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June 12, 2024

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BoE Preview (Jun 20): Data Dependent Easing Bias Makes BoE Decision Unclear
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June 12, 2024 10:42 AM UTC

After Bank Rate was kept at 5.25% for the sixth successive MPC meeting last month, Governor Bailey remarked that then market rate pricing may be too cautious.  He also accepted that a rate cut at the next MPC verdict on June 20 was a distinct possibility, but underscored the importance of the data

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UK GDP Review: Flat April - How Resilient is the Economy?
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June 12, 2024 6:31 AM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive, albeit with some continued volatility.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m

June 11, 2024

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UK CPI Inflation Preview (Jun 19): Inflation Falls To Target?
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June 11, 2024 9:57 AM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle.  But perhaps the CPI data is the most crucial especially with April’s signs of resilient services (and particularly in regard to eating out) very mu

June 05, 2024

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France Downgrade: Warning for the U.S./UK?
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June 5, 2024 9:30 AM UTC

 French politics makes it difficult for President Macron to improve the underlying budget deficit and government debt after the S&P downgrade to AA-.  The National Rally could also do well in this week’s European parliamentary elections and put further pressure on Macron.  Meanwhile, though rat

June 03, 2024

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UK GDP Preview (Jun 12): Fresh Correction on the Cards?
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June 3, 2024 1:52 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m in March accentuating the upgraded boun

May 28, 2024

Continuum Economics Calendar June 2024
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May 28, 2024 11:13 AM UTC

Data and Events Calendar June 2024.

May 24, 2024

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UK Sales Weakness Curbing Pricing Power?
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May 24, 2024 7:05 AM UTC

Ending an interesting week of UK data, retail sales slumped in April, partly due to what was a wet month.  Notably, sales volumes fell by 2.3% m/m following a broadly flat February and March 2024 and were down by 2.7% y/y and 3.8% below their pre-pandemic level.  This weaker-than-expected outcome

May 22, 2024

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UK: July Election Called
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May 22, 2024 4:27 PM UTC

In a somewhat surprise announcement, PM Sunak has called a general election for July 4, somewhat earlier than the autumn timetable that had been previously hinted at.  He is doing so with his Conservative Party lagging severely in the polls.  However, especially after recent local election results

May 21, 2024

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BOE: August Expected But Could be June and Not Enough Discounted
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May 21, 2024 11:11 AM UTC

The market is not discounting enough BOE easing in the next 6-18 months during which we see a cumulative 175-200bps of cuts.  The BOE is swinging from a reactive to proactive policy stance and will take account of the prospects of further wage and service inflation slowing.  UK fiscal tightening w

May 14, 2024

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UK Labor Market: Further Signs of Resilient Wage Pressure But Soggier Activity More Notable
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May 14, 2024 8:40 AM UTC

As we have underscored repeatedly, the BoE has come to regard the official ONS average earnings data with some suspicion given response rates to the surveys that have fallen towards just 10%.   But the BoE will not be able to dismiss the latest earnings data given that alternative (and more author

May 13, 2024

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UK CPI Inflation Preview (May 22): Inflation to Fall Further and More Broadly
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May 13, 2024 12:10 PM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even existence if any start to an easing cycle.  But perhaps the CPI data is the most crucial making the looming April data all the more important for markets as they weigh the chances of an initial rat

May 10, 2024

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Asset Allocation 2024: Tricky Seven Months Remaining
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May 10, 2024 1:06 PM UTC

Fed easing expectations for 2025 and 2026 can shift from a terminal 4% Fed Funds rate towards 3%, as the U.S. economy slows due to lagged tightening effects.  Combined with Fed easing starting in September this should mean a consistent decline in 2yr yields.  However, 10yr U.S. Treasury yields wil

May 09, 2024

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BoE Review: Data Dependent Easing Bias Clearer?
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May 9, 2024 12:52 PM UTC

There was little surprise that Bank Rate was kept at 5.25% for the sixth successive MPC meeting, nor that the dissent in favor of an immediate rate cut doubled to two as a result of Dep Gov Ramsden confirming more dovish leanings.  The updated projections at least validated the rate path discounted

May 02, 2024

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BoE Preview (May 9): Easing Bias Clearer?
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May 2, 2024 11:06 AM UTC

In flagging no need to be dominated by Fed policy, we think that the BoE is not only moving towards rate cuts but the MPC majority may be overtly advertising such a likelihood.  But we do not see any move at the looming May 9 verdict, with Bank Rate again likely to remain at 5.25%. But the accompan

