Archive

March 17, 2025
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EU: Defence Spending

  • The EU faces two imminent deadlines in determining defence spending. On 20 March, the Commission presents its full loans-for-arms proposal to a divided European Council, and on 24 March, the ‘old’ Bundestag will step down, after which easing Germany’s debt brake becomes even harder.

By Alastair Newton

March 13, 2025
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Heavy Metal Trade War

  • Volatility in US trade policy continues a cleaner tightening trend against China in the well-established tech war. Tariffs are a tool, but so are export restrictions.
  • China expanded restrictions on rare earth mineral exports to license critical materials like tungsten. The West lacks friendly suppliers and struggles to develop alternatives.
  • European defence investments may flounder. Japan and Korea may also suffer, so they can indirectly frustrate the US. Aggressive trade policy hits volumes as well as prices.

By Philip Rush

March 10, 2025
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Euro Sentiment Flies Like Icarus

  • Resilient data led to hawkish monetary policy guidance, consistent with our bullish Euro view. Fiscal announcements have super-charged that move, so we dropped our call.
  • European Commission statements are an upper bound on loosening while Germany’s plans are not yet legislated. Extra defence spending on imports will also damp the Euro.
  • Sentiment has flown too high. US trade policy seems set to hit Europe soon, potentially melting sentiment and sending the Euro plummeting back to Earth like Icarus.

By Philip Rush

March 06, 2025
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ECB: Meaningfully Less Restrictive

  • The ECB’s sixth 25bp deposit rate cut to 2.5% was unsurprising, and its characterisation of policy as meaningfully less restrictive leaned towards our relatively hawkish view.
  • Policy rates may already be close to neutral. Looser fiscal policy plans also pressure monetary policy to follow a tighter path than would otherwise have been necessary.
  • We still expect the ECB to hold rates in April, which is no longer a controversial call. A final 25bp ECB cut in June remains in our outlook (BoE cuts in May and Fed on hold).

By Philip Rush

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