Europe Summary and Highlights 20 November

November 20, 2024 12:01 PM UTC

The USD was generally stronger through the European morning.

Eurozone: ECB Stability Review Broadens the Case for Easier Policy

November 20, 2024 11:30 AM UTC

It seems that worries about weaker growth are reverberating more discernibly and more broadly within the ECB.  Indeed, the worries may now be at least twofold. Clearly, weaker growth risks possible (added) downside risks to inflation, with BoI Governor Panetta yesterday warning that restrictive mon

U.S. Equities: Exceptionalism v Valuations

November 20, 2024 10:05 AM UTC

Bottom Line: Momentum towards further deregulation, tech optimism, and the prospect of aggressive tax cuts could help the U.S. equity market in H1 2025 before the fear of higher yields and Fed Funds hurts in H2.  6100 could be seen H1 2025, before a softening to 5850 for end 2025 S&P500.   We see

UK CPI Review: Inflation Back Above Target & Core Pressures Higher

November 20, 2024 7:42 AM UTC

Coming in higher than expected and a notch above BoE thinking, CPI inflation jumped to 2.3% in October. Helped by a fall in fuel prices and airfares, amplified by base effects, alongside some belated broader softening in services costs, UK inflation had dropped to 1.7% in the September CPI (from 2.2

Brazil and Mexico Labour Productivity: A Headwind for Growth

November 19, 2024 12:03 PM UTC

Brazil and Mexico labour productivity has been stagnant in the last years, with both countries registering lower labour productivity levels than they were 12 years ago, with the gap with U.S. only widening. With both countries approaching full-employment, measures will need to be taken to foster gro

U.S.-Gilt Yields and Fed v BOE policy

November 19, 2024 10:07 AM UTC

We see scope for 10yr UK yields to diverge from the U.S. despite our new forecast of rising U.S. Treasury yields (here).  We feel that the BOE will ease by more than the Fed in 2025 and ease selectively in 2026 before and after our forecast of Fed Funds hikes.  Meanwhile, the UK fiscal stance is l

FX Daily Strategy: Europe, November 19th

November 19, 2024 4:05 AM UTC

CAD under pressure ahead of Canadian CPI
Further modest losses possible but positioning is extreme
GBP could soften if BoE hints at possibility of December rate cut

UK: Weak Growth – Don’t Blame It All on the Budget!

November 18, 2024 12:40 PM UTC

To suggest that the disappointing Q3 GDP data is largely down to apprehension about the Budget presented at the end of October is incomplete at best and misplaced at worst.  After all, monthly GDP data suggest that the economy has not grown since May and by only 0.2% since March.  These numbers ar

FX Daily Strategy: November 18th-22nd

November 18, 2024 10:06 AM UTC

USD strength to pause after initial post-election gains
Scope for some movement on the crosses
JPY disappointed by Ueda speech 
GBP could suffer on weak CPI
CAD might recover if CPI comes in stronger

U.S.-Germany Yield Decoupling

November 18, 2024 9:25 AM UTC

We see scope for 10yr German Bund yields to remain close to current levels in the next 1-2 years, despite our new forecast of rising U.S. Treasury yields (here[MG(1] ).  A weak economic recovery; fiscal consolidation rather than easing in the U.S. and less underlying inflation pressures should all

FX Daily Strategy: Europe, November 18th-22nd

November 18, 2024 4:04 AM UTC

USD strength to pause after initial post-election gains
Scope for some movement on the crosses
JPY disappointed by Ueda speech 
GBP could suffer on weak CPI
CAD might recover if CPI comes in stronger

SARB MPC Preview: Easing Cycle to Continue on November 21

November 15, 2024 4:04 PM UTC

Bottom line: After South African Reserve Bank (SARB) cut the key rate to 8.0% on September 19 following seven consecutive meetings at a 15-year peak of 8.25% given that September inflation hit below the midpoint of target band of 3% - 6%, power cuts (loadshedding) are suspended and inflation expecta

U.S. October Retail Sales - Trend solid but may start to lose momentum

November 15, 2024 1:53 PM UTC

October retail sales are in line with expectations overall but stronger net of revisions, with September revised up to a 0.8% increase from 0.4%, outweighing a downward revision to August to -0.1% from a 0.1% increase. October gains were subdued ex autos and ex autos and gasoline, both up by 0.1%.

U.S. Yield Curve Steepens Then Flattening on 2026 Fed Tightening?

November 15, 2024 10:14 AM UTC

We see 10-2yr U.S. Treasury yield curve steepening in 2025, as the Fed keeps easing to 3.75% but the long-end is worried about medium-term issuance and the budget deficit trajectory being excessive.  A moderate Fed tightening cycle in 2026 to curtail inflation from fiscal stimulus/tariffs should th

FX Daily Strategy: N America, November 15th

November 15, 2024 10:12 AM UTC

US retail sales to maintain impression of solid US growth
USD should hold firm but gains becoming harder to make
AUD to outperform EUR
JPY weakness unlikely to turn without weaker US data or equities
GBP may see short term dip on GDP but EUR/GBP remains well offered

UK GDP Review: Momentum Dissipated?

November 15, 2024 7:58 AM UTC

The latest data, including that for the Q3, very much questions the UK’s economy’s apparent solidity, if not strength, as apparently seen in sizeable q/q gains in the first two quarters of the year of 0.7% and 0.5% respectively.  Indeed, GDP growth has been positive in only two of the last six

China Data: Mixed Data Backs More Stimulus

November 15, 2024 7:42 AM UTC

China October data is mixed with a bounce in retail sales helped by government trade ins and a holiday, but industrial production and housing construction disappointing.  This all argues for further fiscal stimulus.  However, given our view that some tariff increases against China by the U.S will

FX Daily Strategy: APAC, November 15th

November 14, 2024 3:37 PM UTC

US retail sales to maintain impression of solid US growth
USD should hold firm but gains becoming harder to make
AUD to outperform EUR
JPY weakness unlikely o turn without weaker US data or equities
GBP may see short term dip on GDP but EUR/GBP remains well offered

Preview: Due November 15 - U.S. October Retail Sales - Trend still solid

November 14, 2024 2:47 PM UTC

We expect US retail sales to maintain momentum in October, with a 0.4% increase overall matching that of September. However gains of 0.2% ex autos and 0.3% ex autos and gasoline would see some loss of momentum from surprisingly strong respective gains of 0.5% and 0.7% in September.

ECB October Meeting Account: It’s the (Real) Economy Stupid!

November 14, 2024 1:42 PM UTC

It is clear but hardly surprising that the ECB rate cut last month was driven as much, if not more by real economy consideration than prices or possible fiscal tightening.  The Oct account 16-17 suggested that the downside risks to the growth outlook in the September baseline, with the associated w