Archive

November 26, 2024
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Wrestling Euro Bears Before Christmas

  • The Euro’s trend weakness reflects rate differentials that are already stretched, with ECB cut pricing at the extremes erroneously priced for the Fed two months ago.
  • Labour market data matter, and not just to the Fed. Unemployment trends are even more hawkish in the Euro area, and the ECB should clarify the policy relevance of this.
  • Seasonality also supports a fading of the fundamental consensus story. EURUSD hasn’t fallen into yearend since 2016, and crowded positioning could compound the reversal.

By Philip Rush

November 25, 2024
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The US And The ‘Axis of Upheaval’

  • How Donald Trump goes about trying to fulfil his commitment to end the Russia/Ukraine war stands to have a direct impact on rising tensions on the Korean peninsula and in the Taiwan Strait.

By Alastair Newton

November 21, 2024
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EA Wages Are Too Inflationary For 50bp

  • Upwards revisions to Euro area labour costs and a jump in negotiated wage settlements extend cost growth inconsistent with a sustainable return to the 2% inflation target.
  • The ECB hopes this will subside swiftly in 2025, with productivity growth and squeezed profit margins helping contain inflation. But these hopes seem set to be disappointed.
  • Persistent wage pressures should prevent a 50bp rate cut in December and limit further cuts. Less dovish fundamentals feed bullish Euro seasonality, magnified by positioning.

By Philip Rush

November 20, 2024
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UK Inflation Flies Cuts To 2025

  • A surprising airfare rebound extended CPI inflation’s energised rise to 2.3%. Its higher weighting in core and services measures compounded the upside surprise there.
  • Underlying inflation also strengthened on other measures, like the median, and looks inconsistent with a sustainable return to the inflation target.
  • We still expect inflation to trend above the target in 2025 on excessive unit labour cost pressures. The BoE can remain gradual in its easing cycle, skipping a cut in December.

By Philip Rush

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