U.S. August trade deficit slips back after bounce in July, still in correction from inflated pre-tariff deficits

November 19, 2025 2:00 PM UTC

August’s delayed trade deficit of $59.55bn is narrower than expected, down significantly from July’s $78.5bn, but still marginally above June’s $59.09bn. Despite July’s bounce, the deficit remains in a correction from the inflated pre-tariff levels of Q1 which saw a record deficit of $136.42

Markets 2026

November 18, 2025 10:30 AM UTC

·        The Fed, ECB and BOE will likely drive further 10-2yr government bond yield curve steepening, with 10yr Bund yields rising due to ECB QT and German fiscal expansion. 10yr JGB yields are set to surge through 2%, as BOJ QT remains excessive and underestimated.  The BOJ could partiall

Bank of Canada Minutes from October 29 reinforce steady policy message after a 25bps easing

November 12, 2025 7:18 PM UTC

The Bank of Canada has released minutes from its October 29 meeting, and after a 25bps easing members agreed that monetary policy was now close to the limits of what it could do to support the economy under current circumstances. They agreed to be as clear as possible to communicate that policy was

Canada Budget Sees Larger Deficits, Slower Growth

November 4, 2025 9:58 PM UTC

Canada’s budget has seen the deficit for 2025-26 revised up to C$78.3bn from C$42.2bn in the December 2024 statement, which will now be 2.5% of GDP versus 1.3%, still a level that is quite small compared to many other developed countries. The deficit is projected to slip after that, reaching C$56.

Canada: BoC's Macklem - Can't stabilise inflation and output at the same time

November 3, 2025 7:25 PM UTC

BoC Governor Macklem's comments are consistent with last week's message that policy is now at an appropriate level.

U.S./China Trade Framework: Avoiding Escalation

October 31, 2025 7:48 AM UTC

·         The U.S./China framework deal avoids renewed escalation of trade tension, but is unlikely to be followed by a comprehensive trade deal in 2026 as China does not want major import and bilateral trade commitments.  The economic effects will likely be small and the deal main aim app

Bank of Canada - Hawkish Ease with Current Rate Level Seen as Appropriate

October 29, 2025 3:40 PM UTC

The Bank of Canada delivered a hawkish easing, cutting rates for the second straight meeting by 25bps, to 2.25%, but stating that if inflation and activity evolve in line with its projection, the current rate is seen as about the right level to keep inflation close to 2% while helping the economy th

Canada: BoC's Macklem - Policy rate at about the right level

October 29, 2025 1:59 PM UTC

The Bank of Canada delivered an expected 25bps easing for a second straight meeting but suggests data will need to underperform its expectations if it is to move again.

U.S-China Trade Tensions Ease, US-Canada Tensions Escalate

October 27, 2025 3:32 PM UTC

Trade tensions between the US and China appear to be easing, with it looking increasingly unlikely that the US will impose a threatened extra 100% tariff on China on November 1. However trade tensions with Canada have increased, with Canada receiving an extra 10% tariff, adding to downside economic

Bank of Canada Preview for October 29: A Pause before easing resumes in December

October 21, 2025 3:52 PM UTC

While we do not believe the Bank of Canada is done with easing, we expect the October 29 meeting to see rates left on hold at 2.50% given that most recent data have been on the firm side of expectations, though not strong enough to rule out a move. A pause in October would follow easing in September

Canada September CPI - Not alarmingly strong but argues against BoC easing next week

October 21, 2025 12:59 PM UTC

September Canadian CPI at 2.4% from 1.9% yr/yr is stronger than expected with the Bank of Canada’s Bank of Canada’s core rates also mostly marginally firmer. The monthly details do not look alarmingly strong but, particularly after a strong employment report, the data argues against a BoC easing

Canada - BoC Q3 Business Outlook Survey - Unlikely to shift BoC's views

October 20, 2025 3:52 PM UTC

The Bank of Canada’s Q3 business outlook survey is mixed though overall probably does not change the Bank of Canada’s view very much. The overall business outlook indicator of -2.28 is marginally improved from Q2’s -2.40 but leaves the index is a fairly narrow and marginally negative range. Th

Canada August trade deficit inflated by moves in gold, but damage from U.S. tariffs is clear

October 7, 2025 12:56 PM UTC

Canada’s August trade deficit of C$6.32bn is up from C$3.82bn (revised from C$4.94bn) in July and the widest since April, suggesting the Canadian economy remains pressured by the impact of US tariffs. However the August deficit is inflated by strong movements in both exports and imports of gold.

