UK: Tax Rises Looming?

July 2, 2025 8:34 AM UTC

The politically damaging climb-down on welfare spending yesterday also saw the government face an additional fiscal hole after the fiscal watchdog (the Office for Budget Responsibility, OBR) hinted it has been repeatedly overestimating growth.  Indeed, in its annual Forecast Evaluation Report, it s

EZ HICP and ECB Strategy Review: Headline Up to Target as Services Inflation Rises Back?

July 1, 2025 9:32 AM UTC

Despite its updated its monetary policy strategy detailed yesterday, inflation – now at target – is very much a side issue for the ECB at present, albeit with oil prices possibly accentuating Council divides.  Admittedly, the flash June HICP rose a notch to 2.0% matching the -consensus, but up

German Data Review: Services Dip Further Despite Calendar Effects?

June 30, 2025 12:30 PM UTC

Germany’s disinflation process continues, with the lower-than-expected June preliminary numbers refreshing and reinforcing this pattern, with a 0. Ppt drop to 2.0%, a 10-mth low (Figure 1)!  Previously but there have been signs that the downtrend was flattening out and this impression may have be

Mexico: Back Toward Neutral Policy Rates

June 27, 2025 6:56 AM UTC

Banxico has cut by 50bps to 8.00%, while also signalling in its statement that further easing will now be data dependent. Our forecast is for easing to move to a 25bps pace and to come once a quarter – most likely in September and December. Some improvement in the monthly inflation trajectory woul

Ukraine War Update: War Continuing Probability is Now at 70%

June 26, 2025 11:06 AM UTC

Bottom Line: Our baseline scenario (70%) is based on the war continuing after talks fail since president Putin insists on his peace terms. President Trump is reluctant to threaten or implement of secondary tariffs on Russia oil buyers, that would really pressure president Putin. The U.S. financing o

EM FX Outlook: USD Less in Favor, but EM Mixed

June 25, 2025 8:05 AM UTC

·       The Chinese Yuan (CNY) will likely remain stable while trade negotiations with the U.S. continue.  We see a trade deal in our baseline (probably Q4) and then a small rise in CNY v USD due to general USD weakness. 
·       In terms of total returns for the remainder of 2025, th

Tariffs and the Timing of FOMC Easing

June 24, 2025 6:06 PM UTC

While two Fed Governors. Waller and Bowman, have suggested a July easing could be appropriate, testimony from Chairman Powell suggests a move that early is unlikely, though September is possible if inflation data continues to show a lack of feed through from tariffs. We, and Powell, expect some acce

German Data Preview (Jun 30): Calm Before the Storm?

June 23, 2025 10:29 AM UTC

Germany’s disinflation process continues, but there have been signs that the downtrend was flattening out and this impression may have been accentuated by the small and lower than expected (ie 0.1 ppt) drop in the headline in May to 2.1%, still an eight-month low (Figure 1).  Adjusted data also s

Preview: Due July 3 - U.S. June Employment (Non-Farm Payrolls) - Increasing signs of slowing, but not a recession

June 20, 2025 4:29 PM UTC

We expect a 75k increase in June’s non-farm payroll, significantly slower than May’s 139k though consistent with a slowdown in growth rather than an economy entering recession. We expect an in line with trend 0.3% increase in average hourly earnings and an uptick in unemployment to 4.3% after th

Canada April retail sales resilient but May seen much weaker

June 20, 2025 1:04 PM UTC

Canadian retail sales saw a 0.3% increase in April, slightly less than the preliminary estimate of 0.5% made with March’s data. The preliminary estimate for May is for a 1.1% decline, which suggests US tariffs are starting to weaken the Canadian economy.

