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April 25, 2025 7:09 AM UTC
On balance, our baseline still remains a U.S./China trade deal (55-60%) being reached, given Trump deal instincts; China desire for a deal and the economic disadvantage of an economic cold war to the U.S. when it is trying to reset trade with all countries. Timeline is Q4 2025 or H1 2026. An al
April 24, 2025 8:39 AM UTC
EZ HICP inflation is likely to fall back to the 2% target in flash April data, this six-month low would largely reflect a fall in fuel prices, but with services largely consolidating the clear fall seen last time around (Figure 1). All of which would mean a stable core reading of 2.4% but where th
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
April 23, 2025 9:56 AM UTC
Amid what are now an ever broader array if indicators suggesting that the economy is stagnating, if not contracting the BoE has the opportunity to address this risks with three separate MPC speeches due later today. Chief Economist Pill, Governor Bailey and Deputy Breeden can address the extent to
April 23, 2025 9:18 AM UTC
Continuing a series of upside surprises, EZ GDP overshot both consensus and ECB expectations in Q4), albeit only after what was a cumulative 0.2 ppt upward revisions compared to the flash. We see a further rise in Q1 data (Figure 1), partly reflecting recent m/m increases in both manufacturing and s
April 23, 2025 7:15 AM UTC
A deteriorating economic; volatile financial markets and weakening approval ratings are all putting pressure on the Trump administration to do trade deals. However, Trump instincts means he still likes tariffs, while negotiations will not be quick with China restraints and non-tariffs list desired
April 22, 2025 1:16 PM UTC
Germany’s disinflation process continues, but there had been signs that the downtrend was flattening out but this changed somewhat in February and again in the March. Indeed, HICP inflation fell back from 2.6% to 2.3% in March, this despite a pick-up in food inflation in both months. Notably the
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
April 17, 2025 1:48 PM UTC
A seventh and widely expected 25 bp deposit rate cut was overshadowed by the ECB’s communication shift about the outlook hereafter, no longer talking about how restrictive policy may be. This shift is entirely appropriate not least given the manner in which financial conditions are now tightenin
April 17, 2025 8:30 AM UTC
The USD and U.S. Treasuries are currently not acting like safe havens, as the crisis is U.S. centric with the tariff debacle. 10yr Treasuries can regain safe haven status if a U.S. recession occurs, but U.S. equities are still clearly overvalued versus equity and equity-bond metrics. We prefer Ind
April 16, 2025 4:28 PM UTC
The Bank of Canada left rates unchanged at 2.75% as expected. The statement concluded that the BoC will proceed carefully, noting that monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war, but it can and must maintain price stability in Canada. While this shows cauti
April 16, 2025 6:28 AM UTC
Although relegated by current market ructions and tariff threats, the main near-term inflation story was (and remains) what happens in the April data when a series of energy, utility, post office and some other regulated and service price rises are due, albeit now possibly offset somewhat by a fall
April 15, 2025 12:54 PM UTC
March Canadian CPI in falling to 2.3% yr/yr from 2.6% is significantly weaker than expected. Lower prices for gasoline and travel tours were cited as negative influences, the latter surely impacted by the unwillingness of Canadians to travel to the USA. The BoC core rates are on balance slightly s
April 15, 2025 11:14 AM UTC
The ECB can draw comfort from signs that credit demand and supply for EZ households continues to improve. But the ECB’s latest bank lending survey (BLS) also offers worrying signs in regard to firms as well as questioning the alleged neutrality of the QT program. It shows a further (admittedly
April 15, 2025 9:45 AM UTC
Policy-making is fraught with difficult decision making at the best of times. But at present in the UK, such decisions are made all the more problematic given inconsistencies, if not conflicts, in the data backdrop, thereby making any reading of the economy all the more subjective. Is employment
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
April 14, 2025 7:30 AM UTC
