Eurozone: PMI Slump Shows Energy Surge Constraining Activity, Not Just Hitting Costs

May 21, 2026 8:36 AM UTC

Once again surprising on the downside flash Eurozone Composite PMI fell to 47.5 in May from 48.8 in April and below the 50.0 no-change mark for the second successive month. The latest reading thereby signalled a further and steeper m/m reduction in business activity, was the sharpest since October 2

ECB: Not the Only Game in Town – But A Time for Hair Shirts?

May 19, 2026 11:22 AM UTC

When hearing ECB Council policy thinking one can get the impression that it sees only a direct link from changes in its policy rate to inflation rather than the latter succumbing to a range of factors, this being the transmission mechanism.  Most important of course is the economic damage that chan

Middle East Conflict: U.S. Helping Chinese Whispers?

May 15, 2026 11:26 AM UTC

 In hosting President Trump this week, China feels it is vying, if not achieving, parity with the U.S. as the world’s superpowers; from China’s perspective, it regards Russia similarly.  It does seem as if China’s goal at this summit was to get more effective flexibility in shaping Taiwan’

Eurozone: In Dire Straits?

May 8, 2026 10:55 AM UTC

Amid all the concern about the energy-induced surge in inflation resulting from the Middle East conflict, the impact on EZ real economy looks to be sizeable and growing.  High profile PMI numbers are flashing alarmingly, but the message from the April composite (at a 17-mth low) may actually be not

ECB Review: ECB Mixed Communications

April 30, 2026 2:01 PM UTC

·       Overall, the June and July meetings have live risks that the ECB could undertake a modest 25bps hike.  If a partial reopening of the Straits of Hormuz occurs then the ECB will likely keep hawkish, but not actually hike.  We feel that the ECB is overestimating natural gas prices, whi

Eurozone GDP & HICP Review: Fragile Resilience?

April 30, 2026 9:30 AM UTC

We continue to be critical of the ECB assertion (at least before the Iran War) that the EZ economy was in a ‘good place’.  This to us was too backward looking and amid some signs in both hard, soft and monetary data, that the economy going into the last quarter was soft and fragile.  Indeed, f

Continuum Economics Calendar May 2026

April 29, 2026 11:00 AM UTC

Data and Events Calendar May 2026.

Eurozone: Even Tighter Corporate Credit Standards Continues and More Loans Applications Rejected

April 28, 2026 8:51 AM UTC

Given the ever clearer fall-out from the conflict in the Gulf, it was hardly a surprise of even tighter credit standards (Figure 1), thereby merely accentuating trends in the four previous Bank Lending Surveys (BLS).  At least as far as firms and especially consumers seeking credit are concerned, t

Straits of Hormuz Standoff and Mixed Markets

April 27, 2026 9:02 AM UTC

•    Equities longer time horizon means that they are hoping for a reopening of the Straits of Hormuz (though also being helped by renewed AI optimism), whereas government bond markets actually want to see tangible progress and an associated tempering of DM central banks posturing.  This dive

ECB Preview (Apr 30): Real Economy Buckling Already!

April 23, 2026 12:21 PM UTC

We again expect no change from the ECB on Apr 30, but President Lagarde will probably have to admit in the Q&A that unlike last time the decision was not unanimous.  Overall, the communication will again suggest upside risks for inflation and downside risks for economic growth the extent and durati

Iran Conflict – Who Has the ‘Trump’ Card

April 22, 2026 9:17 AM UTC

When Trump aspires to reaching a deal, he thinks in either black or white.  But whether it be political, economic or military the reality is that the world is always various shades of grey.  This is very much evident in the way the Iran conflict was planned by the U.S. – the expected clear and r

EZ HICP Preview (Apr 30): Headline Surges Again as Core Stabilises?

April 21, 2026 9:29 AM UTC

The first of the Iran War induced rise in prices arrived with the final March HICP data in line with expectations, as the headline rate spiked higher to 2.6% from February’s 1.9%, but with the core rate falling back (Figure 1) underscoring that this March surge was purely energy-led.  Indeed, thi

Eurozone Flash GDP Preview (Apr 30): Softer Even Before Iran Conflict?

