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Moody's downgrades US debt as long-standing fiscal concerns mount
Paying Article

May 16, 2025 11:42 PM UTC

Moody’s downgraded US debt to AA1 from AAA after Friday’s close. The decision appears due to continued lack of action on the budget deficit rather that being triggered by any specific event, and brings Moody’s into line with S and P and Fitch. However the timing is awkward for markets, with th

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Tax Foreigners Assets: How To Lose Friends

May 30, 2025 9:12 AM UTC

   Increasing taxes on dividends on U.S. equities and corporate bond coupons would alarm foreign investors and hurt the USD and U.S. equities, as it would amplifies foreign investors concerns that they are overweight U.S. assets and the USD.  Starting a capital war with investors into the U.S. is

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U.S. April CPI - Little tariff pass-through so far
Freemium Article

May 13, 2025 1:02 PM UTC

April CPI is on the low side of expectations at 0.2% both overall and ex food and energy, showing a loss of inflationary momentum since a strong start to the year in January, despite the imposition of tariffs. The core rate was up 0.24% before rounding, with the overall pace 0.22%, so the surprise i

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Trump Tariffs: China and UK Precedents
Paying Article

May 12, 2025 8:02 AM UTC

 The U.S./China have announced major reductions in reciprocal tariffs to 10% with other measures postponed for 90 days.  Though the U.S. is still imposing an extra 20% due to fentanyl, China will likely make some moves that could also help to reduce this.  This is in line with our previous thinki

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Markets: Less U.S. Recession Risk, But Trade Headwinds
Paying Article

May 13, 2025 9:38 AM UTC

Though we had expected a U.S./China trade truce, the terms are more favorable to U.S. growth than we anticipated.  Combined with the UK framework deal, we have revised down the probability of a U.S. recession from 35% to 20%.  In turn we have revised up the end 2025 and end 2026 S&P500 forecasts t

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Court Stops Trump Reciprocal and Fentanyl Tariff
Freemium Article

May 29, 2025 7:18 AM UTC

•    The Trump administration will likely follow a multi-track response by appealing the judgement but also fast-tracking section 232 product tariffs for pharmaceuticals and semiconductors.  The administration could also consider section 301 or 122 tariffs (the latter 15% for 150 days against c

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Eurozone: US Stepped-Up Tariff Threat – Negotiations or Concessions?
Freemium Article

May 27, 2025 9:22 AM UTC

At least within markets there is some relief that President Trump has deferred his ramped up 50% tariff threat from early June to July 9.  Unambiguously positive is the fact that a better line of communication, if not rapport, now seems to exist between the U.S. president and EU Commission Presiden

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Europe Portfolio Leverage Over Trump
Freemium Article

May 14, 2025 9:05 AM UTC

The U.S. will likely introduce a 25% tariff on pharmaceuticals, which will increase pressure on the EU and other European countries (e.g. Switzerland) and also delay serious negotiations close to the 90 day reciprocal tariff deadline on July 9, adding to pressure on Europe by deliberately prolonging

USD flows: USD under pressure
Paying Article

May 22, 2025 6:40 AM UTC

USD weakens after Bessent/Kato meeting, PMIs in focus

FX Weekly Strategy: May 12th-16th
Paying Article

May 9, 2025 2:56 PM UTC

US CPI the focus but probably too early for much tariff impact
USD still likely to be favoured if CPI on the high side
GBP can extend recent recovery against the EUR
AUD needs positive US/China news to restore bullish tone

FX Daily Strategy: APAC, May 30th
Paying Article

May 29, 2025 2:46 PM UTC

Risks to USD turning negative as market awaits Trump reaction to court decision
USD/JPY vulnerable to any announcement of new tariff measures
CPI data more likely to support JPY than EUR

Asia Summary and Highlights 26 May
Freemium Article

May 26, 2025 5:39 AM UTC

Trump Delay EU Tariffs Till July 9 after speaking with European Commission President Ursula von der Leyen
China criticizes Australia's effort to return Darwin port to local ownership
Japan PM aims for a trade deal with US by mid-June

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Big Beautiful Bill will bring larger US budget deficits
Paying Article

