USD Rebalancing: Some to EM?

April 24, 2025 8:30 AM UTC

Some portfolios rotations towards EM assets will likely be evident, as we see the USD decline is now extending and broadening.  However, flows will likely be selective, both given underwhelming EM performance in the last 5-10 years and the uncertainty over how much Trump will reduce reciprocal tari

Brazil: Fiscal Result Improves but Structural Changes Remains in Doubt

April 23, 2025 5:57 PM UTC

Brazil’s fiscal data shows slight improvement, with a 0.1% primary deficit by February and a 2024 deficit in line with targets, excluding flood aid. The 2025 goal is a 0% deficit, but structural issues remain. Recent gains stem from reduced court-ordered payments and delayed hiring. However, risin

Foreign Official U.S. Treasury Holders: The Kindness of Strangers

April 22, 2025 7:30 AM UTC

Official holdings of U.S. Treasuries show a mixed picture with China, Brazil and Saudi Arabia well off peak holdings. Two drivers of some of these country flows are the peak in global central bank FX reserve holdings in 2021 and an increased holdings of other currencies in the last decade.  Neverth

Nervous U.S. Long Term Asset Holders

April 15, 2025 8:30 AM UTC

   Overall, foreign equity investors can no longer count on U.S. exceptionalism and could face lower long-term corporate earnings growth, which at a minimum will likely slow net inflows.  Bond investors also face ongoing policy volatility, which likely means a need for an extra risk premium – t

Brazil CPI Review: March Acceleration, Hike Confirmation

April 11, 2025 2:21 PM UTC

March CPI in Brazil rose 0.6%, above expectations, pushing the annual rate to 5.5%. Broad-based price increases, especially in food, signal persistent inflation pressures. Core inflation, notably in services, is well above the BCB’s target, and external volatility adds risk. With activity and cred

Trade Deals with the U.S.: Pressures and Obstacles

April 10, 2025 7:17 AM UTC

Pressures to do trade deals include the weaker U.S. economy and higher inflation when it arrives/foreigners becoming nervous of their USD30trn plus holdings of U.S. securities and more crucially risks to Trump and GOP approval ratings from Republican voters. Obstacles to quick trade deals include Tr

Brazil: Credit Accelerating Despite Higher Rates

April 8, 2025 6:44 PM UTC

The Brazilian Central Bank (BCB) has resumed raising the policy rate due to persistent inflation concerns, despite expectations of credit deceleration. In contrast, credit has accelerated in recent months, indicating that the credit channel through monetary policy may be compromised, increasing disi

Reciprocal Tariffs: The Hit To Other Countries

April 8, 2025 9:30 AM UTC

 Overall, we are still assessing the effects on non U.S. countries from the tariffs being imposed by the U.S. via direct trade/business investment/currency and financial & monetary conditions swings.  The impact will be adverse to GDP, but for some major countries could be less than the U.S.  How

U.S. Trade Surplus Countries: No Special Treatment?

March 31, 2025 9:04 AM UTC

Quick dilutions of tariffs or exemption will likely be slow in coming for countries that the U.S. has trade surpluses with, as the Trump administration are currently more focused on tariffs for tax revenue and trying to switch production back to the U.S. than trade deals.  Trade policy uncertainty

March Outlook: Navigating the Turbulence

March 27, 2025 10:30 AM UTC

All chapters of the March Outlook are now available and simply click the link below. 

Car Tariffs Then Lenient Reciprocal Tariffs?

March 27, 2025 8:59 AM UTC

   The 25% tariffs on cars underlines that tariffs are not just about getting better trade deals, but in Trump’s view raising (tax) revenue and trying to shift production back to the U.S. Combined with other tariffs being implemented, plus policy uncertainty, we see a moderate overall hit from t

LatAm Outlook: Navigating the Uncertainty

March 26, 2025 9:56 PM UTC

·       Brazil and Mexico economy are likely to decelerate in terms of growth in 2025, although we see this being stronger in Mexico. Mexico institutional reforms and its close ties with U.S. increases uncertainty for 2025, especially after Trump victory, and the menaces of Trump imposing tar

Outlook Overview: Navigating the Turbulence

March 26, 2025 9:30 AM UTC

·       More tariffs will arrive from the U.S. from April with product (car, pharma, semiconductors and lumber) and reciprocal tariffs. President Trump has a 3-part approach to tariffs to raise (tax) revenue; bring production back to the U.S. and get fairer trade deals.  This means some of t

EMFX Outlook: Divergence versus the USD

March 26, 2025 9:16 AM UTC

EM currencies will be helped by the ongoing USD downtrend against DM currencies, but prospects also depend on relative inflation differentials versus the USD and starting point in terms of valuations.  The Brazilian Real (BRL), Mexican Peso (MXN) and Indonesian Rupiah (IDR) should all make modest s

Equities Outlook: Turbulence Ahead

March 26, 2025 9:05 AM UTC

·       U.S. trade wars will likely hurt U.S. growth and raise inflation, with only small to modest Fed easing and a 10yr budget bill that will likely be neutral to negative for the economy.  With valuations still very high (Figure 1), we see scope for a correction to extend into mid-year th

