Recent revisions to our macroeconomic and markets forecasts are more positive for industrial metals than oil, and they support our slightly bearish outlook for the price of gold . The starting point for our commodity price analysis is our view on the …
25th June 2020
The ECB has used the minutes of this month’s policy meeting to try to defuse the dispute in Germany over the legality of its asset purchase programmes. Helped by the Bundesbank, this should be enough to smooth things over for now. But future court cases …
Turkey’s central bank unexpectedly left interest rates on hold today and it’s difficult to see how economic conditions will change in such a way over the coming months to justify renewed easing. We now expect rates to be left on hold over the rest of this …
Transactions in April and May have surprised on the upside. What’s more, there are signs that new demand in June has been stronger than expected. Of course, the economic damage from lockdown suggests that sales won’t sustain their pre-virus level anytime …
The central bank in the Philippines (BSP) today cut its policy rate by a larger-than-expected 50bps, to 2.25%, and with economic activity unlikely to recover fully anytime soon, we expect further easing. The timing of today’s decision was a surprise given …
We estimate that the revenues of firms in most sectors were still too low in mid-June to generate profits. If those conditions persisted, nearly one-third of firms would run out of cash by the end of Q3. However, revenue should recover over coming months …
While the Greek economy is set to slump this year, it is becoming increasingly clear that the drop in activity will be much less severe than we previously anticipated. We now think that the Greek economy will shrink by “only” 8% or so this year. At the …
We suspect that the real yields of US Treasury Inflation Protected Securities (TIPS) will fall a bit further, fuelling renewed gains in risky assets and underpinning gold despite a reduction in safe-haven demand. To re-cap, the real yields of TIPS have …
24th June 2020
South Africa’s emergency budget highlighted that the dire state of the public finances is limiting the scope for fiscal support this year and attention is already focused on dealing with the legacy of higher debt. Austerity will be the first port of call, …
Reports that the US is considering rescinding Canada’s exemption to its 10% tariff on aluminium this week are unlikely to have much of an impact on the metal’s price . But such moves have the potential to worsen the oversupply in the global market, acting …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% today despite the dire outlook for the economy suggests that further cuts to the policy rate are unlikely. Instead, the emphasis over the coming months is likely to be on what …
Euro-zone countries seeking to avoid a surge in unemployment have sought to replicate Germany’s short-time working scheme that served it well during the global financial crisis. Germany’s experience suggests that while euro-zone unemployment will probably …
The Reserve Bank of New Zealand (RBNZ) sounded fairly balanced when it left policy settings unchanged today. But we still think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated …
The generosity of CERB, signs the government will continue payments for as long as needed, and the fact that household savings have already risen sharply all suggest the initial stages of the rebound in consumer spending will be stronger than we thought. …
23rd June 2020
Hungary’s central bank (MNB) unexpectedly cut its base rate from 0.90% to 0.75% at today’s monetary policy meeting, and we now think another cut is likely in the second half of this year. With the economic recovery likely to fall short of the central …
The latest batch of DM flash PMIs generally came out below 50, which might suggest that output fell a bit further in June compared to May. But we should not read too much into the precise level of the PMIs. The point is that they have come back a long way …
The Fed’s balance sheet has started to shrink again, as the emergency liquidity measures deployed at the height of the crisis have started to wind down, the pace of Treasury purchases has slowed dramatically and the rollout of the new 13( 3 ) lending …
Gasoline demand in the US is recovering from the coronavirus-related slump. However, we think that it will take some time before consumption fully returns to its pre-virus level . By way of background, implied US gasoline demand was around 9m bpd in 2019. …
22nd June 2020
The increase in coronavirus cases in Germany is a reminder that the virus has not been eradicated and suggests that local restrictions may be re-imposed periodically in the coming months. But for now, the increase seems too small and localised to pose a …
If the behaviour of Samuel Pepys after the Great Plague of 1665/66 is anything to go by, then people will be willing to return to offices, shops, pubs and theatres surprisingly quickly once the coronavirus crisis subsides. So as long as the virus is …
Recent developments have strengthened the ruling BJP’s hand in the Rajya Sabha (the upper house of parliament). This should help to ease the passage of economic reforms, provided that the BJP has the appetite to pursue them. Efforts over the past month to …
Consumer spending is bouncing back more strongly than we had anticipated. However, that partly reflects pent-up demand and the strong support from government initiatives. Employment income has slumped and we only expect spending to return to pre-virus …
Commercial banks left the Loan Prime Rate (LPR) on hold today. We may see a cut or two next quarter but most signs suggest that the bulk of monetary easing this cycle has already taken place. The one-year rate was unchanged at 3.85% (the Bloomberg …
If we are right that commodity prices will make up more ground as economies continue to reopen, the rally in commodity currencies may have further to go. Australia, Canada, New Zealand and Norway are heavily reliant on exports of commodities (see Chart …
19th June 2020
We have turned more positive on the outlook for the price of tin. China’s demand is coming back strongly after a virus-related slump and, in the more medium-term, tin will benefit from its heavy use in new technologies. At the same time, supply is …