BoE Review : Labour Market Softness Triggers a Dovish Hold

June 19, 2025 11:51 AM UTC

A stable BoE policy decision was always the most likely (Bank Rate staying at 4.25%) as the MPC discussed its two alternative scenarios still, but possibly where hawks have been forced into diluting what were previous concerns about a ‘tight’ labor market.  In fact, partly based on what was see

Brazil: Last Hike And Then Long Hold

June 19, 2025 6:33 AM UTC

Though the BCB surprised and hiked by 25bps to 15%, the statement signalled that policy will now go on hold for a very long period.  Some economists feel that by year-end, that the BCB will be confident enough to move from very restrictive to restrictive and lower the SELIC rate.  We would suspect

U.S. May Retail Sales - Two straight declines as confidence slides

June 17, 2025 12:50 PM UTC

May retail sales with a 0.9% decline are slightly weaker than expected. The ex auto data at -0.3% and ex auto and gas at -0.1% are negative too, though the control group which contributes to GDP was resilient with a 0.4% rise. 

BoJ Preview: Little Cues Expected

June 17, 2025 12:19 AM UTC

The BoJ will keep rates unchanged at 0.5% in the June 17th meeting with anticipation for another two year plan on bond purchase tapering 

Preview: Due June 17 - U.S. May Retail Sales - Autos to correct lower, underlying momentum subdued

June 16, 2025 12:07 PM UTC

We expect a 0.7% decline in May retail sales as auto sales show a sharp reversal from recent strength. Ex autos we expect a subdued 0.1% increase, with a 0.2% rise ex autos and gasoline. Both of these outcomes would match those of April.

India CPI Review: CPI at 2.82%: Disinflation Deepens, But Risks Linger

June 13, 2025 7:18 AM UTC

India’s retail inflation dropped to a six-year low of 2.82% in May, driven by easing food prices and supported by favourable base effects. While disinflation continues to create monetary space, RBI's next rate cut will be data driven. 

BoE Preview (Jun 19): Splits to Continue?

June 12, 2025 12:57 PM UTC

A stable BoE policy decision next Thursday is most likely (Bank Rate staying at 4.25%) as the MPC discusses various scenarios still, possibly with any hawks diluting what were previous concerns about a ‘tight’ labor market.  In fact, we see two dissents in favor of a 25 bp rate cut albeit where

SNB Preview (Jun 19): Toying With Being Negative?

June 11, 2025 9:23 AM UTC

A further 25 bp cut (to zero) in the SNB policy rate on Jun 19 now looks almost certain.  Weak(er) business surveys suggest that the tariff threat is both tangible and growing and this is before key Swiss pharmaceutical exports come under fire.  Meanwhile, there is the strong currency where FX int

ECB: Time to Reassess and Slow QT?

June 10, 2025 2:25 PM UTC

Further ECB easing is on the cards, the question being whether this should start to encompass toning down quantitative tightening (QT) plans too! Notably, the two ppt fall in the discount rate cuts has come against a backdrop where the ECB has continued unconventional tightening by scaling back its

China Disinflation Rather than Deflation

June 9, 2025 7:27 AM UTC

May China CPI remains negative Yr/Yr, but the breakdown is consistent with disinflation rather deflation.  Deflation could end up as a drag on the economy, but while growth remains close to the 5% target and CPI is regarded as disinflation rather than deflation, further policy easing will be slow.

Eurozone: The Tail Wagging the Dog?

June 6, 2025 10:26 AM UTC

Given what now looks to have been an outstanding first quarter, the ECB’s assertion at this month’s Council press conference that it is a good position to navigate the uncertain conditions looks more tenable.  After all, GDP jumped 0.6%, twice the previous estimate.  But this is no indicator o

Preview: Due June 6 - U.S. May Employment (Non-Farm Payrolls) - Some slowing, but not a recession signal

June 5, 2025 2:04 PM UTC

We expect a 120k increase in May’s non-farm payroll, with 110k in the private sector, slower than seen in March and April but stronger than what may have been weather-restrained months in January and February. We expect a slightly stronger 0.3% rise in average hourly earnings and an unchanged unem

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

EZ HICP and Labor Market Review: Headline Back Below Target as Services Inflation Reverses Easter Effect

June 3, 2025 9:42 AM UTC

EZ HICP inflation met our below-consensus expectation in dropping to an eight-month low and below-target 1.9% (Figure 1) helped by rounding and a further m/m fall in fuel prices.  More notably, having jumped 0.5 ppt to 4.0% in April, very probably due to the impact of the timing of Easter affecting

EM Europe and CIS: Select Country Risk Ratings

June 2, 2025 10:00 AM UTC

We provide country risk reviews for EM Europe/CIS countries including Russia and Ukraine. 