Trump Tariffs: China, Mexico and Semiconductors

September 30, 2025 8:00 AM UTC

  ·       Our baseline (60% probability) remains that a U.S./China trade deal will be agreed in Q4/Q1 2026 and it is possible though unlikely that this could be announced at the Trump/Xi meeting at the October 31 APEC summit – China requests that the U.S. changes policy on Taiwan could slo

DM Government Bond Saints v U.S.

September 29, 2025 7:35 AM UTC

·       Overall, although the fiscal saints (Australia/Canada/Germany/Sweden) have merits over the U.S. in the scenario where Fed independence is undermined and more Fed rate cuts occur than warranted by the economics, the 10yr area of other government bond markets may not outperform. 10yr go

Outlook Overview: Into 2026

September 23, 2025 8:25 AM UTC

·       The critical question is how much the U.S. economy is slowing down with the feedthrough of President Donald Trump’s tariffs to boost inflation and restrain GDP growth, with the effective rate currently around 17% on U.S. imports. Though semiconductor tariffs are likely, the bulk of

Bank of Canada - Clear consensus to ease, we expect two further 25bps moves

September 17, 2025 3:46 PM UTC

The Bank of Canada’s decision to ease today for the first time since March, by 25bps to 2.50% was as the market expected.  We expect two further easings from the BoC, in Q4 of this year and Q1 of 2025, which would take the rate to 2.0%, which is likely to prove the floor.  

Canada: BoC's Macklem - Was clear consensus to ease rates

September 17, 2025 1:56 PM UTC

BoC Governor Macklem states there was a clear consensus to ease today, contrasting a clear consensus to hold at July's meeting.

Canada August CPI - Subdued enough for a BoC easing

September 16, 2025 1:04 PM UTC

August Canadian CPI at 1.9% yr/yr reversed a July dip to 1.7% yr/yr and remains restrained by around 0.7% by the abolition of the carbon tax. Core rates remain above target but are on balance marginally softer while monthly details also look acceptably subdued. The data is not an obstacle to an expe

Bank of Canada Preview for September 17: Weak data justifies resumption of easing

September 9, 2025 6:26 PM UTC

After the Bank of Canada’s last meeting on July 30 we expected rates to be left on hold in September before easing resumed in October. However with data since that meeting having been mostly weak, a 25bps easing, the first move since March, now looks likely at the September 17 meeting, to 2.5%. We

July US trade deficit up as imports bounce, deficits with Canada and China increase

September 4, 2025 1:36 PM UTC

July’s US trade deficit of $78.3bn was not far off expectations, but up sharply from $59.1bn in June. Imports bounced by 5.9% after three straight declines, while exports saw a modest rise of 0.3% after two straight declines.

Preview: Due August 29 - Canada Q2/June GDP - Exports plunge to send GDP lower

August 28, 2025 2:17 PM UTC

We expect Q2 Canadian GDP to fall by 1.0% annualized after five straight gains marginally above 2.0%. This would be slightly stronger than a Bank of Canada forecast of -1.5% but weaker than what monthly GDP data is likely to imply for the quarter, with June seen rising by 0.1%.

Bank of Canada Minutes from July 30 - Differences of opinion on whether further easing would be needed

August 13, 2025 7:32 PM UTC

The Bank of Canada has released minutes from its July 30 meeting, which saw rates left unchanged at 2.75% with Governor Macklem stating after the meeting that there was a clear consensus to do so. However the minutes show that some felt the rate had been reduced sufficiently, while others felt that

Preview: Due August 29 - Canada Q2/June GDP - Exports plunge to send GDP lower

August 11, 2025 7:54 PM UTC

We expect Q2 Canadian GDP to fall by 1.0% annualized after five straight gains marginally above 2.0%. This would be slightly stronger than a Bank of Canada forecast of -1.5% but weaker than what monthly GDP data is likely to imply for the quarter, with June seen rising by 0.1%.

