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Today’s weak US non-farm payrolls data has undone much of the dollar’s rally this week. While the DXY index is still on up the week, and ~2.5% stronger since the start of July, the increased risk of a recession in the US and the consequent drop in US …
1st August 2025
Weak non-farm payrolls data have left investors concluding that a September Fed rate cut is almost nailed on and sparked a reassessment of risk across markets. We think this reassessment is slightly overdone, and that sentiment around AI is likely to …
Judging by yesterday’s policy announcement and Chair Powell’s press conference remarks, the FOMC doesn’t look to be in a hurry to change its policy stance. That points to somewhat higher Treasury yields and a flatter yield curve. It also supports our view …
31st July 2025
Faster growth in earnings per share (EPS) is the main reason why equities in the US have fared better in local-currency (LC) terms than those in the euro-zone since the Global Financial Crisis (GFC). With than in mind, today’s GDP releases for the US and …
30th July 2025
It’s increasingly looking as though the S&P 500 will continue to power ahead. At the time of writing, S&P 500 futures were pointing to fresh all-time high at Tuesday’s open. But even if it slips a bit, the index has probably already surpassed an …
29th July 2025
Euro-zone equities have, in general, already given back much of their gains after this weekend’s trade deal between the US and the EU. And we don’t foresee a new wave of euro-zone exceptionalism. One reason is our view of the euro, which fell quite …
28th July 2025
The US dollar is set to end the week lower against most other G10 currencies, with progress on US trade deals with Japan and Europe, a relatively hawkish ECB meeting, and continued headlines around Fed independence all contributing to downward pressure on …
25th July 2025
The combination of some relatively hawkish signals from the ECB yesterday and some more soggy data out of the UK has sent the euro to its strongest level against sterling since late 2023. We think there is more to come on that front as the BoE continues …
The ECB has left rates unchanged and, with inflation at target, we now suspect its monetary easing cycle is over. So bond yields are unlikely in our view to fall much, particularly at the short end. We still expect the euro to fall, but that reflects our …
24th July 2025
We think Colombia’s fragile fiscal position – which could get even worse ahead of next year’s election – and a likely deterioration in the current account deficit will cause the peso to fall by more than most currently anticipate, to 4,600/$ by end-2026 …
We held an online Drop-In session yesterday (see here for a recording) to discuss the latest developments in Japan’s economy and financial markets. This Update answers several of the questions that we received . What has the economic impact of higher US …
We think Japan’s equities will do well over the rest of this year, even accounting for their big rally today, and that the yen will recover in time. But, the trade announcement looks like worse news for JGBs, especially at the front end. US President …
23rd July 2025
Government bond yields in the euro-zone are converging, and we expect the “peripheral” frontier to keep blurring. Fears about deteriorating public finances are mounting in many places – for instance, Gilt yields opened higher today as an early data …
22nd July 2025
We held an online Drop-In session last week to discuss the outlook for equity, bond and currency markets. (See a recording here .) This Update answers several of the questions that we received. Tech/AI-driven equities are pushing the US equity markets …
The result of this weekend’s Upper House election in Japan may not reverse the recent rout at the very long end of the JGB market when it re-opens after a holiday on Monday, given the possibility that fiscal policy will be loosened in due course. But …
21st July 2025
While trade and overcapacity related risks remain, we see a bright outlook for China’s equities. But we expect a more challenging path for its bonds and currency over the remainder of the year. Until recently, China’s stock market had been under quite a …
Renewed concerns around the Trump administration’s attacks on the Fed’s independence have meant that while the US dollar is a touch stronger over the week as a whole, it is ending the week on the backfoot . Even if the president swiftly denied reports …
18th July 2025
We don’t think worries about Japan’s fiscal position are too severe, and expect the country’s equities and exchange rate, at least, to recover by the end of the year. At face value, concerns about Japan seem to be building again. The yen, for example, has …
Yesterday’s reports that President Trump is considering firing Fed Chair Powell imminently were quickly denied and most key market prices have reverted to roughly where they were before the news broke. But the sharp price swings in the hour or so between …
17th July 2025
Yesterday’s further ‘narrowing’ of the US stock market will have left it increasingly ‘concentrated’. But we don’t think these trends will reverse any time soon. And they may strengthen next year. To re-cap, more than 90% of the stocks in the S&P 500 fell …
16th July 2025
The latest US CPI report showed limited sign of any tariff impact but we continue to think that a rebound in inflation remains a headwind to US stock and bond markets this year – though it would probably help to drive a rebound in the US dollar. US CPI …
15th July 2025
Despite some weakness on the back of the latest tariff threats, emerging market currencies have broadly appreciated against the US dollar this year, mostly due to greenback-specific headwinds. We think most EM currencies will give back some of those gains …
The Trump administration’s continued re-escalation of tariffs threats have so far made limited impact on financial markets, but one key difference in the way market participants have digested the recent flurry of threats is that the dollar has …
14th July 2025