May 23, 2025 4:32 PM UTC

The “Big Beautiful Bill” on fiscal policy passed by the House was costed by the Congressional Budget Office on May 20 and shows a significant boost to the budget deficit in the remainder of the current Trump presidential term. This is because tax cuts have been front loaded and spending cuts bac

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UK CPI Review (May 21): How Durable a Surge?
Paying Article

May 21, 2025 6:50 AM UTC

The UK and the rest of the DM world are now decoupling, at least in terms of inflation, where the UK is seeing a surge, (largely home-grown) just as W European sees their respective inflation fall back to, if not below, targets – although some measures if underling EZ inflation have started to edg

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Big EM’s: Cyclical Tariff Hit V Structural Drivers
Freemium Article

May 16, 2025 10:00 AM UTC

China, India and Brazil are all seeing cyclical slowdown for varying reasons, with China likely to be hardest hit by adverse net exports due to Trump’s tariff wars. Though financial repression in China can allow further fiscal stimulus, the household sector and residential property investment are

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Brazil: Reaching the Rate Peak
Freemium Article

May 8, 2025 6:43 AM UTC

Forward guidance from the BCB after the 50bps hike to 14.75% suggests that we are close to a rate peak, with inflation concerns now cited on both sides.  The disinflationary impact of Trump tariffs on global trade and commodity prices is now being watched, as BCB members have signaled over the last

North American Summary and Highlights 6 May
Freemium Article

May 6, 2025 7:58 PM UTC

Overview - The USD was generally weaker, with losses becoming broader based in North American trade. 

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U.S. Q1 GDP dips, Imports surge goes into inventories and business investment
Freemium Article

April 30, 2025 1:07 PM UTC

The 0.3% decline in Q1 GDP is in line with expectations that were downgraded from a marginal increase after yesterday’s sharp rise in March’s advance goods trade deficit. A 3.5% rise in the core PCE price index is stronger than expected. While the Q1 data does not tell us very much about Q2, the

FX Daily Strategy: N America, May 28th
Paying Article

May 28, 2025 9:05 AM UTC

RBNZ may be more hawkish than priced in…
…but NZD risks against the AUD look to be on the downside medium term
JPY weaker on improving risk sentiment, but JPY upside still favoured medium term
GBP recovery likely to pause

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The U.S. Slowdown Question Key for Markets
Paying Article

May 28, 2025 7:35 AM UTC

•    Though financial markets are debating the effects of the U.S. budget deficit trajectory on yields and how much global investors will reduce overweight U.S. exposure long-term, the critical question remains the scale of the economic slowdown and what it means for tactical asset allocation

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Likely U.S. Tariff Scenario for Japan
Freemium Article

May 26, 2025 5:36 AM UTC

After the U.S.-UK trade deal announcement, most countries are looking forward to lower tariffs. U.S.-Japan high level remarks are so far positive but lack concrete commitment. The U.S. has said that 10% tariff will be a baseline and we do not see Japan to be an exemption. However, we have a likely t

FX Weekly Strategy: May 26th-30th
Paying Article

May 23, 2025 3:10 PM UTC

US/EU tariffs the main focus
USD weakness and JPY strength likely to extend modestly
AUD still looks well supported at 0.64

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Eurozone: Services Offer Sobering News
Freemium Article

May 22, 2025 9:00 AM UTC

The May flash composite PMI data may have fallen into apparent contraction territory as the index dropped to 49.5 in May from 50.4 in April, below the 50.0 no-change mark for the first time in five months and thereby signalling a reduction, albeit a marginal one.  We do not take much issue whether

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Deterrence on a Deadline: India, Pakistan, and the New Escalation Paradigm
Freemium Article

May 9, 2025 6:29 AM UTC

India and Pakistan are now embroiled in their most serious military confrontation in years, with hostilities expanding across air, land, and unmanned domains. Following the May 7 cross-border strikes under Operation Sindoor, India launched a calibrated military offensive on Thursday targeting Pakist

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BoE Review: Divided by Scenarios?
Paying Article

May 8, 2025 1:24 PM UTC

The widely expected 25 bp Bank Rate cut (to a 2-year low of 4.25%) came amid a less dovish rather than a more hawkish assessment than was envisaged beforehand.  While the new Monetary Policy Report MPR) now sees inflation fall below target almost a year earlier than seen three months ago (Figure 1)