U.S. Markets: Soft Versus Hard Landing

August 14, 2025 1:02 PM UTC

      A mild recession would likely trigger the Fed to ease quickly to 2.0-2.5%, which would produce yield curve steepening but would likely drag 10yr yields down to 3.50-3.75%.  The S&P500 would likely fall to 5000 in this scenario, as corporate earnings are axed; buybacks slow and the price/ea

September Fed ease now more likely than not, but far from assured

August 13, 2025 3:29 PM UTC

A September FOMC easing now looks more likely than not, but remains far from a done deal. We are however revising our call to two 25bps FOMC easings this year, in September and December, from just one, in December. 2026 is harder still to call given threats to Fed independence, but we continue to ex

China: Echoes of Japan?

August 13, 2025 8:05 AM UTC

     Overall, some of China’s private businesses and households are suffering from Japan’s style balance sheet recession.  Combined with slowing productivity and a shrinking workforce, this points to slower trend growth in the coming years.  However, fiscal stimulus and the clean-up of Loca

India CPI Review: Headline inflation drops sharply on account of food prices

August 13, 2025 7:38 AM UTC

India’s retail inflation fell to 1.55% yr/yr in July 2025, its lowest since 2017 and below the RBI’s 2–6% target band for the first time in over six years. The drop was driven by a sharp contraction in food prices, even as edible oil and fruit inflation remained elevated. With inflation well b

U.S. July CPI - Core rate, particularly services, a marginal disappointment

August 12, 2025 1:02 PM UTC

July’s CPI is in line with consensus at 0.2% overall, 0.3% ex food and energy, but the core rate of 0.322% before rounding is a little high for comfort. The detail shows the acceleration from June was more in services than goods, so the story is not a simple one of tariffs. 

RBA Review: A Expected

August 12, 2025 5:37 AM UTC

The RBA meeting on August 12th cut rates to 3.6% and continue to point toward data dependency

RBA Preview: Locked and Loaded

August 11, 2025 4:44 AM UTC

The RBA meeting on August 12th will cut rates to 3.6% and indicates more cut to come if data allows

Mexico: Further 25bps Cuts Ahead

August 8, 2025 6:44 AM UTC

Banxico forward guidance, plus trade policy risks with the U.S. now see us forecasting an end 2025 policy rate at 7.25% with two 25bps cuts in September and December. We now feel that the risks to 2026 growth will encourage Banxico to move the policy rate down to 6.5% by spring 2026 by two 25bps rat

EM Rates: Domestic Fundamentals Dominate

August 7, 2025 9:30 AM UTC

Once trade is agreed with the U.S., the good fundamentals actually argue for a 10yr Mexico-U.S. spread close to 400bps and this is our favored strategic risk reward for big EM government bonds. In Brazil a case can be made for a 12.75% policy rate end 2026 and 10% in 2027, but this could only mean 1

No Rush to Ease: RBI Flags External Risks, Holds Policy Steady

August 6, 2025 4:39 PM UTC

The RBI held the policy rate at 5.5% in its August 2025 meeting, opting for a strategic pause after front-loading 100bps of cuts earlier this year. While inflation has dropped sharply, global trade risks and sticky core prices argue against further easing for now. The central bank’s neutral stance

U.S. Immigration Slowdown and the Labor Market

August 6, 2025 7:58 AM UTC

Overall, slower illegal and legal immigration will likely slow employment growth and curtail the rise in the unemployment rate from the U.S. economic slowdown.  More older workers or an increase in the percentage of female workers would help, but are not a priority for the Trump administration and

U.S. July ISM Services - Consistent with payroll weakness

August 5, 2025 2:17 PM UTC

July’s ISM services index of 50.1 is down from June’s 50.8 and while still above May’s 49.9 suggests minimal growth in activity, and gives support to the weak message of recent non-farm payroll data.

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

Indonesia Q2 GDP Beats Expectations

August 5, 2025 9:45 AM UTC

Q2’s outperformance gives Indonesia’s economic planners breathing space. Investment recovery is a strong positive signal, but sustaining growth in H2 will depend on policy agility, export resilience, and keeping domestic consumption robust.

