Archive

May 14, 2025
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USD Bears Broke The Bandwagon

  • Investors ask whether threats to the USD’s reserve currency status are resting or dead, whereas we wonder if it was ever alive. Commentators routinely overextend narratives.
  • The USD share of allocated FX reserves is already trending downward. A potential acceleration from smaller deficits and higher tariffs would partly offset the impact.
  • Fuller hedging of USD asset holdings abroad may have already reached its limit. We still see more attractive mispricing elsewhere, such as excessively dovish rate curves.

By Philip Rush

May 13, 2025
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UK: Tax Not Breaking Cost Pressures

  • Underlying unemployment rates are broadly stable, despite higher headline and underemployment rates, where the latter lacks relevance to disinflationary pressures.
  • Activity levels are expanding healthily and redundancies fell in April, suggesting no substantial jobs impact from the NICs rise, contrary to dovish fears.
  • Wage growth should slow to accommodate some of the tax cost increase, but there isn’t much evidence yet. Total pay growth is little changed in recent years.

By Philip Rush

May 01, 2025
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UK: Tax Hikes Disrupt Housing Market

  • Domestic tax hikes are more substantial than US tariffs in April, so the impact should not be forgotten, even if the UK government wants to blame any damage on Trump.
  • Frontrunning April’s stamp duty increases stoked transactions and lending, and may take at least a few months to recover afterwards. Resilient approvals are reassuring.
  • Higher transaction costs probably won’t break expectations into a downwards spiral, but are now widely cited as a major hurdle, contributing to slower UK activity growth.

By Philip Rush

April 30, 2025
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EA: GDP Stimulated Faster Than Supply

  • Activity growth in Q1 shouldn’t be dismissed as it helps signal the economy’s momentum and effective monetary conditions that trade shocks will fall on top of in the euro area.
  • GDP growth exceeded expectations again by increasing to 0.35% q-o-q. Productivity’s poor post-pandemic performance helps GDP drive the ongoing fall in unemployment.
  • Supply’s trend seems to have softened despite demand’s improving, raising excesses and the risk that ECB monetary policy was already stimulative before the trade shock.

By Philip Rush

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