The economic fallout from the coronavirus crisis is likely to push bad loans in South Africa’s banking sector to levels that trigger a round of recapitalisations, which could further increase the burden on the public finances and reinforce fears about the …
While there has been a decline in the number of pubs, revenues had been rising in recent years. This has led to some big deals in the sector and falling prime yields. Nevertheless, when pubs re-open, social distancing and reduced tourism are likely to …
Russia’s central bank (CBR) didn’t disappoint at today’s meeting, cutting the key policy rate by 100bp to a new post-Soviet low of 4.50%. With disinflationary forces proving stronger than expected and financial markets stabilising, the accompanying …
Our new coal switching price indicator (CSPI) shows that, in the UK and the Netherlands, power generation using natural gas is much more cost-effective than coal. While this has been true for a while, it has been entrenched by the recent virus-related …
18th June 2020
A drop in house price expectations has helped boost demand from some looking to pick up a bargain, but it has also encouraged sellers to delay listing until the price outlook improves. Indeed, selling sentiment has seen a larger drop compared to buying …
We think that the recovery in equity prices has further to run, and now expect an even swifter economic rebound in China. Accordingly, we have raised our base metal price forecasts, which now show a return to their pre-virus levels as early as next year …
If the recent increase in US retail sales is anything to go by, consumption in the euro-zone will have recovered sharply now that the lockdown restrictions have been eased. Indeed, evidence from French and Spanish bank card transactions data suggest that …
Peru’s economy appears to be suffering one of the largest economic hits of any country from the coronavirus, which is likely to spur further policy easing. With short-term interest rates essentially at zero, further monetary loosening would initially …
We think today’s Monetary Policy Committee (MPC) decision to keep rates on hold at +0.10% and increase Quantitative Easing (QE) by £100bn is unlikely to be the last act of policy loosening. And while we wouldn’t rule out the Bank of England cutting …
The unexpected strength of the bounce-back in retail sales in May could mean that we are under-estimating the potential for economic activity to return to pre-pandemic levels soon. Nevertheless, capacity in some sectors, like eat-in dining, will remain …
Taiwan’s central bank (CBC) kept its policy rate on hold today at 1.125%, but given the poor outlook for the economy, we think it will cut again soon. Today’s decision to keep rates at 1.125% was unanimous. The decision was correctly predicted by 15 out …
Data published today show huge demand for the ECB’s targeted lending to commercial banks. So far, these operations and government loan guarantees have been successful in raising bank lending to the private sector, and there is scope for the ECB to make …
Bank Indonesia (BI) cut interest rates today for the first time in three months, but the modest 25bp cut suggests that it remains worried about the outlook for the rupiah. Given the bleak growth outlook we expect further gradual easing over the coming …
This morning’s decisions by the SNB and the Norges Bank to leave interest rates on hold at -0.75% and zero respectively were never really in doubt. Both banks are set to leave policy unchanged throughout our forecast horizon and, in the case of the SNB, …
The statement from yesterday’s Brazilian central bank meeting poured cold water on expectations in the market that the Selic rate would be cut further from its current level of 2.25% to as low as 1.00-1.50%. It seems that policymakers will consider only …
The rental market data have been surprisingly resilient. But informal rent cuts may be happening under the radar, while government support has delayed the crunch point for households. As a result, we have pushed back our expected fall in rents to the end …
Other forecasters were slow to appreciate the depth of the recession. Since then, the consensus GDP forecast has been revised down close to our own. But we think other forecasters are still underestimating how weak inflation will be, and how much further …
Banking sectors across the Middle East and North Africa are generally well placed to weather the current economic downturn but there are pockets of vulnerability, particularly in Qatar and parts of North Africa. And there is a growing risk of a wave of …
17th June 2020
A lot could still change over the next five months but, as things stand, Joe Biden appears to be the favourite to win November’s presidential election. Biden’s policies are more moderate than some of his earlier Democratic rivals’ and we would expect his …
The latest data highlighted a diverging trend between the two main measures of unemployment. Neither measure is perfect, but at least the claimant count is timelier than the ILO measure. Until the ILO measure catches up, we are putting more weight on the …
The rise in new infections in a handful of states across the South and West is nothing like the national surge we saw in late-March and early April that triggered widespread lockdowns . (See Chart 1.) It does illustrate that the background risk of …
The sizes and sources of second waves of COVID-19 are likely to be key factors in determining how much ground, if any, equities cede to government bonds in coming months. While our forecasts allow for new small, localised outbreaks in advanced economies, …
Worsening employment prospects for Indian migrants in the Gulf and the US mean that remittance inflows are likely to drop even as lockdowns are eased. While this won’t have severe ramifications for the balance of payments position, it will weigh on …
The decision by Chile’s central bank to leave its policy interest rate unchanged at 0.50% was accompanied by a statement which appeared to unveil a QE programme. The finer details will be fleshed out in the coming days but, along with a recently announced …
