Archive

November 28, 2024
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Korea: 25bp Rate Cut To 3.0% (Consensus 3.25%) in Nov-24

  • The Bank of Korea reduced its base rate by 25bp to 3.00%, defying consensus expectations, citing stabilised inflation and increased downside risks to growth.
  • Weaker export performance, subdued domestic demand recovery, and heightened global uncertainties, including exchange rate volatility and US monetary policy changes, are pivotal to future rate decisions.
  • Future policy will carefully balance growth support with financial stability, focusing on managing inflation, household debt, and exchange rate fluctuations amid ongoing uncertainties.

November 27, 2024
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RBNZ: 50bp Rate Cut To 4.25% (Consensus 4.25%) in Nov-24

  • The RBNZ lowered the OCR by 50 basis points to 4.25%, as anticipated, citing confidence in inflation converging towards the 2% midpoint of its target range and subdued economic activity.
  • Domestic demand remains weak, with excess capacity and soft labour market conditions expected to persist through 2025, providing scope for additional monetary easing early next year.
  • Geopolitical risks and global economic uncertainty may lead to medium-term inflation volatility, but the current policy framework positions the central bank well to address potential shocks.

November 26, 2024
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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 21, 2024
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EA Wages Are Too Inflationary For 50bp

  • Upwards revisions to Euro area labour costs and a jump in negotiated wage settlements extend cost growth inconsistent with a sustainable return to the 2% inflation target.
  • The ECB hopes this will subside swiftly in 2025, with productivity growth and squeezed profit margins helping contain inflation. But these hopes seem set to be disappointed.
  • Persistent wage pressures should prevent a 50bp rate cut in December and limit further cuts. Less dovish fundamentals feed bullish Euro seasonality, magnified by positioning.

By Philip Rush