June US trade deficit falls on weak imports, Canada trade deficit increases on one-time imports bounce

August 5, 2025 1:02 PM UTC

June’s US trade deficit of $60.2bn is even lower than expected, down from $71.7bn in May and in slipping marginally below April’s $60.3bn has reached its lowest level since September 2023. Exports fell by 0.5%, a second straight decline, but imports fell by 3.7%, a third straight fall as strong

August 5, 2025 9:50 AM UTC

U.S. Treasury spreads versus other DM government bond markets or 10-2yr U.S. Treasuries are not yet showing a risk premium from the Trump administration attacks on the Fed and economic data. Debate over whether the U.S. is seeing a soft or hard landing are reemerging and this will dominate the outlo

Trump Tougher Posture with Russia

August 4, 2025 8:31 AM UTC

      We suspect that Trump will not follow-through with an across the board secondary sanction on importers of Russia oil, as it would freeze U.S./China trade again and could boost U.S. gasoline prices – high inflation is one main reason for Trump’s softer approval rating.  Trump could agre

Reciprocal Tariffs: Some Hikes, Deals and Delays

August 1, 2025 8:40 AM UTC

 Though high reciprocal tariffs with some countries catches the headline, five of the top 10 countries with large bilateral deficits have reached framework trade deals, two have delays and three have higher tariffs imposed.  With exemptions on some USMCA Canada/Mexico goods, plus phones/ semicondu

Bank of Canada - Consensus to hold, but cautious bias towards easing

July 30, 2025 3:34 PM UTC

Bank of Canada Governor Tiff Macklem stated that there was a clear consensus to leave rates steady at 2.75% at the latest meeting, as was also the case in June.  There does however appear to be scope for further easing ahead. We still expect rates to bottom at 2.25% and end 2026 at 2.5%, but we now

Canada: BoC's Macklem - Clear consensus to hold rates steady

July 30, 2025 2:07 PM UTC

BoC's Macklem states the BoC held rates steady based on tariff uncertainty, some economic resilience and evidence underlying inflationary pressures. 

Trump Deals: Japan, Philippines and Indonesia

July 23, 2025 8:26 AM UTC

•    Other countries cannot be guaranteed to get a Japan style deal, both as Japan is the key geopolitical ally in the Asia pivot against China and as Trump is keen to agree deals by August 1.  India and Taiwan are trying to finalize deals, but the EU is more difficult.  China 90 day deadlin

Trump’s Tariffs and Markets

July 17, 2025 12:00 PM UTC

The assumption in financial markets is that some trade framework deals will be done by August 1; some countries will make enough progress to be given an extra 30 days and some countries could have higher tariffs implemented. This would be broadly consistent with the average 15% tariff that is widely

Bank of Canada Preview for July 30: Hold after firm data with uncertainty high

July 15, 2025 3:30 PM UTC

The Bank of Canada meets on July 30 and what had been seen as a close call between a 25bps easing and unchanged now looks likely to leave rates unchanged at 2.75%. Continued above target core CPI data and a strong employment report for June argue against easing, though uncertainty remains high with

Canada June CPI - Argues against a July BoC easing

July 15, 2025 1:18 PM UTC

June CPI was as expected with yr/yr growth at 1.9% after two straight months at 1.7%, though without April’s abolition of the Consumer Carbon Tax would be standing around 2.5%. The Bank of Canada’s core rates showed no progress lower, and coupled with Friday’s strong employment report for June

Tariffs: Seeking a Trigger for the TACO Trade

July 14, 2025 4:28 PM UTC

It has been fairly clear for some time that 10% represented a likely floor for the eventual Trump tariff regime. However, expectations that Trump would not be willing to go dramatically above that are being tested. A rate in the mid-teens still looks the most likely outcome, as the economic damage t

Trump Tariffs: Poker Face?