April 30, 2024

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UK GDP Preview (May 10): Fragile Sideways-Moving Activity Continues?
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April 30, 2024 2:19 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

April 29, 2024

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UK Consumers: Rent the Growing Hit to Spending Power
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April 29, 2024 2:02 PM UTC

The UK has faced a series of cost-of-living shocks in the last few years.  Some such as the surge in food prices may even be reversing, while it now looks likely the BoE hiking cycle may also start to reverse, although rising market rates may mean little further fall in effective mortgage rates in

April 26, 2024

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Headwinds To Long-term Global Growth
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April 26, 2024 9:30 AM UTC

Bottom line: While much focus is on the cyclical economic position to determine 2024 monetary policy prospects, the 2025-28 structural growth trajectory differs to the pre 2020 GDP trajectory for major economies.  While global fragmentation has a role to play, aging populations are already having a

April 22, 2024

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Short-end European Government Bonds Following U.S. But June Decoupling
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April 22, 2024 1:15 PM UTC

The Fed’s shift to higher for longer has spilled over to drag European government bond yields higher through April.  This now looks overdone as a June ECB rate cut is not fully discounted and ECB officials/data clearly point towards a 25bps cut.  UK money markets are more out of line, with a Jun

April 17, 2024

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Markets: Fed Rather Than Middle East Worries
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April 17, 2024 12:34 PM UTC

Global markets are being driven by a scale back in Fed easing expectations and we see a 5-10% U.S. equity market correction being underway.  However, with the market now only discounting one 25bps Fed cut in 2024, any downside surprises on U.S. growth or better controlled monthly inflation numbers

April 12, 2024

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UK GDP Review: Less Fragile Recovery to Fuel BoE Hawks?
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April 12, 2024 6:50 AM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

April 11, 2024

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How Durable are Better UK Housing Market Signs?
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April 11, 2024 9:45 AM UTC

Amid some mixed remarks from one the MPC hawks, the BoE will be noting more positive housing market signs.  The latest RICS survey very much points to a clear pic-up in housing demand, something that chimes with the results in the just-published BoE Credit Conditions Survey (CCS), which also sugges

April 08, 2024

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UK CPI Inflation Preview (Apr 17): Inflation to Fall Broadly Further, But Momentum Still Evident
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April 8, 2024 2:12 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly going to feel much better with GDP growth hardly positive.  Admittedly, coming in as largely expUK headline and core inflation have been on a clear downward trajectory in the last few mont

April 05, 2024

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BoE Forecast Report: Uncertain How to Assess Uncertainty?
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April 5, 2024 8:14 AM UTC

A long-awaited review of BoE forecasting techniques and goals is due on Apr 12 with a report commissioned by the BoE but authored by ex-Fed Chair Ben Bernanke.  It is set to offer alternatives to the way the MPC currently produces and communicates its outlook and has been prompted by marked forecas

April 03, 2024

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UK GDP Preview (Apr 12): Fragile Recovery?
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April 3, 2024 1:26 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly going to feel much better with GDP growth hardly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.2% m/m in January more than reversing th

April 02, 2024

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Asset Allocation: Pausing for Breath
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April 2, 2024 9:00 AM UTC

Into Q2, data and policy (actual and perceived) will dominate DM markets. The ECB will likely take the spotlight with a 25bps cut on June 7, as the Fed face a better growth/more fiscal policy expansion and a tighter labor market than the EZ but also with a better productivity backdrop and outlook to

March 27, 2024

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March Outlook: Europe in Focus, Then Elections Around the World
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March 27, 2024 9:00 AM UTC

March 26, 2024

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Chartbook: Quarterly Forecasts FX/Rates/Equities For Q2 2024
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March 26, 2024 9:23 AM UTC

Our latest quarterly Forecasts FX/Rates/Equities/Commodities for Q2 2024 are now available, see resources at the end.  

March 25, 2024

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Outlook Overview: Europe in Focus, Then Elections Around the World
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March 25, 2024 11:15 AM UTC

March 22, 2024

Continuum Economics Calendar April 2024
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March 22, 2024 4:19 PM UTC

Data and Events Calendar April2024.

