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Risk of further escalation continues to mount The continued Israel-Iran military strikes are likely to have a limited direct impact on Israel’s economy – so long as the conflict remains confined to a matter of weeks. But the risk of escalation is high, …
20th June 2025
Europe is taking Trump’s side on China When President Trump returned to office, his aggressive treatment of traditional allies raised the possibility that the EU and China would come together in defence of free trade. But the opposite is happening: US …
At our in-person Roundtables in London on Tuesday 1st July, clients can discuss with our economists and their peers how the government has influenced the economy in its first year in office. (Register here .) Upside risk to inflation from Middle East …
Given the further escalation of the Israel-Iran conflict in the past few days, this Weekly considers its possible implications for euro-zone inflation and monetary policy. These will depend mainly on how the conflict will affect energy prices , which we …
Mapping out conflict scenarios Much of the focus this week has understandably been on oil markets. Oil prices continued to climb as the Israel-Iran conflict escalated, reaching $76pb from $73 at the start of the week. In particular, the potential for US …
The Israeli air strikes on Iran overnight have renewed fears of a widening of conflict in the Middle East. We covered the implications for the oil market and the global economy in a report here , and discussed the latest developments in a Drop-in …
13th June 2025
We’ll be discussing the outlook for Bank of England, Fed and ECB policy in a 20 minute online Drop-In at 3pm BST on Thursday 19th June. (Register here .) If the Chancellor, Rachel Reeves, was hoping that at the end of the week of her Spending Review we’d …
OPEC+ watches on closely Israeli strikes on Iran and fears over the potential nature of Iranian retaliation sent Brent crude prices from ~$67pb to a peak of $78pb this week. While prices have since fallen back to $75pb at the time of writing, they are …
Short-term gain, long-term pain April’s data suggest that the boost to the euro-zone economy from exporters front-running US tariffs came to an end at the start of the second quarter. Euro-zone industrial production and exports were very strong in Q1 as …
The European Commission gave its approval for Bulgaria join the euro-zone this week, which clears the way for the country to adopt the euro on 1 st January 2026. Bulgaria’s accession had been delayed over the past couple of years in large part due to …
6th June 2025
Fiscal policy back in focus With confidence-sapping fiscal “black holes” and rises in business taxes dominating much of her first year in office, the Chancellor, Rachel Reeves, will finally get to splash the cash by announcing a series of infrastructure …
Tariff scenarios compared Along with its slightly hawkish communications, which we commented on here , the ECB published estimates this week of how US tariffs could affect the economy. In short, they think tariffs of 10% or more would reduce GDP …
We have consistently argued that the influence of Trump’s tariffs on the UK economy would be modest. As a result, the impact on UK GDP of the eventual outcome of the US court ruling on the legality of the 10% universal tariff will probably also be small. …
30th May 2025
The polls ahead of the second-round run off of Poland’s presidential election on Sunday point to a very tight race, with the two remaining candidates sharing virtually equal levels of support. The president of Poland has little direct input into domestic …
The latest twists and turns in the US tariff saga once again dominated the week. We responded to the court ruling that suspended Trump’s tariffs here . The news that tariffs have now been reinstated doesn’t alter our main conclusions. The latest legal …
“One Big Beautiful Bill” (but not for clean energy) The passage of President Trump’s fiscal package – termed the “ One Big Beautiful Bill ” – through the House of Representatives is another step back for climate action in the US. Indeed, the bill would …
Assessing the fallout after a busy election weekend Last Sunday was a busy day of voting in CEE and threw out some surprises. Pro-EU centrist Nicusor Dan won the second round of Romania’s presidential election, even though he’d lagged in the polls. …
23rd May 2025
ECB account reveals disagreement The account of last month’s ECB meeting, published on Thursday, showed diverging views on the risks to inflation and the appropriate monetary policy stance. It noted that “a few” members of the Governing Council “could …
The headline news this week was the bigger-than-expected leap in CPI inflation from 2.6% in March to 3.5% in April. (See here .) It would be easy to conclude that most of the increase was due to one-off price rises that will stay in the inflation rate for …
Israel readying strikes on Iran’s nuclear facilities? Rumours that Israel could strike Iran’s nuclear facilities suggest that conflict in the region could escalate. But there are reasons to think that the fallout for the oil market, and therefore the Gulf …
22nd May 2025
The agreement to roll back some tariffs reached by the US with both China and the UK raises the question of whether the EU will reach a similar deal before 9 th July, when the pause on the so-called “reciprocal” tariffs expires. We suspect a US-EU deal …
16th May 2025
The implications of the government’s latest policies for the economy bring to mind the quote “what the right hand giveth, the left hand taketh away”. The right hand – EU reset In the right hand is the UK-EU reset, which will begin on Monday to much pomp …
The polls ahead of presidential elections in Romania and Poland this Sunday point to diverging political paths for the two largest economies in Central and Eastern Europe over the coming years. We’ll be discussing the implications of Sunday’s election …
The strong showing for far-right nationalist, George Simion, in the first round of Romania’s Presidential election on Sunday has deepened the country’s political crisis, and the fallout in Romania’s financial markets could get more messy in the coming …
9th May 2025
Five months ago, we incorporated a 10% tariff on all UK goods exports to the US in our forecast. That has turned out to be a good call. Despite this week’s UK-US trade deal, the 10% “baseline” tariff remains. (See here for our response to the US-UK trade …