April 20, 2026 1:20 PM UTC

We have been critical of the ECB assertion (at least before the Iran War) that the EZ economy was in a ‘good place’.  This to us was too backward looking and amid some signs in both hard, soft and monetary data, that the economy going into the last quarter was slowing.  Indeed, part of a broad

Equities: Still a Rocky Road in 2026

April 17, 2026 12:49 PM UTC

·       Any deal between the U.S. and Iran would still be seen as a positive win in equities, as it would raise hopes that it could be followed by a multi-year settlement that could include more Iran oil and gas into the global energy markets and lower energy prices. No deal is also feasible,

Eurozone; ECB Tone More Neutral Than Suggested by March Meeting Market Reaction?

April 16, 2026 12:18 PM UTC

Little new can be taken from the minutes to the March ECB Council 19 meeting, save that at least to us the ECB was too optimistic about growth and too pessimistic about inflation. In regard to the latter, while acknowledging tighter financial conditions, the ECB still seemed to be downplaying what a

DM Central Bank Signals Awaited

April 15, 2026 12:12 PM UTC

·       Fed/ECB and BOE meetings will likely see concern over the potential 2nd round inflation effects from the Iran war, but forecasts seeing inflation coming down in 2027 and no imminent signals of tightening from the ECB/BOE – our baseline remains for easing later in the year, as energy

Eurozone: ECB Downplaying Supply of Credit as it Focuses on its Cost

April 14, 2026 1:35 PM UTC

Even amid increasing suggestions that the Middle East conflict will reap marked real economy damage that should limit the length and extent of any inflation surge, markets are still pricing in almost three 25 bp ECB hikes in the coming year.  We think this is still very excessive and reflects an ou

Eurozone: Manufacturing Seeing Excess Supply Not Excess Demand

April 8, 2026 11:13 AM UTC

In Europe generally, but especially in the EZ, it will be manufacturing that will bear the brunt of the recent jump in energy prices, where industrial electricity prices even before the conflict started were among the highest globally. While high energy costs affect all sectors, manufacturing’s re

2-Week Ceasefire, Then?

April 8, 2026 10:09 AM UTC

·       The ceasefire will likely involve a new normal of shipping companies paying Iran a toll.  While this is adding a cost to Gulf crude oil/products and LNG, the premium will be a lot lower than the cost of an ongoing war.  The U.S. and Iran will now likely be reluctant to restart the w

Eurozone Labor Market: A Structural and Disinflationary Shift?

April 1, 2026 10:00 AM UTC

That we think the ECB is being optimistic about the real economy and labor market outlook is almost an understatement made all the more so since the outbreak of the Iran War.  In the ECB’s latest baseline scenario, recession is clearly avoided and the jobless rate, while revised a little higher (

EZ HICP Review: Headline Surges as Core Slips Back?

March 31, 2026 9:44 AM UTC

The first of the Iran War induced rise in prices has arrived but with the flash March HICP data a little below expectations, both the consensus and that of the ECB.  Instead, the headline rate spiked higher to 2.5% from February’s 1.9%, but with the core rate falling back (Figure 1) underscoring

Markets: Short vs Long Iran War

March 30, 2026 8:00 AM UTC

·       For a 4-8 week war and 3-4 quarters of energy price normalisation, we see a 10% U.S. equity market correction in H1 2026 driven by the current Iran war and/or consumption slowing due to lower (real) wage growth, alongside still stretched valuations in equity and equity-bond terms.  T

Continuum Economics Calendar April 2026

March 27, 2026 2:30 PM UTC

Data and Events Calendar April 2026.

EZ HICP Preview (Mar 31): Headline to Surge but Core to Slip Back?

March 26, 2026 1:54 PM UTC

The first of the Iran War induced rise in prices arrive in the coming week with flash March HICP data.  We see the headline rate spiking higher to 2.6%-2.7 from February’s 1.9%, the former largely chiming with that implied ECB thinking from the latter’s recent updated projections.  But both it

March Outlook: Iran War and AI Challenges

March 26, 2026 7:17 AM UTC

Our March Outlook is now published and please see all our economic and policy chapters below.  

