Heteronomics Archive

February 14, 2025

HEW: Hawkish Canaries and Sick Doves

Resurgent US inflation and UK GDP growth sicken dovish arguments, even if the turn is exaggerated by residual seasonality in H1. We now see the Fed’s next move as a hike. Uruguay joined Brazil as another hawkish canary by hiking, while BSP didn’t cut.
It’s the RBA and RBNZ’s turn next week, where cuts are expected, but they are lagging behind the global policy cycle, not leading it. UK inflation, unemployment and wage data will be the highlights for us, along with FOMC minutes and flash PMIs.
Note: Smartkarma is now the sole distributor of our research, so clients will only receive all other research from Smartkarma (queries to transition@smartkarma.com).

By Philip Rush

February 07, 2025

New neutral estimates for the UK and Euro area suggest policy is less tight, if at all, urging caution. The BoE unsurprisingly cut again but with a shockingly dovish dissent for 50bp. A strong US labour market and EA inflation sustain cyclical hawkish pressure.
Next week’s thin European data calendar leaves UK GDP data as a focal point despite it suffering residual seasonality. US inflation data are more globally relevant, though unlikely to impact monetary policy decisions from the Philippines or Peru.
Note: Smartkarma is now the sole distributor of our research, so clients should log in now to ensure smooth ongoing access (send queries to transition@smartkarma.com).

By Philip Rush

January 31, 2025

AI news shocked market pricing at the start of the week, but policy decisions proceeded as planned. The ECB, Riksbank and BoC cut by 25bp, the Fed and Chile skipped a step in this cycle while Brazil jumped up 1pp again as it hurries to unwind premature stimulus.
The BoE dominates next week’s policy calendar with its likely 25bp cut after skipping in December. We expect two hawkish dissents. Sticky flash Euro area inflation and resilient US payrolls are the most critical data releases topping and tailing the week.
Note: Smartkarma is now the sole distributor of our research, so clients should log in now to ensure smooth ongoing access (send queries to transition@smartkarma.com).

By Philip Rush

January 24, 2025

The chasm between the US and European PMIs compressed, removing this justification for the massive Fed-ECB policy divergence in the price. Ironically, their policies are set to start diverging next week with the ECB cutting while the Fed holds rates.
The BOJ hiked while the Norges Bank approached its first cut in March. Meanwhile, UK pay awkwardly surged, but rising unemployment will help justify a cut on 6 February. Sweden, Canada, Chile, Brazil, and Colombia will also announce policy before then.
Note: Smartkarma will become the sole distributor of our research in February, so clients should prepare their access now (send queries to transition@smartkarma.com).