Archive

November 26, 2024
2024-11-26 Euro_head.png

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 12, 2024
2024-11-12 UK_head.png

UK Teaches Youth Unemployment

  • UK unemployment jumped by 0.3pp to 4.3% in September as students struggled to find work in the new academic year, extending a trend since the election was called.
  • Evidence for this move is from a statistical sore spot with few respondents. Underlying changes only softened slightly to signal small trend increases. Levels remain healthy.
  • Pay growth rebounded surprisingly far and will increase further when bumper public sector deals take effect. Students won’t slow this as their pay is broadly set by policy.

By Philip Rush

November 06, 2024
2024-11-06 US_head.png

Risk Clears On The Western Front

  • Donald Trump won the US election with scope to implement his plans as the Republican Party also took the Senate and is likely to retain the House in a clean sweep.
  • The nonlinear geopolitical risk of an inconclusive political void being exploited has safely dissipated, clearing the way for renewed equity market strength.
  • Structural US economic outperformance of Europe will likely increase amid renewed deregulation, but fiscal deficits should stoke the term premium and curtail rate cuts.

By Philip Rush

October 24, 2024
2024-10-24 PMI_head.png

PMI Shows Structural Over Cyclical Story

  • Flash PMIs for October extended the US outperformance to the UK and Euro area with more opposing moves and surprises. Such resilience sits uneasily with rate cuts.
  • Modest rises in US unemployment suggest monetary policy is nearly neutral, but slight falls in Europe are more consistent with loose than excessively tight conditions.
  • Slowing European supply growth is not disinflationary unless demand is even worse. Europe’s labour market resilience should not be discounted so much relative to the US.

By Philip Rush

By country