DM FX Outlook: The Rest of 2026

March 25, 2026 7:55 AM UTC

Our baseline is for a 4-8 week Iran war, with WTI down to USD80-85 by June; USD65-70 end 2026 and USD60 by Q3 2027. This should see the USD return to a weaker profile later in the year. In our December Outlook, our favorites were the AUD and NOK based on yield spreads, but it is also worth noting th

Eurozone Outlook: Conflicts of Interest

March 24, 2026 9:55 AM UTC

·       Under our more likely view of limited further fighting in the Middle East, we see oil and gas prices largely falling back to the pre-war levels within a year, with the current situation very different from that of 2022 and the Ukraine War in which the EZ lost access to Russian gas as

DM Rates Outlook: Mixed Policy Rate and Yield Paths

March 24, 2026 8:46 AM UTC

·        The multi quarter outlook for DM rates depends on the length of the Iran war Our baseline is that it will be a 4-8 week war (here) and a 3-4 quarter retracement of oil prices back to pre-war levels – longer from Europe and Asian gas prices. We forecast WTI down to USD80-85 by June

Outlook Overview: Iran War and AI Challenges

March 23, 2026 4:39 PM UTC

·       The Iran war macro impact depends on length of the conflict and impact on energy flows. Our baseline is for a 4-8 week Iran war, with WTI down to USD80-85 by June; USD65-70 end December and USD60 by Q3 2027 (here).  The jump in oil and gas prices mean at least a temporary increase in

Equities Outlook: Navigating Cyclical and Structural Forces

March 23, 2026 4:15 PM UTC

·        For global equities, our baseline (here) is for a 4-8 week Iran war, with WTI down to USD80-85 by June; USD65-70 end 2026 by June and USD60 by Q3 2027.  A fragile situation will mean it will take until 2027 for energy prices to return to pre-war levels. On a multi-quarter basis thi

ECB Review: Not Such a Good Place!

March 19, 2026 2:49 PM UTC

With no change in policy expected and this being delivered unanimously, the ECB underlined its determination to ensure that inflation stabilises at the 2% target in the medium term. Unsurprisingly, it stressed how the Middle East conflict has made the outlook significantly more uncertain, creating u

ECB Preview (Mar 19): No Longer in a Good Place?

March 11, 2026 2:53 PM UTC

With no change in policy expected, what the ECB says is the most important aspect of the ECB meeting next week, both explicitly and implicitly via its updated forecasts (Figure 1).  Both are likely to underscore that rate hikes are certainly possible if the almost inevitable inflation rise proves t

EZ HICP Review: Core Rate Spikes as Upside Inflation Risks Return

March 3, 2026 10:35 AM UTC

Having dropped to 1.7% in the January data, thereby matching expectations and the short-lived Sep 24 outcome, it is likely especially in view of the Middle East conflict that the headline HICP rate may not be any lower through this year and into next.  Indeed, we headline rate rose 0.2 ppt to 1.9%

Continuum Economics Calendar March 2026

February 26, 2026 1:00 PM UTC

Data and Events Calendar March 2026.

EZ HICP Preview (Mar 3): ECB Too Focused on Services Inflation as Goods May Soon Take Core Below Target

February 25, 2026 1:54 PM UTC

Having dropped to 1.7% in the January data, thereby matching expectations and the short-lived Sep 24 outcome, it is possible that the headline HICP rate may not be any lower through this year and into next.  Indeed, we see the headline rate edging up to 1.8% in the February flash mainly due to ener

EUR/USD: Europe’s Counter Threats to Trump

February 10, 2026 11:05 AM UTC

·       Europe is highly unlikely to weaponize its existing portfolio holdings or new flows into the U.S., as Europe is dependent on the U.S. nuclear umbrella and as EZ/EU decision making is slow and modest in action.  Such a move would be strongly opposed by EZ/European investors. Even so,

ECB: Papering Over the Cracks

February 5, 2026 2:51 PM UTC

·       As widely expected the ECB kept the policy rate unchanged at the February meeting.  The broad message remains that the ECB Council is comfortable with current policy rates, which provides short-term forward guidance of no change in rates.  This message came from the ECB statement an

