The US dollar is ending the week a touch stronger as President Trump continues to ratchet up his tariff threats again and US interest rate expectations edge higher. As widely expected, the 9 th July deadline for the “pause” on the US’ reciprocal tariffs …
11th July 2025
Fiscal tightening to cause inflation spike in Romania Romania’s fiscal tightening measures will add to the country’s inflation problem in the near term, and we’ve significantly revised up our CPI forecast over the next year. While inflation may be lower …
Trump keeps South Africa in his tariff crosshairs South Africa was threatened with a 30% reciprocal tariff again and, while the economic hit should be manageable, the uneasy relationship with the US suggests that an even higher tariff rate remains a …
You've got mail Canada found itself among the unlucky recipients of a letter from President Donald Trump this week, in which a 35% tariff was threatened to come into effect from August 1 st unless more was done to stop cross-border fentanyl flows. Though …
Inflation picture becoming more benign The raft of June inflation figures released across the region this week were encouraging. Headline inflation fell in Mexico , Colombia and Chile (and by more than expected in the latter two) while inflation in Brazil …
Trump shifts focus back to trade and tariffs President Donald Trump has turned his attention back to trade policy in recent days, threatening to resurrect higher reciprocal tariffs on many countries in another few weeks. He has also indicated that …
The further fall in GDP in May provided yet another excuse to talk down the UK economy. But there is some evidence that we are past the worst and the situation will improve from here (or, at the least, become less bad). Coming after the 0.3% m/m fall in …
Oil demand will struggle to keep up with OPEC+ The week started with oil traders digesting the news that OPEC+ decided to lift output by 548k bpd in August, putting the group on track to unwind it’s 2.2mn bpd of output cuts by September, one year earlier …
Supply-side approach has its limits Policymakers are becoming increasingly concerned about overcapacity and deflation, and are signalling a stronger intent to tackle the issue. On Wednesday, the People’s Daily ran a front-page commentary criticising the …
The media focus this week has continued to be on EU-US trade negotiations as the pause on Liberation Day tariffs was extended beyond the 9 th of July deadline and President Trump threatened to send a letter raising tariffs on the EU again. But in the …
Sharp fall in June inflation could spur rate cut talk The major data release next week will be the consumer price inflation data for June – the last set of inflation numbers before the RBI’s next policy announcement on Wednesday 6 th August. We think the …
A damp squib Liberation Day 2.0 was largely shrugged off by investors, with most equity markets in Asia rising over the course of the week. This could be because tariff deadlines were extended by three weeks, giving countries more time to agree deals …
Deadline for trade deal extended to 1 st August The looming deadline for the imposition of reciprocal tariffs earlier this week proved to be a damp squib as Trump has now given Japan and a range of other countries until 1 st August to negotiate a deal. …
Rates will bottom out in mid-2026 The RBA’s decision to leave its cash rate unchanged at its meeting this Tuesday shocked not only financial markets, which had fully priced in a 25bp cut, but also the overwhelming majority of economists. Setting aside the …
Egypt’s IMF delay reinforces need for reform The IMF has postponed the latest review of Egypt’s $8bn deal but, with external strains still present, officials appear keen to get privatisation and education reforms on track to unlock financing. A statement …
10th July 2025
The US dollar has stabilised to a degree this week after another solid non-farm payrolls report generated a bit of a rebound in US interest rate expectations. The bigger picture remains that the dollar is under pressure on account of both the perception …
4th July 2025
SARB’s lower inflation target proposal looks close A backdrop of subdued price pressures and declining inflation expectations strengthen the argument that a lower inflation target could bring even deeper interest cuts onto the table. Reserve Bank Governor …
The May trade release underscored the difficulties facing exporters. On the face of it the data were positive, as exports rose by 1.1% while imports fell by 1.6% m/m. This was off the back of a grim April when the trade deficit widened to $7.6bn, however, …
Chile: communist scores surprise primary win The positive market reaction to the victory for communist candidate, Jeannette Jara, in the Chilean governing coalition’s presidential primary election seems surprising at first sight. The peso is up by c.1% …
Muddled guidance in Poland, but further cuts likely The decision by the National Bank of Poland (NBP) to cut interest rates by 25bp at its meeting on Wednesday was a dovish surprise to most analysts who had expected policy to be left unchanged, although …
A rate cut at the ECB’s meeting on 24 th July seemed off the table only a few weeks ago, as energy prices had spiked due to the Israel-Iran conflict and ECB President Lagarde had stressed after June’s meeting that the Bank was in a “good position” on …
Surfing the waves of OPEC+ supply The sharp drop back in the risk premium in oil prices in the aftermath of the Israel-Iran ceasefire means that oil market fundamentals have snapped back into focus over the past week or so, particularly with the imminent …
Today (Friday 4 th July) marks the one-year anniversary of the government’s election victory. But on Wednesday this week it looked like there was a chance that the Chancellor, Rachel Reeves, wasn’t going reach the milestone after the Prime Minister …
Key questions left unanswered The trade agreement announced this week between the US and Vietnam, which imposes tariffs of 20% on Vietnam’s exports to the US (along with 40% for re-routed goods), leaves many questions unanswered. Not least how will …
Strong monsoon would boost economy The southwest monsoon this week fully covered India, around a week earlier than the historic norm. This raises the prospect of a bountiful kharif (monsoon) harvest, which bodes well for economic prospects in the second …