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

EZ HICP and Jobs Review: Headline at Target as Services Inflation at Fresh Cycle-low

August 4, 2025 8:25 AM UTC

HICP, inflation – still at target – is very much a side issue for the ECB at present, albeit with the likes of oil prices and tariff retaliation and a low but far from authoritative jobless rate (Figure 3) possibly accentuating existing and looming Council divides.  Regardless, despite adverse

RBI to Hold in August as Policy Cycle Enters Pause Phase

August 4, 2025 4:00 AM UTC

The upcoming RBI August meeting is not about action, but observation. With macro indicators largely aligned and risks tilting toward caution, a rate hold by the RBI is expected. Inflation remains subdued, but growth is resilient—requiring no immediate policy move

Indonesia’s Trade Surplus Widens Sharply in H1 2025 Despite Tariff Headwinds

August 3, 2025 4:43 PM UTC

Indonesia’s June trade numbers reflect a strong first-half export performance, bolstered by frontloading ahead of US tariffs. The 62-month surplus streak highlights ongoing resilience, but softer trade momentum in H2 is anticipated as the tariff impact begins to filter through.

Indonesia’s July CPI Rises on Food Prices, But BI Still Has Room to Ease

August 3, 2025 3:27 PM UTC

Despite a food-driven uptick in July CPI, Indonesia’s inflation remains comfortably within Bank Indonesia’s target range. BI retains room to cut rates further in H2—though global uncertainty, particularly around US trade policy and Fed moves, may temper the pace of easing.

U.S. July Employment - Revisions to May and June mean trend has slowed significantly

August 1, 2025 1:06 PM UTC

July’s non-farm payroll is weaker than expected not only with the 73k headline and 83k rise in the private sector, but also with large downward revisions totaling 258k for May and June. Unemployment remains low but edged up to 4.2% from 4.1% while average hourly earnings were on consensus at 0.3%,

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

BoJ Review: As expected

July 31, 2025 5:20 AM UTC

The BoJ kept rates unchanged at 0.5% in the July 31st meeting with inflation forecast revised higher

Fed's Powell Remains Cautious Over Tariff Risk

July 30, 2025 7:34 PM UTC

The FOMC left rates unchanged at 4.25-4.5% as expected, though there were two dissenting votes for easing, from Governors Waller and Bowman, who had already given signals in that direction. The statement made a concession to the doves stating that growth moderated in the first half of the year, but

Preview: Due July 31 - U.S. June Personal Income and Spending - Core PCE Prices to outpace Core CPI

July 30, 2025 1:41 PM UTC

June’s personal income and spending report will be largely old news, with Q2 totals seen in the GDP report. Ahead of the GDP report we expected a stronger 0.3% increase in core PCE prices, with a weak 0.2% rise in personal income but a solid 0.5% rise in personal spending. If these forecasts prove

DM Household Sluggish Borrowing

July 30, 2025 10:45 AM UTC

·        Overall, restrained credit supply from banks; abundant employment/income or wealth for most households but restrained financial conditions for low income households could have restrained household lending growth to GDP.  However, the surge in government debt and ensuing fear of fut

Eurozone Flash GDP Review: Resilience or Irrelevance?

July 30, 2025 9:52 AM UTC

As we highlighted in our preview, for an economy that has seen repeated upside surprises and above trend growth, now some 1.4% in the year to Q2, GDP data do not seem to have had much impact is shaping, let alone dominating, ECB policy thinking. We think this will continue to be the case even after

EZ Real Economy – Diverging Sentiment Indictors Complicate Outlook

July 29, 2025 9:26 AM UTC

The ECB contends that the EZ economy has shown resilience of late.  Maybe so, albeit where GDP data (likely to average a satisfactory 0.3% q/q performance so far this year) are probably offering a misleading picture of underlying trends in real activity.  Indeed, recent GDP data gains have been pr

China/U.S. Trade Talks Into the Autumn

July 29, 2025 8:20 AM UTC

·        Our baseline (Figure 1) remains that a U.S./China deal will be reached (most likely in Q4), but a moderate probability exists of no deal being done this year and China being stuck with 30% tariffs – the worst-case scenario of still higher tariffs is now less likely with Trump in a

BoJ Preview: Inflation forecast higher

July 29, 2025 6:08 AM UTC

The BoJ will keep rates unchanged at 0.5% in the July 31st meeting 

Food Glorious Food

July 28, 2025 10:15 AM UTC

·       Global food prices should see small increases in the future, as production continues to rise broadly in line with increasing demand driven by population and a rising consumption per person in EM countries.  However, China will remain dependent on food imports given it has limited roo

U.S.-EU Trade Agreement: More a Framework Than a full Deal

July 28, 2025 9:08 AM UTC

In what seems to have been a fully-fledged political capitulation to the U.S. the EU, it seems, is accepting an agreement that would see an almost-blanket reciprocal 15% tariff on its exports to the U.S.  But there still some imponderables, not least the range of sectoral concessions, whether EU me

ECB Review: Policy ‘On Hold’ Leaves Easing Door Open

July 24, 2025 1:48 PM UTC

Given the uncertainty overhanging policy makers worldwide, let alone in the EZ, the ECB was always likely to revert to stable policy after seven consecutive cuts which have taken the discount rate to its current 2%.  In a much shortened statement, but which was more willing to highlight disinflatio

EM Currencies with a USD Downtrend

July 24, 2025 10:15 AM UTC

·       BRL, ZAR and MXN have been helped by FX carry trades and bond inflows on still wide interest rate differentials.  However, actual reciprocal tariff risks are high for all three countries and a wave of profit-taking could be seen.  Elsewhere, though we see a U.S./China trade deal by

EZ HICP Preview (Aug 1): Headline at Target as Services Inflation at Fresh Cycle-low?