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Western Europe Outlook: Easing Cycle Underway?
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March 22, 2024 11:26 AM UTC

·        In the UK, downside economic risks may have dissipated but the tighter monetary stance has far from fully bitten. This accentuates and/or prolongs an already weak domestic backdrop into 2025 that will complement friendlier supply conditions in easing inflation. The BoE will likely e

March 21, 2024

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BoE Review: Easing Bias Continues
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March 21, 2024 1:12 PM UTC

Although no shock that the BoE vote to keep policy on hold this month, there was some surprise that all hawkish dissents ended, with the one MPC member instead still again calling for a cut.  But despite recent CPI underlying falls, the majority continue to focus on assessing how ‘persistent’ a

March 20, 2024

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UK CPI Inflation Review: Headline and Core Fall More Broadly, But Momentum Still Evident
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March 20, 2024 7:44 AM UTC

UK headline and core inflation have been on a clear downward trajectory in the last few months the former having peaked above 10% in February and the latter at 7.1% In May. However, this trend surprisingly stalled in December as the headline rate rose a notch to 4.0%, up from a 27-month low of 3.9%,

March 14, 2024

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BoE Preview: Easing Bias to be Made Clearer?
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March 14, 2024 10:23 AM UTC

It would be something of a shock if the BoE was to vote to do anything but keep policy on hold when the MPC gives its next verdict on Mar 21.  More likely than not there will be no further dissents in favor of a further hike, merely one again calling for a cut.  But despite recent CPI underlying f

March 13, 2024

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UK GDP Review: Recovery Emerging but Fragility Persists?
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March 13, 2024 7:59 AM UTC

Coming in as largely expected, and despite industrial action, GDP rose by 0.2% m/m in January more than reversing the 0.1% drop in December data, a result that reflected the bounce in retail sales and recovery in construction.  The data does look as if the economy is recovering, albeit with the pic

March 11, 2024

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UK CPI Inflation Preview (Mar 20): Headline and Core to Fall More Clearly?
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March 11, 2024 10:59 AM UTC

UK headline and core inflation have been on a clear downward trajectory in the last few months the former having peaked above 10% in February and the latter at 7.1% In May. However, this trend surprisingly stalled in December as the headline rate rose a notch to 4.0%, up from a 27-month low of 3.9%,

March 06, 2024

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UK Budget Review: Demographics Fail to Prevent Ever Smaller Fiscal Headroom?
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March 6, 2024 2:53 PM UTC

Chancellor Hunt’s Budget today was an even clearer politically driven affair.  Hence the focus on offering alleged tax cuts, all framed as helping boost growth potential but where the tax as a share of GDP is forecast to rise to a post-war record 37.1% of GDP in 2028-29.  The political question

March 05, 2024

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UK GDP Preview (Mar 13): Fragility to Continue
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March 5, 2024 11:34 AM UTC

Coming in lower than expected after taking account of downward revisions, and probably hit by industrial action, GDP shrank by 0.1% m/m in December data, a result that reflected the plunge in retail sales and abnormal weather that meant a Q4 drop in GDP and consumer spending.  We see stagnation in

February 29, 2024

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Russia Frozen Assets, Ukraine Reconstruction and G7-BRICS
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February 29, 2024 10:55 AM UTC

Bottom Line: A number of proposals to seize or use Russia frozen assets for Ukraine reconstruction are not getting overwhelming support within the G7 and a decision could be delayed until the G7 summit in Italy June 13-15.  Concerns over the legal standing and reputational risk (China has been shif

February 26, 2024

Continuum Economics Calendar March 2024
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February 26, 2024 11:23 AM UTC

Data and Events Calendar March 2024.

February 21, 2024

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UK Budget Preview: Demographics to Boost Fiscal Headroom?
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February 21, 2024 10:25 AM UTC

It will be no surprise that with a general election looming almost certainly later this year or so and with the government so far behind in the opinion polls, Chancellor Hunt’s Budget on Mar 6 will be yet another very politically driven affair.  It should see gloomier GDP projections but with som

February 15, 2024

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UK GDP Review: Recession Confirmed
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February 15, 2024 7:56 AM UTC

Coming in lower than expected after taking account of downward revisions, and probably hit by industrial action, GDP shrank by 0.1% m/m in December data, a result that reflected the plunge in retail sales and abnormal weather that meant a Q4 drop in GDP and consumer sending (Figure 1).  Admittedly

February 14, 2024

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Markets: ECB/BOE/SNB Before the Fed?
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February 14, 2024 11:35 AM UTC

Bottom Line:  We do see 25bps cuts arriving from the ECB/BOE and SNB and most likely these will all be in June.  Whether this is before the Fed will likely be a function of the Fed, as we see these interest rate moves as being driven by domestic fundamentals rather than the Fed being an influence.