Too soon to signal the all-clear Data released this week showed that the Australian consumer isn’t on the skids just yet. Indeed, with retail turnover having surged in September, sales values rose by a solid 0.8% q/q in Q3, their strongest quarterly …
3rd November 2023
Threat of yen intervention remains As we had expected, the Bank of Japan retained its 1% cap for 10-year yields at this week’s meeting . However, by downgrading that cap to a “reference” and by stopping its daily fixed-rate operations offering to buy an …
Egypt’s gas troubles after Israel cuts supplies Egyptian officials confirmed this week that imports of gas fell to zero after Israel turned off the taps, which will curtail efforts to restart LNG exports. And with gas being cut to energy-intensive …
2nd November 2023
EU ETS will help Tusk meet his climate goals Climate policy will be a key battleground in the upcoming slew of elections over the next 18 months and the climate stakes were high in Poland ahead of its recent election. Note that coal accounts for more than …
31st October 2023
Despite another week of broadly dollar-positive news, the greenback has continued to drift sideways – suggesting its rally since July is running out of steam. Even though US Q3 GDP came in at nearly 5% annualised growth, while data in Europe continued to …
27th October 2023
The string of central bank meetings across Emerging Europe this week highlighted the unique challenges that policymakers across the region are currently facing, but one common thread in all countries is that inflation risks are persisting and we think …
Food prices risk delaying Africa interest rate cuts Inflation across Africa has been falling back recently, but persistent food price pressures pose a threat to policymaker’s ambitions to start cutting interest rates. The SARB’s Deputy Governor Fundi …
The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
Argentina: it’s not the economy, stupid? Elections in Argentina rarely fail to surprise and Sunday’s vote was no exception. While it was widely expected that the election would go to a run-off between Peronist and current Economy Minister Sergio Massa …
Has the AI productivity boom already begun? New Speaker, old problems The House Republicans finally managed to elect a new Speaker this week, with the caucus eventually rallying around Mike Johnson, who up until this week could hardly have been described …
This week’s data releases provide further evidence that the euro-zone is probably in a mild recession. The euro-zone Composite PMI declined to a level consistent with GDP contracting by 0.2% q/q (see here ) and although the Ifo Business Climate Indicator …
Giving with one hand, taking with the other Earlier this week, China’s legislature increased the government’s planned annual budget deficit from 3.0% of GDP to 3.8%. This was the first mid-year revision since 2008 and only the fifth in the PRC’s history. …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) In the last few months there has been more concern over the accuracy of key economic data. The recent …
Strengthening ties with the Quad India’s government is pushing ahead with efforts to make India a key link in global manufacturing supply chains. The Cabinet this week approved a Memorandum of Cooperation with Japan on a semiconductor supply chain …
Taiwan’s growth moderated in Q3 Activity data published this week for Taiwan paint a mixed picture of the economy. Consumer demand is coming off the boil but exports have rebounded. More details will be available in the Q3 GDP figures due next week. …
BoJ probably won’t tweak Yield Curve Control Media reports suggest that the Bank of Japan may tweak Yield Curve Control yet again at next week’s Board meeting. That’s certainly possible: 10-year JGB yields have risen sharply since the launch of the new …
RBA has more work to do Most of the data published this week highlight the imperative for the RBA tighten policy. To start with, Wednesday’s CPI release showed that Australia’s inflation problem is far from over. In fact, there are two pieces of …
Saudi real estate market stuck in a gully The mortgage market in Saudi Arabia has struggled this year as interest rates have surged, which appears to be adding to the trend of the past few years of suppressed land and house prices. Data published over the …
26th October 2023
Amid the surge in Treasury yields and the fall in global equities, the US dollar seems set (somewhat surprisingly) to end the week broadly unchanged. In our view, the key reason the dollar has failed to rally on the back of what looks in many ways like a …
20th October 2023
The apparent strength of third-quarter GDP growth won’t convince the Fed to resume hiking its policy rate, particularly with the ongoing surge in long-term bond yields presenting a growing threat to the economy. Q3 GDP growth strong Despite the recent hit …
Fiscal support coming in Israel, rates to stay on hold There remains significant uncertainty around how the Israel-Hamas war will evolve, but developments this week confirm that fiscal policy will be loosened as policymakers provide support to the …
The renewed weakness in the housing market and likelihood that mortgage interest cost inflation will soon ease are reasons to expect core inflation to trend lower in the coming months. Next week, the Bank of Canada’s new forecasts may show that it thinks …
Africa’s debt challenges look set to continue Sovereign debt restructuring discussions between Zambia and Ghana and their bilateral creditors have been encouraging. But the next challenge is talks with private lender, which may prove lengthy. Zambia …
Argentina’s election also a vote on its China stance Argentines head to the polls on Sunday in the first round of what’s arguably one of the most important presidential elections in the country’s recent history. You can find a note previewing Sunday’s …
Government is gearing towards elections Several policy measures announced by India’s government this week are likely geared towards shoring up popular support ahead of next month’s state elections and next year’s general election. The cabinet approved …
Continued currency weakness Asian currencies have continued to weaken against the US dollar over the past week on the back of a further rise in US bond yields and growing concerns about the worsening situation in the Middle East. Most are now down by 1-6% …