German Data Review: Lower Headline Services Surge Reverses

May 30, 2025 12:47 PM UTC

Germany’s disinflation process continues, but there have been signs that the downtrend was flattening out and this impression may have been accentuated by the small and lower than expected (ie 0.1 ppt) drop in the headline in May to 2.1%, still an eight-month low.  Most notable amid a drop caused

Court Stops Trump Reciprocal and Fentanyl Tariff

May 29, 2025 7:18 AM UTC

•    The Trump administration will likely follow a multi-track response by appealing the judgement but also fast-tracking section 232 product tariffs for pharmaceuticals and semiconductors.  The administration could also consider section 301 or 122 tariffs (the latter 15% for 150 days against c

RBNZ Review: Turning Point?

May 28, 2025 5:45 AM UTC

RBNZ cut its cash rate by 25bp to 3.25% but vote is 5 to 1

Eurozone: US Stepped-Up Tariff Threat – Negotiations or Concessions?

May 27, 2025 9:22 AM UTC

At least within markets there is some relief that President Trump has deferred his ramped up 50% tariff threat from early June to July 9.  Unambiguously positive is the fact that a better line of communication, if not rapport, now seems to exist between the U.S. president and EU Commission Presiden

Likely U.S. Tariff Scenario for Japan

May 26, 2025 5:36 AM UTC

After the U.S.-UK trade deal announcement, most countries are looking forward to lower tariffs. U.S.-Japan high level remarks are so far positive but lack concrete commitment. The U.S. has said that 10% tariff will be a baseline and we do not see Japan to be an exemption. However, we have a likely t

Eurozone: Waging War on Wages

May 23, 2025 1:35 PM UTC

After a protracted period of elevated EZ cost and price pressures, a reversal seems to be very much underway.  Headline and underlying HICP inflation have moved back toward target, but to reinforce this downtrend there are an increasing array of softer cost pressure signals.  ECB wage tracker and

Canada March Retail Sales rise, with autos strong and gasoline weak, April seen firmer

May 23, 2025 12:51 PM UTC

Canada’s 0.8% rise in March retail sales is slightly stronger than a 0.7% preliminary estimate made with February’s release, but the rise is more than fully explained by what was the first rise in three months for autos, possibly related to concerns about upcoming tariffs. Ex auto sales fell by

Eurozone: Services Offer Sobering News

May 22, 2025 9:00 AM UTC

The May flash composite PMI data may have fallen into apparent contraction territory as the index dropped to 49.5 in May from 50.4 in April, below the 50.0 no-change mark for the first time in five months and thereby signalling a reduction, albeit a marginal one.  We do not take much issue whether

German Data Preview (May 30): Lower Headline as Easter Effect Reverse Services Inflation Surge

May 21, 2025 11:54 AM UTC

Germany’s disinflation process continues, but there have been signs that the downtrend was flattening out and this impression was accentuated by the small (ie 0.1 ppt) drop in the headline in April to 2.2%, still a seven-month low.  Most notable amid a drop caused by lower m/m fuel prices, was th

RBA Review: Recognize Inflation Moderates and Upside Risk

May 20, 2025 5:32 AM UTC

The RBA meeting on May 20th cut rates to 3.85% and stated cautious in forward guidance

Eurozone: The European Commission Diverges From the ECB on Inflation

May 19, 2025 10:07 AM UTC

The European Commission (EC) Spring Forecast projects real EZ GDP growth in 2025 at 0.9%, some 0.4 ppt below its previous (autumn) view.   There is also a downgrade to the 2026 growth picture by 0.2 ppt to 1.4%, projections that carry downside risks and where we think they are still too optimistic

Big EM’s: Cyclical Tariff Hit V Structural Drivers

May 16, 2025 10:00 AM UTC

China, India and Brazil are all seeing cyclical slowdown for varying reasons, with China likely to be hardest hit by adverse net exports due to Trump’s tariff wars. Though financial repression in China can allow further fiscal stimulus, the household sector and residential property investment are

U.S. April Retail Sales, Weekly Initial Claims - Only limited signs of slowing

May 15, 2025 12:57 PM UTC

April retail sales and weekly initial claims are in line with expectations, and consistent with a moderate slowing in the economy, but with no recessionary signals. It is however too early for the full impact of tariffs to be seen, particularly with the impact of tariffs on prices so far limited.

