The US dollar is again ending the week on the backfoot in the wake of yesterday’s softer-than-expected US CPI report and what looks (potentially) like another round of FX intervention from Japan’s Ministry of Finance. Short-term momentum has now shifted …
12th July 2024
"More good data" needed There were mixed messages from Fed Chair Jerome Powell this week in his semi-annual testimony to Congress. Powell said in his opening remarks that the “economy continues to expand at a solid pace” and the unemployment rate is …
Inflation data not as bad as headline rates suggest At first sight, the raft of inflation data out of Latin America this week made for worrying reading. Inflation rebounded in most countries last month, with the headline rate in Mexico reaching 5.0% y/y …
Gold prices are going for gold…again The ~18% rise in gold prices seen this year has largely defied the traditional logic of demand drivers. Indeed, the surge in gold prices between February and April took place against a backdrop of a stronger dollar. …
We presume there isn’t a statistical relationship between economic performance and success on the football pitch (although we haven’t tested it). But perhaps comparing the economic performance of Spain and England (we use the UK as a proxy) over the next …
Other than the European Championship, the key event this week was the second round of the French legislative elections. The left-wing New Popular Front (NFP) and President Macron’s Ensemble group both did better than expected and the right-wing National …
Narrowing in Hungary’s budget deficit may not last Hungary’s government announced a new set of measures this week to increase tax revenues and to avoid the budget deficit slipping below its target this year. The government said that firms that have …
PBOC tweaks policy framework The PBOC expanded its toolkit this week to help strengthen its day-to-day management of interbank rates. In addition to the repo operations it conducts each morning, mostly at 7-day maturities, the bank will also perform …
Korea strike highlights inflexible labour market A trade union representing approximately 30,000 workers at Samsung Electronics this week urged its members to take part in an indefinite strike. The announcement was made on Wednesday, which was supposed …
Full Budget a key test for new government The Finance Ministry confirmed this week that the full Union Budget for FY24/25 will be unveiled on Tuesday, 23 rd July (recall that during election years, an “interim” Budget is held in February). We’ll be …
RBA will be content to play the waiting game Financial markets have increasingly been paring back their interest rate expectations for the RBA. They are now pricing in a roughly 20% chance that the Bank will hike rates by 25bp this year, down sharply from …
Goods inflation set to remain strong Data released this week showed that producer price inflation has jumped from 0.3% in January to 2.9% in June, though the bulk of that increase is due to a rebound in electricity & gas inflation. Producer prices of …
Still elevated wage growth is partly due to earlier large gains in public sector pay, which are unlikely to be repeated. There are tentative signs that private sector wage growth is slowing, and the wider evidence suggests this process should gather pace …
11th July 2024
The economic impact of Saudi’s new pension age New pension directives laid out in Saudi Arabia have raised the retirement age in the Kingdom. The potential boost to the size of the labour force could strengthen GDP growth over the coming decades. The …
Trump now has clear lead Trump favourite to beat whomever Democrats pick Following Joe Biden’s disastrous debate performance, which appears to have hit his polling numbers and gone down badly with big donors, there is clearly now a good chance that he …
5th July 2024
More evidence of softening in the US economy from data releases – notably, the ISM survey data and June’s employment report – weighed on US Treasury yields and left the greenback lower against most major currencies on the week. Otherwise, election-related …
There was little to be encouraged by this week, with labour market conditions continuing to soften, the business surveys weak and the real estate board data pointing to a risk of renewed falls in house prices. All that makes it more likely that the Bank …
Chile’s economy losing momentum Having made a very strong start to the year , the latest activity data suggest that Chile’s economy struggled in Q2. The monthly activity index (Imacec) contracted by 0.4% m/m in May – the third consecutive monthly decline. …
After six weeks of intense discussion about what Labour would do if it won the election (for all our analysis, see here ), we are now there. We set out what Labour’s 174 seat majority means for the economy and the financial markets here and discussed the …
Hawks rule the roost Inflation data out of the region this week as well as comments from central banks strengthen the view in our recent Outlook that interest rates are likely to be hiked again in some places (Russia) and kept on hold for longer than most …
Ruto revisits fiscal plans After being forced to withdraw the 2024/25 Budget, Kenya’s President Ruto outlined new fiscal plans today that will go some way towards easing concerns among investors and the IMF. Protests in Kenya have rumbled on this week. …
The latest polls ahead of Sunday’s second round of French parliamentary elections suggest that the far-right National Rally (RN) will win the most seats but fall well short of an absolute majority. (See Chart 1.) This will make it very difficult to form a …
Indonesia needs reform not tariffs Indonesia has become the latest country in Asia to announce measures to stem the flow of cheap imports from China. It is planning to impose tariffs of up to 200% on a range of products, including footwear, clothing, …
Hurricane Beryl puts oil and gas supply in peril While Hurricane Beryl took a tragic and heavy toll on communities and economies in the Caribbean this week, its impact on fossil fuel production in the Gulf of Mexico looks set to be relatively small. …
Final preparations are reportedly in place for Prime Minister Modi to travel to Moscow early next week to meet his Russian counterpart Vladimir Putin. This will be Modi’s first trip to Russia since the invasion of Ukraine, though the two leaders did meet …
