Last week was dominated by developments out of the US and UK, not just because of monetary policy decisions, but also the unexpected announcement of a US-UK trade deal. Fed’s hold and BoE’s cut were were largely overshadowed by the surprise trade breakthrough. Importantly, the structure of the agreement offered valuable insights into the US…
Summary United States: Risks Have Risen (but Haven’t Materialized Yet) The trade deficit blew a hole in Q1 productivity growth, and tariffs are anecdotally increasing price pressures in the services sector. But beyond temporary trade-related distortions, tariffs have yet to meaningfully impact the economic data. We anticipate that tariffs will be negotiated down from current…
Markets The Bank of England stuck to its quarterly cutting pace in place since August of last year. They lowered the key policy rate by 25 bps to 4.25% in a 3-way vote. Five out of nine members supported the decision with two in favour of a larger, 50 bps, rate cut and two in…
The Pound Sterling underperforms its peers as the preliminary UK PMI unexpectedly contracted in April. Trump is confident of closing bilateral deals with various nations soon. Investors await the preliminary US PMI data for April. The Pound Sterling (GBP) weakens against most of its peers on Wednesday after the release of poor preliminary S&P Global/CIPS…
Summary United States: February Bounce More Likely a Head Fake Retail sales, industrial production, existing home sales and housing starts all jumped in February, rebounding from the declines posted the month prior. On closer examination, however, the underlying data point to economic growth hitting a soft patch. Next week: New Home Sales (Tue.), Durable Goods…
Markets European markets took a different, more pessimistic view on yesterday’s Fed policy meeting compared to the US. They appear to have more attention to the (stagflationary) risks in the new forecasts instead of Powell’s reassuring message. European stocks dropped more than 1% with Wall Street suffering from spillover effects. But contrasting with the previous…
We expect the Bank of England (BoE) to keep the Bank Rate unchanged at 4.50% on Thursday 20 March in line with consensus and market pricing. Data has been mixed and amid elevated uncertainty, this warrants a continued signalling of only a gradual approach to monetary policy easing. We expect the reaction in EUR/GBP to…
The British pound continues to have an uneventful week. In the European session, GBP/USD is trading at 1.2595, down 0.13% on the day. UK inflation hits 3% in January Consumer inflation in the UK rose to 3% y/y in January, a sharp rise from the 2.5% gain in December and higher than the market estimate…
Summary After experiencing solid growth during the first half of last year, the U.K. economy essentially came to a standstill in the second half of 2024, including just a 0.1% quarter-over-quarter gain in Q4 GDP. Subdued sentiment suggests a continued slow pace of economic growth in the near term, and we would also argue fiscal…
Dollar faced significant volatility last week as shifting trade policy signals from the White House left investors scrambling for clarity. Initially, tariffs on Canadian and Mexican imports were imposed, only to be quickly suspended for 30 days following new agreements on border security and fentanyl control. Now, the focus turns to “reciprocal tariffs,” a move…