U.S. Inflows: Portfolio Dominates

February 4, 2026 12:05 PM UTC

·        Portfolio flows have dominated U.S. C/A financing looking at the breakdown of the balance of payment data (BOP), with no material slowdown in 2025 from foreign investors. U.S. investors did accelerate buying of overseas equities but this was counterbalanced by slower U.S. buying of

EZ HICP Review: Services Inflation Less Resilient as Core Hits Cycle-Low

February 4, 2026 11:19 AM UTC

Having been range bound for some 5-6 months between 2.0% and 2.2% until November but after a fall to 1.9% in December headline HICP inflation dropped to 1.7% in the flash January data, thereby matching expectations and the short-lived Sep 24 outcome.  The drop came in spite of higher food inflation

EZ HICP Preview (Feb 4): Services Inflation Less Resilient as Headline to Slip Further

February 2, 2026 12:07 PM UTC

HICP inflation had been range bound for some 5-6 months between 2.0% and 2.2% with the November and October numbers in the middle of that range. And it seemingly stayed in that range falling to 2.0% in the December flash numbers, only to be revised down a further notch to 1.9% in the final HICP figu

Markets: Profit-Taking or More?

February 2, 2026 9:22 AM UTC

•    For now we see some further profit-taking on risky positions in gold/silver/copper/equities and short USD positions.  However, a bigger macro catalyst is required to produce a deep correction in equities and major risk off.  The nomination of Kevin Warsh for Fed chair is unlikely to be

ECB Preview: After GDP and Before Feb Meeting

January 30, 2026 10:05 AM UTC

·       Most on the ECB council appear to be comfortable with steady policy in H1 2026, after a cumulative 200bps of cuts.  This will likely be the overall message from the February 5 ECB meeting. This will paper over differences for 2027 among ECB council members. However, we agree with the

Continuum Economics Calendar February 2026

January 29, 2026 4:00 PM UTC

Data and Events Calendar February 2026.

USD Hurt by Hedging More than Asset Outflows

January 27, 2026 10:53 AM UTC

The Greenland drama  and fears of BOJ/Fed Intervention on USDJPY has put the USD under renewed downward pressure against DM Currencies.  What happens next?  Overall, we see scope for further USD decline versus DM currencies in 2026 on more currency hedging; some diversification away from the U.S.

ECB Steady Signals, But

January 19, 2026 8:55 AM UTC

•    We remain of the view that financial conditions and lending rates are worse than the current ECB depo rate level suggest and means that 2026 EZ growth does not really pick-up.  Combined with a mild undershoot in inflation, this can build the case for the ECB to deliver two 25bps cuts.  

DM Government Debt: 2026 Supply & Voters’ Resistance To Fiscal Consolidation

January 14, 2026 11:55 AM UTC

·        We see the most persistent issue being supply (budget deficit + QT) in 2026, which should lessen into 2027 with a slowdown in ECB/BOE QT and a partial U turn by the BOJ.  However, governments are also struggling with electorates that are resistant to higher taxes or lower governmen

EZ HICP Review: Services Inflation Still Resilient But Core Goods Soften Further

January 7, 2026 10:44 AM UTC

HICP inflation has been range bound for the last 5-6 months between 2.0% and 2.2% with the November and October numbers in the middle of that range. And it stayed in that range falling to 2.0% in the December flash numbers, albeit where adverse rounding pre vented a fall to 1.9%.  We see this as th

German HICP Review: Headline and Core Down Afresh

January 6, 2026 4:25 PM UTC

Germany’s disinflation process resumed with a bang as December saw a larger-than-expected fall in both headline and core inflation.  Indeed, the headline HICP fell 0.6 ppt to a five-month low of 2.0%.  This was largely food and energy driven but still with some fall in core at least according to

Markets 2026

January 6, 2026 9:58 AM UTC

•    For financial markets, the muddle through for global economics and policy provides support for risk assets, combined with solid earnings prospects from some of the magnificent 7.  However, U.S. equities are once again significantly overvalued and we look for a 5-10% correction in 2026, b