BCB Minutes: Caution Rather than Optimism

March 25, 2025 10:51 PM UTC

The Brazilian Central Bank (BCB) raised the policy rate by 100bps to 14.25% amid signs of economic deceleration, including slower growth, job creation, and consumption. The BCB highlighted external uncertainties, such as U.S. trade policy, and domestic challenges with rising inflation. It emphasized

Trump Product and Reciprocal Tariffs

March 21, 2025 9:00 AM UTC

It appears that we will get bad news from April 2 on extra tariffs before any good news.  Firstly, the announcement effect of tariffs for many countries and extra products will hurt U.S. business and consumer sentiment.  Secondly, part of the reason for tariffs is extra tax revenue and to try to s

BCB Review: Confirming More Hikes

March 19, 2025 10:38 PM UTC

The Brazilian Central Bank (BCB) raised the policy rate by 100 bps to 14.25% and signaled further hikes, likely reaching 15.0% by May, potentially ending the current tightening cycle. The BCB emphasized inflation concerns and strong economic activity, suggesting a hawkish stance. Fiscal policy was n

Brazil CPI Review: 1.3% Monthly Growth, with Seasonal Impacts

March 12, 2025 10:43 PM UTC

Brazil's February CPI increased by 1.3%, the highest in 22 years, largely driven by the removal of subsidized electricity bills, which boosted Housing by 4.4%. The year-over-year inflation rose to 5.1%, above the BCB's target. Key contributors included Education (up 4.4%) and Food and Beverages (up

Trump and Dollar Policies

March 10, 2025 6:04 AM UTC

   The Trump administration could decide to more broadly talk the USD down or less likely try to reach a cooperative Mar A Lago accord with big DM and EM countries. A more cohesive alternative is a forced currency deal for countries to appreciate their currencies to avoid more tariffs and withdraw

Brazil GDP: 3.4% Growth in 2024, but Deceleration in Q4

March 7, 2025 10:03 PM UTC

Brazil’s economy grew 3.4% in 2024, exceeding forecasts of 1.6%, with a 0.2% growth in Q4, reflecting a significant slowdown from Q3’s 0.9%. Key sectors like agriculture contracted, while industry and services showed modest growth. Investment and government consumption were the main drivers, tho

Central and Latin America: Country Risk Ratings

March 5, 2025 11:00 AM UTC

We provide country risk reviews for select Central and Latin America countries.  

Brazil: Some Deceleration on Labour Markets, But Still Strong

February 27, 2025 7:53 PM UTC

Brazil's labor data through January indicates a slight deceleration in job creation, with annual net formal job growth at 1.6 million, above the 1.4 million registered in July 2023. While the unemployment rate rose slightly to 6.5%, it remains lower than January 2024. Admission salaries are growing

Brazil: Activity Strong in Q4 but Some Marginal Deceleration

February 18, 2025 10:04 PM UTC

We see Brazilian economy growing 1.0% in Q4 and is expected to expand 3.6% in 2024, surpassing initial forecasts. However, monthly data shows signs of weakness, with contractions in services, industry, and retail trade in in December. Despite tight monetary policy (13.25%), the expected slowdown has

Reciprocal Tariffs and Reducing Bilateral Trade Imbalances

February 17, 2025 10:28 AM UTC

·       President Trump’s executive order on reciprocal tariffs has not produced much market reaction, both as the proposals will not be delivered to the president until April 1 and the process of Commerce/U.S. Treasury and Homeland Security input is seen reducing the odds of penal tariffs.

Brazil CPI Review: Mixed Signs from January Inflation

February 12, 2025 12:33 AM UTC

Brazil’s CPI rose 0.16% in January, lowering Y/Y inflation to 4.5% from 4.8%. A temporary electricity discount drove the decline, while Food (+1%) and Transport (+1.3%) showed worrying increases. Core inflation rose 0.7%, with Services CPI jumping to 5.4%, partly due to seasonal healthcare costs.

Trump’s Tariffs: Steel Then Reciprocal and Then Cars

February 11, 2025 1:23 PM UTC

 The 25% Steel and Aluminum tariff could have small to modest adverse inflation and GDP growth impacts on the U.S., but the prospect of reciprocal and more product and country tariffs create trade policy uncertainty/supply chain disruption and paperwork problems.  This could amplify the impact of

BCB Minutes: Detailing the Deterioration

February 4, 2025 6:29 PM UTC

The BCB raised rates by 100bps to 13.25%, signaling another hike in March. External uncertainty remains, but domestic risks worsened, with inflation expectations rising. The BCB stressed fiscal-monetary coordination and warned about policy distortions. Despite markets pricing a 15% rate, we expect s

BCB Review: Maintaining the Course

January 30, 2025 6:09 PM UTC

The Brazilian Central Bank (BCB) raised the policy rate by 100bps to 13.25%, signaling another hike in March while monitoring economic data. The statement had a neutral-to-dovish tone, with inflation risks stemming from services CPI, unanchored expectations, and fiscal policy. Market projections see