The economic hit from a hard stop in U.S. imports/exports is too damaging for both sides and our baseline is still for a truce and de-escalation, in the coming weeks. This could be negotiations on a new trade deal with a more moderate reciprocal tariff on both sides and the extra reciprocal tariffs
April 14, 2025 4:28 AM UTC
With the latest round of "universal" tariff, Japan is being hit again by double digit tariffs despite being the nice ally of the U.S. While we see little change of Japan's retaliation, it is worth looking into the impact towards the Japanese economy as auto export that is hit hard, is one of the maj
April 11, 2025 9:30 AM UTC
Long-dated U.S. Treasury yields were being pushed up by deleveraging among leveraged players, before the 90 days pause on reciprocal tariffs easing deleveraging. Multi quarter the key question for yields is whether real sector data sees a soft or hard landing. We see a slowdown to sub trend growth
April 11, 2025 6:40 AM UTC
UK data can be erratic, but the hugely unexpected surge in February GDP numbers (Figure 1) looks hard to fathom. A 0.5% m/m jump suggests the economy grew by an annualized 6%-plus in the month. This is hard to square against the message from surveys and other data such as that for the labor mark
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
April 9, 2025 7:13 PM UTC
FOMC minutes from March 19 contained no major surprises, though showed a significant degree of concern over inflation which justifies caution towards easing, with the inflationary concerns led by the prospect of tariffs. Even with Trump’s recent partial climbdown, the risks have probably gone up s
April 9, 2025 9:00 AM UTC
The prospect of a trade deal between the U.S. and China are less and likely delayed into 2026, due to the hardline stance of Trump 2.0 due to the extra focus on tariff tax revenue and shifting production back to the U.S. It is still our baseline that a deal will be agreed though we would now see a d
April 9, 2025 8:03 AM UTC
It is surely not a question of whether the ECB cuts rates again at its Apr 17 decision, but what it communicates about policy thereafter. Not least given the manner in which financial conditions have tightened, the then-notable change in rhetoric last month to suggest the policy stance had become
April 8, 2025 2:04 PM UTC
The Bank of Canada meets on April 16 and we expect that strength in some recent data and high uncertainty will see rates left unchanged at 2.75%. There will be little forward guidance and the accompanying Monetary Policy Report may avoid providing its usual economic forecasts. We do not expect that
April 8, 2025 2:03 PM UTC
Not surprisingly, February’s CPI data provided mixed signals, albeit reversing some of the upside surprises seen in January data. The numbers may have undershot expectations, but actually tallied with our and BoE thinking, at least in terms of a 0.2 ppt drop for both the headline to 2.8% and for
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
April 7, 2025 2:57 PM UTC
The Bank of Canada’s Q1 business outlook survey is weaker, though probably not by enough to shock the Bank of Canada. The survey was conducted in February, when tariffs were a worry but not yet a reality.
April 7, 2025 9:08 AM UTC
• The U.S. equity market still remains under pressure from the announcement effect of large reciprocal tariffs, though hopes of trade deals could start to soon produce a stabilization of the market later this week. Multi month the U.S. equity market outlook depends on whether a recession
April 4, 2025 1:22 PM UTC
Canada’s March employment with a 32.6k decline is the steepest fall since a brief plunge in the lockdowns of January 2022 and highlights the recessionary risks posed by US tariffs. Unemployment rose to 6.7% from 6.6% while wage growth slowed significantly, to 3.5% from 4.0%.
April 4, 2025 9:13 AM UTC
UK GDP Preview: Resilience in Spite of Soft(er) Surveys
Despite a fresh downside surprise for January numbers, the odds are increasing that current quarter GDP will be decidedly positive as opposed to the weak(ish) picture we perceive. This is all the more likely given the 0.1% m/m ‘recovery’ w
April 3, 2025 4:12 PM UTC
While surprising the market in their intensity, Trump’s “reciprocal” tariffs were in line with previous threats on most countries, and with Canada and Mexico being treated less harshly that feared, the net surprise is modest to us. However we do feel that inflationary risks have increased furt