A strong case for an August hold The minutes of the RBA’s June meeting revealed that the Board hasn’t yet shut the door on another rate hike. In our view, the Bank’s tightening bias is not unwarranted. After all, data published this week showed that …
Government spending probably fell last year In its April WEO, the IMF estimated that Japan’s budget deficit widened from 4.2% of GDP in 2022 to 5.7% last year and will rise further to 6.5% this year. By contrast, we expect the deficit to have shrunk to 3% …
Drop in long-term yields has made PBOC uneasy On Monday, the PBOC announced that it would start borrowing Chinese government bonds (CGBs) from primary market dealers (i.e. the major banks). While it didn’t elaborate further, the aim is clearly to shore up …
A facelift for Egypt’s cabinet, but no shift in policy Egypt’s cabinet was shaken up this week but the new faces are highly unlikely to diverge from the economic policy path their predecessors were on, particularly when it comes to the public finances. …
4th July 2024
The US dollar index looks set to end the week broadly unchanged after core PCE came in line with expectations today. Yesterday’s presidential debate in the US also does not seem to have had much impact on the dollar despite the sizable change in election …
28th June 2024
The May CPI data were a step back after the run of soft core price readings in the first quarter. The broader evidence stills seems supportive of a July interest rate cut, but the next CPI release for June, to be released in the run up to that meeting, …
Biden debate woes leave Trump ahead Trump’s conviction vs Biden’s lack of conviction Joe Biden’s faltering debate performance leaves Donald Trump as the narrow favourite to win this November’s presidential election. There isn’t an alternative Democratic …
Failed coup, economy on the ropes The news on Wednesday that armed soldiers had tried to storm Bolivia’s presidential palace in an attempted coup seemed to hark back to the Latin America of the 1970s (as well as a James Bond film of the 2000s). The …
Supply-side reform won’t fix consumer weakness This week, the government published guidelines on creating “new consumption scenarios” with the aim of “coordinating the expansion of domestic demand while deepening supply-side structural reforms”. We’ve …
We’re just two days from the first round of the French legislative election. (All of our election coverage can be found here .) Voting closes on Sunday at 8pm Paris time (7pm BST) and polling organisations should release estimated results shortly …
The Dallas Fed survey of oil and gas firms released this week revealed deep dissatisfaction with the Biden administration. While there was little of note in the closely trailed headline numbers – participants indicate that oil and natural gas production …
How could the French election result impact CEE? The surprise decision by French President Macron to announce early parliamentary elections (with the first round taking place this Sunday) has led to a period of turbulence in European bond markets. The …
It is striking how calm UK financial markets have been ahead of next week’s general election. As we set out in our UK Markets Chart Pack , while investor concern over the result of the French elections has led to a near-30 basis points (bps) rise in …
South Africa: cracks already showing in the GNU Disagreements between the South Africa’s largest party, the ANC, and its main partner in the government of national unity (GNU), the DA, over cabinet posts reinforces our point that the coalition is fragile …
Further economic weakness in Korea Korea’s economy weakened markedly in May. Data published today show that retail sales fell by 0.2% m/m last month, a second consecutive monthly fall. With the labour market cooling and high interest rates weighing on …
The UK offers a microcosm of green fiscal issues The issue of paying for the green transition has been a recurring theme in the run-up to the forthcoming UK election; the watering down of Labour’s flagship climate policy earlier this year, which had …
More to plunge in inward FDI that meets the eye The Q1 2024 Balance of Payments data released this week has refocused attention on the slump in net foreign direct investment (FDI) inflows. In the four quarters to Q1, net FDI inflows dropped to US$26.5bn, …
Yen sliding to multi-decade lows The yen continued its descent this week, climbing above the 160 mark against the dollar that triggered foreign exchange intervention in late-April . It has not been this weak since 1986. The Ministry of Finance this week …
A narrower path The release of hotter-than-expected CPI data this Wednesday sent shockwaves through financial markets. Indeed, investors are now pricing in a nearly 40% chance of 25bp rate hike by year-end, whereas at the start of the week they thought …
Egypt needs to adapt to keep the lights on Daily blackouts in Egypt have returned as gas shortages intensify and, while the government can afford to spend its way out of the issue for now, climate risks require a permanent shift in strategy. Temperatures …
27th June 2024
The Summary of Deliberations from the Bank of Canada’s June meeting reiterated that further interest rate cuts are likely but gave little away about how quickly the Bank will move. With another two CPI releases before the July meeting, our sense is that …
21st June 2024
Bond buying redux PBOC Governor Pan Gongsheng this week again flagged the PBOC’s plans to start buying and selling government bonds and again argued that this wouldn’t constitute QE. (See our earlier discussion of the issue here .) The purpose of the new …
Despite more central bank policy announcements this week, most currencies fluctuated within a tight range and the dollar seems set to end the week broadly flat – boosted a bit by the release of PMI data earlier today. Our sense is that this may remain the …
IMF praises Milei but more to be done The eighth review of Argentina’s $44bn IMF programme, which was published this week, is a whole-hearted endorsement of President Milei’s economic record. It notes that the “program remains firmly on track” and that …
SA: GNU stability will face reform challenges The announcement that a Government of National Unity (GNU) has been formed in South Africa, led by the ANC and DA has triggered a rally in local financial markets. But this may prove to be the easy part; …