BCB Preview: 100bps Hike Will Buy Some Time

January 27, 2025 7:09 PM UTC

The Brazilian Central Bank is expected to maintain its course with two 100bps hikes, reaching 14.25% by March. Inflation forecasts for 2025 exceed the target, necessitating a firm policy stance. Despite market concerns, new President Gabriel Galípoli is likely to act decisively. The Real’s recent

Brazil: Some Deceleration in Services

January 24, 2025 4:48 PM UTC

The Brazilian economy grew over 3% in 2024 despite tight monetary policy. While services (-0.9% m/m), industry, and retail sales weakened in November, agricultural exports and fiscal stimulus boosted overall activity. The Central Bank Activity Index showed marginal growth (0.1%) in October and Novem

Brazil Risk Premia and EM Debt

January 20, 2025 8:15 AM UTC

Brazil debt market has two domestic crises rather than a spillover from the U.S. in the form of inflation and fiscal policy. Very restrictive BCB policy can help produce some disinflation and we forecast 4.1% for 2026, which some allow some rate cuts in H2. Brazil risk premium will likely be reduced

Brazil: Fiscal Target will be Fulfilled but Doubts Remains over the Fiscal Sustainability

January 16, 2025 3:08 PM UTC

Brazil achieved significant fiscal consolidation in 2024, with a primary deficit of 0.6% of GDP, or 0.2% excluding flood-related costs, driven by revenue growth and reduced judicial expenditures. However, rising debt servicing costs, now at 8% of GDP, worsen the nominal result. Fiscal discipline wil

Brazil CPI Review: Some Deterioration in December

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

Markets 2025: A Tale of Two Halves

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

EM Government Debt: BRICS Divergence

January 2, 2025 8:05 AM UTC

   Brazil and South Africa suffer from debt servicing costs outstripping nominal GDP, which will remain a concern unless a consistent primary budget surplus is seen – though S Africa enjoys a much longer than average term to maturity than Brazil.  India and Indonesia, in contrast, enjoy nominal

December Outlook: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics

December 30, 2024 8:05 AM UTC

All chapters of the December Outlook are now available and simply click the link below. 

December Outlook Webinar on Jan 7: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics

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

December Outlook: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics

December 20, 2024 12:15 PM UTC

All chapters of the December Outlook are now available and simply click the link below. 

EMFX Outlook: Hit From Tariffs, Before Divergence

December 20, 2024 10:00 AM UTC

·        EM currencies on a spot basis will remain on the defensive in H1 2025, as we see the U.S. threatening and then introducing tariffs on China imports – 30% against the current average of 20%. China’s response will likely include a Yuan (CNY) depreciation to the 7.65 area on USD/CN

Outlook Overview: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics

December 19, 2024 9:25 AM UTC

·        The U.S. economy momentum remains reasonable before President elect Trump’s policies impact in 2025 and 2026.  While high uncertainty exists on the scale and timing of policies, the strategic bias is clear – sizeable tax cuts that will boost the budget deficit; tariffs (threats

LatAm Outlook: Economic Shifts

December 18, 2024 5:21 PM UTC

·       Brazil and Mexico economy are likely to decelerate in terms of growth in 2025, although we see this being stronger in Mexico. Mexico legal reforms and its close ties with U.S. increases uncertainty for 2025, especially after Trump elections, although we see tariffs in 2025 as unlikely

Jan 7 Outlook Webinar: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics

December 18, 2024 1:23 PM 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

Equities Outlook: U.S. Exceptionalism v Valuations

December 18, 2024 10:05 AM UTC

·        The glory days of exceptionalism for U.S. equities will likely extend in Q1 2025 to bring the S&P500 to 6200-6300. The problem is that valuations have now become stretched with S&P500 ex magnificent 7 on a forward P/E of 19 and valuations out of line with real bond yields (Figure 1)

BCB Review: Shock 100bps Hike

December 12, 2024 10:12 AM UTC

The Brazilian Central Bank raised the policy rate by 100bps to 12.25%, with plans for two more 100bps hikes, reaching 14.25% by early 2025—the highest in 18 years. The decision reflects fiscal concerns, inflation risks, and a 10% depreciation of the Real. The BCB aims to curb inflation and protect

Central and Latin America: Country Risk Ratings

December 6, 2024 11:00 AM UTC

We provide country risk reviews for select Central and Latin America countries.  

Brazil GDP Review: Economy Continues Resilient

December 4, 2024 12:50 AM UTC

Brazil’s Q3 GDP grew by 0.9% (q/q) and 4.0% year-over-year, driven by gains in Services (+0.9%) and Industry (+0.6%), which offset a 1.4% drop in Agriculture. Household Consumption (+1.5%) and Investments (+2.1%) were key growth drivers, supported by domestic demand. Despite an unemployment rate o

Brazil: Timid Fiscal Package Presented

November 28, 2024 2:01 PM UTC

Brazil's Finance Minister Fernando Haddad introduced a fiscal package to improve the country's fiscal position without direct budget cuts. Key changes include adjusting the minimum wage growth to align with a new framework limiting expenditures to a maximum of 2.5% in real terms. Other measures rest

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