Archive

June 09, 2025
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Trade Avoidance Easing Shocks

  • China’s crashing exports to the US partly reflect avoidance measures, including rerouting through other countries and marking down import prices to subsidiaries.
  • Exports to the EU and UK are only trending slightly higher, making little difference to disinflation. ASEAN countries, and especially Vietnam, are seeing trade surge again.
  • The US may clamp down on avoidance measures that have eased the shock so far. It could make a painful example of one to encourage concessions from all trade partners.

By Philip Rush

June 06, 2025
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HEW: Poorly Positioned Doves

  • The ECB was even more hesitant to signal cuts than we expected, with the level after the unsurprising cut now deemed well-positioned. Cuts will require downside news.
  • Disinflationary surprises across the Euro area in the May flash releases are already embedded in that assessment. Doves are poorly positioned for this reaction function.
  • US inflation data may be the most crucial global release next week, although the signal may not be clear. Statistical issues affect the UK labour market and GDP data.

By Philip Rush

June 05, 2025
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ECB: Policy Well-Positioned Already

  • The ECB’s 25bp cut took rates to a level that it considers well-positioned for the current outlook, thereby removing the presumption in favour of further easing.
  • Lower headline inflation forecasts are already embedded in that judgement, with the temporary role of energy and FX recognised. Downside risks preserve some dovish bias.
  • We still see this rate cut as the final one amid tight labour markets that preserve excessive underlying inflationary pressure. Market pricing should be less dovish.

By Philip Rush

June 04, 2025
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US vs EU: Mutually Assured Destruction?

  • The consensus over Section 899 is that it is about leverage and deterrence, and that it is unlikely ever to be fully deployed, given the damage it would do to the US itself. However, what if the EU, in particular, calls Mr Trump’s bluff and/or it is intended even in part as a revenue-raising measure?

By Alastair Newton

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