July 23, 2025 10:35 AM UTC

HICP, inflation – now at target – is very much a side issue for the ECB at present, albeit with the likes of oil prices and tariff retaliation possibly accentuating Council divides.  Despite adverse energy base effects, we see the flash July HICP staying at June’s 2.0% but up from May’s eig

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

Japan: Mission Accomplished?

July 23, 2025 8:01 AM UTC

U.S.-Japan reached a trade deal with 15% reciprocal tariff

DM Rates: QT adds to Budget Deficits Pressures

July 22, 2025 10:05 AM UTC

·        Heavy issuance due to the U.S. budget deficit, plus Fed rate cuts will help further yield curve steepening in H2 2025.  In EZ and UK, ECB and BOE QT is large and amplifies the amount of debt that the rest of the market has to absorb, which will also drives yield curve steepening al

Eurozone Flash GDP Preview (Jul 30): A Pause that Does Not Refresh?

July 22, 2025 9:13 AM UTC

For an economy that has seen repeated upside surprises and above trend growth of 1.5% in the year to Q1, GDP data do not seem to have had much impact is shaping, let alone dominating, ECB policy thinking. We think this will continue to be the case even where the looming Q2 data may show a modest con

2yr Germany and ECB Expectations

July 21, 2025 10:07 AM UTC

·       Money markets are putting too much weight on ECB communications and we feel that a softening labour market/financial conditions and more tariffs from the U.S. will be enough to shift the ECB to deliver two final 25bps cuts in H2 2025.  Though the 2yr Germany to ECB depo rate spread w

LDP Likely Lose Control of the Japan Upper House

July 21, 2025 2:00 AM UTC

Early exit pools suggest the ruling LDP coalition will likely lose majority

Trump’s and Fed Easing

July 18, 2025 9:34 AM UTC

•    Trump goal of substantially lower short-term rates could be achieved with a recession, but otherwise is unlikely even when Fed chair Powell is replaced.  The majority of voting FOMC members will make decisions based on economics not politics.  However, Trump fixation with lower rates an

Preview: Due July 31 - U.S. June Personal Income and Spending - Core PCE Prices to outpace Core CPI

July 17, 2025 2:48 PM UTC

June’s personal income and spending report will be largely old news at the time of the release, with Q2 totals due in the GDP report due the day before. Ahead of the GDP report we expect a stronger 0.3% increase in core PCE prices, with a weak 0.2% rise in personal income but a solid 0.5% rise in

U.S. June Retail Sales, Weekly Initial Claims, July Philly Fed - Economy regaining momentum in the tariff pause

July 17, 2025 1:06 PM UTC

The latest US data presents a picture of an economy regaining some momentum as tariff fears fade, at least temporarily. June retail sales with gains of 0.6% overall and ex auto and gas, with ex autos and the control group which contributes to GDP both up 0.5%, ended Q2 on a firm note. July’s Phill

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

ECB Preview (Jul 24, Part Two): Policy Pause Despite Tighter Financial Conditions

July 16, 2025 1:07 PM UTC

The next ECB Council meeting decision on Jul 24 looms but (as we noted in the part one preview) markets (understandably) sees no further cut, at least at that juncture.  However, we think that the ECB will ultimately still have to ease further - two more 25 bp cuts in H2 - and would not even rule o

FOMC Preview for July 30: No change given uncertainty on tariffs and their consequences

July 15, 2025 6:15 PM UTC

The FOMC meets on July 30 and recent data suggests no reason to move rates from the current 4.25-4.50% level, though Q2 GDP data due on the morning on the decision will impact the wording of the statement. This meeting will not see an update to the dots leaving focus on Chairman Powell’s press con

U.S. June CPI - Tariff pass-through limited but not zero

July 15, 2025 12:58 PM UTC

June core CPI at 0.228% before rounding is on the low side of expectations and still shows a limited, though not zero, feed through from tariffs. Moderate gains in food and energy lifted overall CPI to a 0.3% increase, with the gain rounded up from 0.287%.  Trump will use this data to argue for Fed