But China is less exposed than one might think The full details of the US-China trade “deal” that was signed last week still haven’t been made public. But the US has rolled back some measures against China in recent days, including its export controls on …
A cut remains more likely than not There is a growing sense amongst most observers that the Reserve Bank of Australia will deliver a 25bp cut at its meeting ending on 8 th July. Indeed, markets are pricing in a whopping 95% chance of that outcome. And …
Japan back in the doghouse The temporary pause on the 24% “reciprocal” tariff Trump imposed on imports from Japan in April is due to expire next week. As things stand, a deal with Japan looks unlikely and it’s possible that Japan will face even higher …
With the House seemingly on the cusp of passing the Senate’s revised budget reconciliation bill, the House looks set to support larger fiscal deficits over the next 10 years than it originally supported. The CBO estimated that the Senate bill would add …
3rd July 2025
Saudi current account deficit widens, FDI struggles Saudi Arabia’s current account deficit widened at the start of the year and is likely to deteriorate further as oil export receipts decline. This won’t cause any major macro problems yet, but it …
With activity having rebounded strongly in Q1 and headline inflation firming up, the RBNZ is likely to leave rates unchanged at 3.25% next week. However, we’re not convinced that the economy has turned the corner. And with the output gap set to remain …
2nd July 2025
Investment trends are not consistent with net zero The IEA published the latest edition of its World Energy Investment report in early June, which revealed that clean energy investment is expected to rise by a healthy 6% y/y in 2025. (See Chart 1.) What’s …
30th June 2025
Romania takes a (small) step in the right direction The fiscal tightening measures announced by Romania’s new government, which took office this week, are a welcome development for investors after the political turmoil last month and the alarming widening …
27th June 2025
The CPI data showed the Bank of Canada’s preferred CPI-trim and CPI-median core measures rose by an average of 0.2% m/m in May, which was lower than in the previous month but still a bit too strong for comfort. Several goods prices rose strongly, as was …
With the Fed divided between doves calling for a rate cut as early as July and hawks expecting no further easing this year, Fed Chair Jerome Powell struck a careful balance in his semi-annual testimony to Congress this week. He offered no signal that a …
GNU’s first birthday: fights holding back reform Next week marks a year in office for South Africa’s Government of National Unity (GNU). Both investor sentiment and supply conditions have improved under their watch, but persistent intra-party disputes …
The US dollar has generally lost further ground this week and the DXY index currently sits at around its lowest level since February 2022. This index has now fallen by more at this stage in the year than in any previous year since the US moved to a …
Mexico’s exports: so far, so (relatively) good Mexico’s trade figures for May released on Thursday showed that exports have continued to hold up well despite higher US import tariffs. Overall goods exports were down by a modest 0.4% y/y in dollar terms. A …
Conflicting reports cloud prospects of a trade deal President Trump on Thursday talked up the prospects of the US and India signing a “very big” trade deal ahead of the ending of the 90-day tariff reprieve on 8 th July. India has also sent a delegation of …
There were two key developments for the inflation outlook this week. First, some of the upside risk to CPI inflation posed by the conflict in the Middle East and higher energy prices has subsided. After the price of Brent oil ended the UK business day on …
Oil prices and volatility come full circle Oil price volatility is within touching distance of its five-year average following the ceasefire between Iran and Israel. (See Chart 1.) While the ceasefire could well prove fragile, reported violations early on …
Euro powering ahead The catalyst for this week’s further appreciation of the euro was nothing to do with Europe: instead, it reflected President Trump’s renewed attacks on the Fed and suggestions that he will appoint the next Fed Chair earlier than …
Boost for Korean consumers The weakness of consumer spending in Korea has continued in recent months, with retail sales now just over 2% below their pre-pandemic levels. (See Chart 1.) However, there are good reasons to think the worst is now over. …
Détente is on shaky foundations The understanding reached between the US and China during talks in Geneva and London has now been formalised, with the White House revealing that a written agreement was signed off two days ago. US officials have confirmed …
Tokyo election defeat is a red herring The poor showing of the LDP in Sunday’s metropolitan election in Tokyo is probably a red herring. While the number of seats the LDP won in Tokyo fell to a record low, the share of people that intend to vote for the …
Bank will speed up the pace of easing It’s become increasingly clear that the downside risks the RBA has been worried about are starting to manifest. Our GDP Nowcast suggests that recovery is struggling to gain momentum, prompting us to revise down our …
The Israel-Iran conflict escalated dramatically and, even more quickly, subsided over the past week. The focus now is on whether Iran pursues diplomacy or seeks to restart its nuclear efforts. To recap, this time last week, Israel and Iran were trading …
26th June 2025
The dollar has made some further gains this week, on net, but remains not far off its weakest level in three years. It has mainly benefitted on the back of a somewhat hawkish FOMC announcement, which contrasts with dovish policy signals from some other …
20th June 2025
The Summary of Deliberations from the Bank of Canada’s June policy meeting, released on Tuesday, revealed it held rates for three reasons: the economy had slowed but not significantly, uncertainty remained high, and recent inflation data had firmed. …
Israel-Iran and what it means for Africa The Israel-Iran conflict has caused a jump in oil prices over the past week and there’s a clear risk of further escalation that pushes prices up even higher. That would spell bad news for most African economies, …