Europe Portfolio Leverage Over Trump

May 14, 2025 9:05 AM UTC

The U.S. will likely introduce a 25% tariff on pharmaceuticals, which will increase pressure on the EU and other European countries (e.g. Switzerland) and also delay serious negotiations close to the 90 day reciprocal tariff deadline on July 9, adding to pressure on Europe by deliberately prolonging

U.S. April CPI - Little tariff pass-through so far

May 13, 2025 1:02 PM UTC

April CPI is on the low side of expectations at 0.2% both overall and ex food and energy, showing a loss of inflationary momentum since a strong start to the year in January, despite the imposition of tariffs. The core rate was up 0.24% before rounding, with the overall pace 0.22%, so the surprise i

Ceasefire or Reset? India Redraws the Rules

May 12, 2025 6:05 AM UTC

India and Pakistan have entered a fragile ceasefire after a week of precision strikes, drone warfare, and missile exchanges. But New Delhi’s clear message—that future terror attacks will be treated as acts of war—marks a strategic shift. Deterrence in South Asia has a new author, and India is

Deterrence on a Deadline: India, Pakistan, and the New Escalation Paradigm

May 9, 2025 6:29 AM UTC

India and Pakistan are now embroiled in their most serious military confrontation in years, with hostilities expanding across air, land, and unmanned domains. Following the May 7 cross-border strikes under Operation Sindoor, India launched a calibrated military offensive on Thursday targeting Pakist

Brazil: Reaching the Rate Peak

May 8, 2025 6:43 AM UTC

Forward guidance from the BCB after the 50bps hike to 14.75% suggests that we are close to a rate peak, with inflation concerns now cited on both sides.  The disinflationary impact of Trump tariffs on global trade and commodity prices is now being watched, as BCB members have signaled over the last

Eurozone Labor Market: Rising Supply Adding to Lower Wage Pressures

May 7, 2025 9:34 AM UTC

With the EZ jobless rate nestling at record lows, it would support the ECB assessment that the EZ labor market is strong, the central bank seeing only a small rise in the jobless rate this year and on to be reversed from early next year onwards.  However, that glosses over the fact that the labor m

Standoff Renewed: India and Pakistan Edge Closer to the Brink

May 6, 2025 3:33 AM UTC

India–Pakistan tensions have sharply escalated following a deadly terror attack in Kashmir, prompting sweeping diplomatic, military, and economic measures on both sides. New Delhi has ordered mock civilian defence drills and restricted the flow of river Chenab. Additionally, ceasefire violations a

Annual Inflation Slightly Decreased in April Despite MoM Hit 3.0% Due to High FX Pass Through

May 5, 2025 10:15 AM UTC

Bottom line: Turkish Statistical Institute (TUIK) announced on May 5 that the inflation softened to 37.9% y/y in April from 38.1% y/y in March. We think monetary tightening and suppressed wages helped relieve the price pressure despite hikes in electricity and natural gas prices in April, and curre

EZ HICP Review: Headline Fails to Fall as Services Inflation Rises on Easter Effect?

May 2, 2025 9:46 AM UTC

EZ HICP inflation failed to fall back toward the 2% target in flash April data, instead staying at 2.2%.  More notably, services inflation jumped 0.4 ppt, very probably due to the impact of the timing of Easter affecting airfares and holiday costs. As was the case when this Easter effect last happe

BoJ Review: 2025 GDP Forecast Halved

May 1, 2025 5:48 AM UTC

The BoJ kept rates unchanged at 0.5% with significant revision to economic forecast

U.S. Q1 GDP dips, Imports surge goes into inventories and business investment

April 30, 2025 1:07 PM UTC

The 0.3% decline in Q1 GDP is in line with expectations that were downgraded from a marginal increase after yesterday’s sharp rise in March’s advance goods trade deficit. A 3.5% rise in the core PCE price index is stronger than expected. While the Q1 data does not tell us very much about Q2, the