While the interest-rate-differential-defying strength of EUR/USD may be partly explained by increased currency hedging, it also reflects shifting expectations for economic growth. We think those will be dashed, even if the US doesn’t end up imposing a …
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
We think the outperformance of Mexican assets and the peso since “Liberation Day”, owing to large tariff exemptions for exports to the US, has largely run its course. Instead, we think the weak economic backdrop in Mexico and the risk of renewed …
We think concerns about government deficits could put further pressure on long-dated bonds. Tests of investors’ nerves have come thick and fast lately, with the latest being a hike in tariffs in Canada. But, despite some small wobbles, the big picture is …
Donald Trump’s planned imposition of a 50% tariff on Brazil for seemingly political reasons may represent a new milestone, but Brazil simply isn’t a big enough trading partner of the US to rattle global markets. For that to happen, negotiations with …
10th July 2025
Even if tariffs on US imports don’t rise substantially more next month for many countries after yet another delay, who is ‘paying’ for the increases in tariffs that have already occurred and appear likely to remain in place? The Q2 earnings season, which …
9th July 2025
Market participants have largely shrugged off President Trump’s latest set of threats to raise tariffs on a range of countries, focusing on the fact that today’s “deadline” for re-imposing the “reciprocal tariffs” from 2 nd April has, as widely expected, …
8th July 2025
In this Update, we answer the key questions about what stablecoins are, whether they will become more widely used and what implications they have for the US Treasury market. What are stablecoins? Stablecoins are a type of cryptocurrency, whose value is …
Despite the uncertainty about tariffs, we continue to expect US markets – especially equities and the dollar – to rally over the rest of the year. There have been two key parts of the US tariff drama that have mattered for markets over the past couple of …
7th July 2025
There may be little to stand in the way of further gains in the S&P 500 this summer, provided today’s enactment of the ‘One Big Beautiful Bill’ is followed next week by a market-friendly decision on tariffs and the upcoming earnings season doesn’t spring …
4th 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 …
Another robust US payrolls report supports our view that the FOMC will remain on hold this year and, in turn, our forecast for Treasury yields and the dollar to rebound over the coming months. Today’s June US non-farm payrolls report came in stronger than …
3rd July 2025
We still think gilts will rally over the rest of this year even if fiscal concerns don’t entirely abate, as the Bank of England cuts interest rates by more than investors seem to expect. But concerns about debt levels and a dovish central bank could be a …
The Taiwan dollar has appreciated sharply against the US dollar in recent months but, for a host of reasons, the central bank seems now to be less tolerant of further currency strength. Even without intervention, we think that the currency will give up …
2nd July 2025
We expect Treasuries to struggle over the rest of the year, despite their recent strong run. At the time of writing, Treasuries’ weeks-long rally seemed to have hit pause . One trigger seemed to be Fed Chair Powell’s comments at the ECB’s Sintra …
The weakness in the dollar in June was easier to explain than its slide in April and May since – unlike in those months – it was accompanied by a shift in bond yields that might have been expected to weigh on the greenback. Even so, there is still a lot …
1st July 2025
With the S&P 500 at a new all-time high, its fall of more than 20% earlier this year already seems like a distant memory. However, we don’t think it’s really back to square one for US equities. For a start, equity indices tend to follow an upward trend. …
30th June 2025
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 …
27th June 2025
Although the US dollar has tumbled as President Trump has ramped up the pressure on the Fed to cut rates, we don’t think investors are that concerned about the central bank’s independence yet. But the longer the attacks go on, the greater the pressure on …
With the noise around US tariffs and war in the Middle East fading, at least for now, we think the stage is set for some further decent returns from “risky” assets – especially US equities – over the next couple of years. But we suspect commodities will …
26th June 2025
The Fed’s proposed loosening of supplementary leverage ratio (SLR) rules for big banks might help to improve demand for Treasuries, but we’re not yet persuaded it will outweigh the other headwinds facing the world’s largest bond market. Treasuries have …
With the S&P 500 almost back at a record-high, we take stock of the different drivers of the US stock market’s recent (mis)fortunes. We suspect that the conditions will soon be back for equities in the US to lead those in the rest of the world. Four …
25th June 2025
The overnight announcement of a ceasefire between Israel/US and Iran has brought commodity and financial markets largely back to their pre-conflict square one. While tensions remain high and could easily re-ignite, our sense is that attention will now …
24th June 2025
US involvement in the Israel/Iran conflict has so far prompted just some volatility in global financial markets, with most major asset classes ultimately not far away from where they were on Friday. It’s easy, though, to see growing downside risks. …
23rd 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
In general, stock markets tend to be less affected by energy markets today than in the past. But the Israel-Iran conflict has already produced some interesting patterns in stock markets around the world amid a rise in energy prices. Much has been made of …
We continue to think Treasury yields will rise, as the Fed stays on hold longer than investors expect. There was minimal market reaction on Wednesday (local time) to a cautious Fed : policy was left on hold, the statement was almost unchanged, and the …
19th June 2025