July 1, 2025 12:55 PM UTC

Our central scenario (but less than 50%) is towards a scenario of compromise, with some agreements in principle or trade framework deals, delays for most other negotiating in good faith but with one or two countries seeing a reciprocal tariff rise e.g. Spain and/or Vietnam.  This could still be fol

June Outlook: Trump’s Fluid Policies

June 25, 2025 10:00 AM UTC

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

Outlook Overview: Trump’s Fluid Policies

June 25, 2025 7:20 AM UTC

·       President Donald Trump still wants to use the tariff tool, and we see the eventual average tariff rate being in the 13-15% area, lowered by deals but increased by more product tariffs. Any lasting legal block on reciprocal tariffs will likely see the administration pivoting towards ot

Canada May CPI - Mixed data leaves July BoC decision a close call

June 24, 2025 12:49 PM UTC

May Canadian CPI has come in as expected, unchanged at 1.7% with this yr/yr rate still restrained by the abolition of the consumer carbon tax which took 0.7% off the rate in April. The BoC’s core rates are on balance slightly softer, but do not fully reverse acceleration seen in May, leaving the J

Canada: BoC's Macklem - Leaves options open on rates

June 18, 2025 3:34 PM UTC

Comments from BoC's Macklem, reiterating yesterday's minutes, see situations in which the BoC would ease again but also those in which it could stay on hold.

Trump Tariffs: China and July 9 Reciprocal Deadline

June 12, 2025 7:17 AM UTC

 We attach a 65% probability to a U.S./China reaching a new trade deal that reduces the minimum overall tariff to 15-20% imposed by the U.S., most likely agreed in Q4 2025 and to be implemented in 2026.  However, a 35% probability exist of no deal and this could eventually mean higher tariffs (Fig

Bank of Canada - Consensus to hold in June, but we now expect easings in July and October

June 4, 2025 3:54 PM UTC

Governor Tiff Macklem stated that the Bank of Canada’s decision to leave rates unchanged at 2.75% was a clear consensus. There was more diversity of views on the path forward, though members thought there could be a need for easing, depending on data. We now expect two further easings in 2025, in

Canada: BoC's Macklem - Consensus to hold at this meeting but scope for future easing seen

June 4, 2025 2:04 PM UTC

The opening statement from BoC's Macklem suggests the decision to hold at this meeting was not the close call seen by many, but scope for future easing is seen, depending on how data evolves.

Nato Summit 5% Target and Trump

June 3, 2025 10:48 AM UTC

Trump’s natural instincts will likely see extra pressure applied on Europe in the coming weeks to commit to 5%, but we do not see existential threats from Trump.  In the end, our baseline is that NATO will agree a “soft” aim of 5% (3.5% hard military spending and 1.5% infrastructure/cybersecu

Trump’s 50% Steel And Aluminum: Negotiating Leverage?

June 2, 2025 7:42 AM UTC

•    President Donald Trump increase in steel and aluminum tariffs from 25% to 50% is not just about boosting the steel and aluminum industry.  It also a demonstration that Trump remains in control of tariffs and can aggressively change tariffs to increase negotiating leverage.  It is a mess

Bank of Canada Preview for June 4: A close call for another policy pause

May 30, 2025 3:43 PM UTC

The Bank of Canada meets on June 4 and it is a close call between leaving rates unchanged at 2.75% and a 25bps easing to 2.5%, though we now lean to the former. The statement is unlikely to give any forward guidance and we still expect further easing this year as the economy weakens in response to U

Preview: Due May 30 - Canada Q1/March GDP - A slower quarter, with risk for a weak start to Q2

May 29, 2025 2:44 PM UTC

We expect Q1 Canadian GDP to rise by a five-quarter low of 1.5% annualized, below a 1.8% estimate made with the Bank of Canada’s April Monetary Policy Report. We expect a 0.1% increase in March GDP, matching an estimate made with February’s data. We expect a slight decline in the preliminary est