Data released this week reinforce the case for the ECB to keep rates on hold at its meeting next week . There was more evidence of economic weakness in the construction activity figures, which showed that output fell by 1.1% m/m in August and is likely …
Q3 acceleration may be statistical mirage The GDP figures published earlier this week were stronger than most had expected . They showed that growth accelerated from 0.5% q/q in Q2 to 1.3% in Q3, an annualised rate of 5.3%. But the official q/q …
We'll be discussing the implications of the end of the ultra-low interest rates era and the rise in R* in an online Drop-In at 12:30 GMT on Tuesday 31st October. (Register here .) The conflict in the Middle East continues to dominate the news and from an …
One more hike for the road Labour market data published yesterday showed that Australia's unemployment rate fell anew, from 3.7% to 3.6% in September, due largely to a pullback in workforce participation. As we explained in this Update , it increasingly …
Export values hit record high in September Export volumes bounced back by 4.6% m/m in September following the 6.1% m/m plunge in August. However, that left them a touch below the record high reached in July and means that export volumes have largely tread …
Could Egypt’s financing fears be set to ease? Reports over the past week have suggested that Egypt could be poised to leverage its position in the region to receive financial support in exchange for helping to de-escalate the Israel-Hamas conflict . …
19th October 2023
After another topsy-turvy week in financial markets, the dollar appears to be back on the front foot. In part, that probably reflects Thursday’s US CPI print, which came in a touch higher than expected. That led to a rebound in US Treasury yields, which …
13th October 2023
Ghana rate cuts more likely as inflation falls Annual inflation in Ghana eased again to 38.1% y/y over September which gives the central bank some leeway to consider cutting rates at its next meeting. The drop in inflation last month was down from 40.1% …
The fall in house prices in September shows just how quickly conditions in the housing market have shifted and the plunge in the sales-to-new listing ratio points to more weakness to come. That is another reason to expect the Bank of Canada to cut …
Ecuador’s presidential run off Ecuadorians head to the polls on Sunday in a run-off vote for the country’s next president that pits left-wing candidate Luisa González against centre-right businessman Daniel Noboa. Whoever wins will serve the remainder of …
We set out our initial thoughts on the potential implications of the conflict between Israel and Hamas earlier this week here . It’s hard to know how things will develop from here, but we think that there are four key points worth making at this stage. …
There appears to be growing support at the Fed for the idea that the recent sell-off in long-term Treasuries reduces the need for further policy rate hikes, but the more persuasive reason for the Fed to pause is that inflation is continuing to ease …
Almost as fast as gilt yields rose (see here ) they have subsided. After surging from 4.68% on 2 nd October to a 21-year high of 5.11% last Friday, the 30-year gilt yield dropped to 4.72% on Thursday, although it has since ticked up to 4.85% on the back …
Online briefing about the health of China's economy We'll be online on Wednesday shortly after the release of the September activity and spending data and Q3 GDP. Register here to join us. US export controls about to bite harder The US government is on …
The Hamas-Israeli conflict has so far had relatively little impact on oil prices but has pushed up European natural gas prices by nearly 30% this week, to €53 per MWh at the time of writing. There has been a small direct impact on the supply of gas as …
Investment growth may have slowed in Q3 Data released this week showed that growth in industrial output accelerated from 6.0% y/y in July to 10.3% y/y in August, the fastest in more than a year. And in m/m seasonally adjusted terms, output rose from 0.2% …
Economy probably won’t overheat The IMF this week revised up its forecast for Japan’s 2023 GDP growth from 1.4% to 2.0%, broadly matching our own. With activity rising much faster than its sustainable rate, any remaining spare capacity in the economy has …
What to expect from a change of guard The headlines this week have largely been dominated by the last leg of campaigning ahead of New Zealand’s general election on October 14 th . The latest opinion polling suggests that five parties are likely to cross …
The outbreak of conflict between Hamas and Israel this week has not yet spilled over into the wider region. But the situation is in flux and, if Iran is pulled into direct conflict, the ramifications for the region would be a lot larger. Since we …
12th October 2023
Remarkably, the dollar may be about the lose its record streak of weekly gains despite a strong US payrolls report . (See Chart 1.) While the initial reaction to today’s data was another jump in the greenback, it has since given back that gain, and those …
6th October 2023
The further rise in home listings in September and likelihood that mortgage rates will increase amid the global bond market sell-off suggests that house prices will soon fall again. While employment rose strongly in September, the fall in hours worked …
Nigeria: labour strike averted at a cost Nigeria avoided a potentially disruptive workers’ strike this week after the government made a late offer of short term relief measures, but these risk adding to fiscal and inflationary pressures. Unions had called …
Feeling the spillovers… Latin America has been far from immune from spillovers from the sell-off in global bond markets. (For more on the impact on the global economy, see here .) Like in DMs, local currency bond yields in the region have risen sharply, …
Rising long rates a fiscal rather than monetary problem Surge in long yields not all due to higher for longer The conventional wisdom is that the recent surge in Treasury yields is a reaction to the Fed’s “higher for longer” message. But that surge has …
