff Macklem has stated that the tax suspension is expected to move inflation down to a
January 10, 2025 4:38 PM UTC
Bottom line: According to Turkish Statistical Institute’s (TUIK) figures announced on January 10, the unemployment rate declined to 8.6% in November from 8.7% in October. The number of jobless dropped 84,000 from October to 3.07 million in November, the data showed. As unemployment rate continue
January 9, 2025 11:23 AM UTC
Bottom line: After South African Reserve Bank (SARB) started cutting the key rate on September 19 and decreased the rate from 8.25% to 7.75% in 2024 given fall in inflation below midpoint of target band of 3% - 6%, suspended power cuts (loadshedding) and deceleration in inflation expectation, we for
January 6, 2025 2:19 PM UTC
Mexico's December CPI is forecasted to grow by 0.5% in December, bringing 2024 inflation to 4.3%, above Banxico's target. Core CPI aligns better at 3.5%. Weak demand aids inflation convergence, expected by Q3 2026. Risks include a 22% MXN depreciation and U.S. tariffs. Banxico is likely to continue