Archive

December 13, 2024
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HEW: Festive Policy Disagreements

  • The seasonal festival of packed macro releases before Christmas has already yielded some stark policy divergence and surprise. The SNB joined the Bank of Canada in cutting by 50bp while Brazil hiked by 100bp. The ECB’s 25bp cut was reassuringly as expected.
  • Pricing for the BoE and Fed has also built firm consensus calls around our view of no change and a 25bp cut, respectively. One of the several other announcements is more likely to shock. Our UK CPI inflation call is relatively high at 2.6% on the data front.

By Philip Rush

December 06, 2024
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HEW: Politics Doesn’t Derail Policy Rate

  • The rebound in US payrolls left a disappointing rise in the unemployment rate and the likelihood of another 25bp rate cut. Upwards revisions to UK employment and implicitly unit labour costs push the BoE the other way, reinforcing our call for it to hold rates.
  • Uncertainty around next week’s ECB decision has narrowed, partly because there hasn’t been a concerted effort to support expectations for 50bp. The data don’t justify it. Other announcements will come from Australia, Canada, Switzerland, Brazil and Peru.

By Philip Rush

November 29, 2024
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HEW: Euro Doves Face Reality

  • Resilient Euro area inflation and activity data (in the ESI) reiterated the need for ECB easing to be careful. Monetary policy divergence is priced far too widely, depressing EURUSD excessively. Schnable’s guidance was consistent with our contrarian pushback.
  • Next week’s calendar is quiet ahead of the usual pre-Christmas concentration. US nonfarm payrolls are the uncontested highlight, where we expect their rebound to be soft enough for the Fed to cut by 25bp in December.

By Philip Rush

November 22, 2024
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HEW: Misaligned Data Focus For FX

  • Euro weakness extended over the past week as markets discounted hawkish price and wage inflation. The market is excessively focused on activity growth rates and the PMIs rather than unemployment and the resulting underlying inflationary pressures.
  • Flash HICP for November may rise less than expected owing to base effects like German package holidays, but that is a temporary blip. Most other data have consistently warned against 50bp. The RBNZ’s likely 50bp cut again is an outlier.

By Philip Rush

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