Tariff damage likely to be limited This week brought further evidence that the impact of US tariffs on activity in the euro-zone has been limited so far, and may even have been positive. March’s industrial production data from Germany and Ireland showed …
$50 oil is not a pipe dream Plenty of oil market analysts, including ourselves, have slashed their price forecasts this week following the OPEC+ decision to raise output in June by more than the group had originally outlined for the second month in a row. …
The larger-than-expected fall in the Nationwide measure of house prices in April has raised concerns about how quickly the housing market is losing momentum. After price gains of 1.1% m/m and 0.7% m/m in November and December last year, prices are down …
2nd May 2025
We think there are two key takeaways from the flurry of activity figures released this week. First, the euro-zone economy held up better than we expected in Q1. GDP expanded by 0.4% q/q. That was partly due to a very strong outturn in Ireland, where data …
Russia’s economy may be starting to break ... The latest economic data released out of Russia have given clear signals that growth has slowed sharply, with GDP having potentially contracted outright in q/q terms in Q1. We had expected a slowdown to …
What do Trump tariffs mean for green tech? Much ink has been spilled over the macro and market impacts of various US tariff announcements over the past month. (See here .) From a climate perspective, these tariffs will only add to existing trade barriers …
30th April 2025
The US steps up its peace deal efforts The US has been pushing harder over the past week to achieve a peace deal that Russia is willing to accept. But the more concessions that are offered to Putin, the less willing Ukraine is likely to be on board with a …
25th April 2025
Business surveys for April suggest that US tariffs have not done much damage in the euro-zone so far. The euro-zone Composite PMI edged down rather than collapsing and the Ifo Business Climate Index for Germany, which is the most vulnerable of the larger …
The fall in market interest rate expectations since ‘Liberation Day’ is striking. On 31 st March, investors were pricing in just two more 25 basis points (bps) interest rate cuts this year from 4.50% now to 4.00%. Now they are fully pricing in three more …
More cuts to come from the ECB This week’s decision by the ECB to cut interest rates came as no surprise, and the Bank’s overall messaging reinforces our view – which is shared by investors – that the Bank will keep cutting. (You can read our response …
17th April 2025
CBRT hikes rates amid significant capital outflows Turkey’s central bank (CBRT) delivered a hawkish surprise in raising its one-week repo rate to 46.00% today. While this won't tighten monetary conditions, it does formalise the tightening delivered …
The news on inflation this week was pretty good even before any influence from the US tariffs chaos has been felt. Although average earnings growth stayed close to 6.0% in February, pay growth on the more timely PAYE measure slowed to 5.4%. (See here .) …
Pause on reciprocal tariffs reduces risks for CEE President Trump’s 90-day pause on “reciprocal” tariffs has reduced the scale of downside risks to the global economy, and our new working assumption is that US tariffs on most economies stay at the 10% …
11th April 2025
The extraordinary tariff chaos over the past week and associated fallout in the financial markets (see our coverage here ) have increased the chances that the damage to the UK from the US trade war will be larger and that inflation and interest rates will …
This week’s historic changes in US trade policy and the associated market fallout point in the direction of a weaker euro-zone economy, lower inflation and looser monetary policy. While US tariff policy has become extraordinarily volatile, we are assuming …
If the US tariffs on imports from the EU announced this week are kept in place, our current assessment is that this will lower GDP growth across Central and Eastern Europe (CEE) by 0.3-0.4%-pts on average over the coming year. Judging by the sharp …
4th April 2025
President Trump’s decision to hit the EU with a 20% tariff on all imports has roiled European markets – the Euro Stoxx is down more than 7% since the announcement – and pose a growing risk to the global and European economies. Our forecast before the …
With President Trump announcing reciprocal tariffs of 34% and 20% on all US imports from China and the European Union respectively this week, the news that UK goods exports to the US will be subject to the minimum 10% “baseline” tariff from 5 th April …
The recent scrapping of the carbon tax in Canada shows that the political pushback against climate policy is certainly not just confined to the United States. But to paraphrase Mark Twain, rumours of the death of climate policy are greatly exaggerated; …
31st March 2025
With all the major business surveys for March now published, it is clear that while sentiment in the euro-zone has jumped, activity is still growing slowly at best. The more sentiment-driven ZEW and Sentix indices recorded big increases but the Composite …
28th March 2025
Tariffs – UK still not very exposed The announcement of US reciprocal tariffs on 2 nd April will dominate next week. The UK has mostly flown under the radar of Trump’s tariffs and its economy is naturally less exposed than others – our Trade War Dashboard …
Autos now in the crosshairs The Trump administration’s announcement of a 25% import tariff on autos and some auto parts will have a particularly large impact on Hungary and Slovakia. Our detailed response on Thursday to the tariff news can be found here . …
A pause for thought? The Bank of England was never going to do anything but continue the cut-hold-cut-hold pattern and keep interest rates unchanged at 4.50% this week. But the Monetary Policy Committee’s (MPC) hawkish tone suggests it is preparing to …
21st March 2025
Heightened military threat… but stronger GDP The rise in optimism about the euro-zone economy over the past few weeks has been remarkable. The ZEW index of investor sentiment in Germany saw one of the biggest increases on record in March. (See Chart 1.) …
Erdogan alarms investors The arrest of a leading opposition politician in Turkey on Wednesday triggered a major sell-off in the country’s stock market and currency. Events are in flux at the moment, but there are three takeaways. The first is that the …
