Perspectives Pictet

We see the ECB making its QE programme progressively more flexible in response to the shortage of eligible bonds Press reports suggest the European Central Bank (ECB) may be weighing up the idea of loosening its QE rules via a deviation from the capital keys which the central bank uses as a basis for balancing its sovereign bonds purchases across euro area member states.The ECB faces a problem, because a Brexit-led flight-to-safety has reduced the universe of core bonds eligible for...

Following the Brexit referendum, prolonged GBP weakness is likely, while the Swiss franc faces renewed upward pressure Greater uncertainties, such as those caused by the Brexit vote, generally favour lower risk appetite. As a result, safe-haven currencies like the US dollar and currencies with positive current accounts and/or positive net international investment positions (JPY and CHF) are expected to outperform. Between the Bank of Japan and the Swiss National Bank, the latter would seem...

Healthy consumer spending figures lead us to believe that US GDP growth might actually be better than we have been forecasting. Inflation pressures look likely to remain modest for a while Real consumer spending in the US rose by a healthy 0.3% month over month in May, according to the Bureau of Economic Analysis (BEA) on 29 June, beating consensus expectations. Moreover April’s number was revised up, so that between Q1 and April-May, US personal consumption grew by an astonishing 4.8%...

Brexit puts upward pressure on US financial conditions, but growth forecast remains unchanged Read full report hereSo far, the UK vote to leave the UE has only led to a modest tightening in US monetary and financial conditions. Nevertheless, Brexit will probably mean lasting upward pressure on the US dollar and on US financial conditions.The UK absorbs less than 4% of US exports and the total of EU countries around 18%. This corresponds to 0.5%, respectively 2.3% of US GDP. Even a recession...

The re-run of the Spanish general elections produced a fragmented parliament again, but a minority government could take shape. In Europe, Greece, Portugal and Italy remain political flash points. Read full report hereAfter an inconclusive vote in the December general election and the subsequent failure of Spain’s political parties to reach an agreement to form a government, Spaniards returned to the polls on 26 June. Once again, the results produced a fragmented parliament, but traditional...

QE guidance, front-loading of asset purchases, and augmented TLTROs in the offing Read full report hereThere is considerable uncertainty around the modalities and consequences of Brexit, but one thing looks certain: central banks will be under great pressure to act again as circuit-breakers.The Bank of England (BoE) has issued a statement saying that it “will not hesitate to take additional measures”, including injecting “more than GBP250bn” of additional liquidity into the market. Rate...

By referendum, UK voters have decided the UK should leave the EU. This result leads us to alter our economic and market forecasts Looking at the referendum result in terms of macroeconomics, financial markets and politics, our views are as follows:Macroeconomics. The vote for Brexit is, we believe, likely to reinforce a recent loss of momentum in parts of the UK economy. We believe the result of the referendum will hit consumer and business confidence, at least in the short term. Business...

Macroview We maintain our above-consensus forecast of 1.8% for euro area GDP growth this year Read full report hereThe euro area composite ‘flash’ purchasing managers’ index (PMI) compiled by Markit fell marginally, from 53.1 in May to 52.8 in June, slightly below consensus expectations. The sector breakdown showed that the drop was driven by a fall in the services sectors while the manufacturing PMI index rose from 51.5 to 52.6 in June, beating consensus expectations and reaching a...

Macroview No change in base rates, but currency intervention on the cards as franc continues to strengthen Read full report hereThe Swiss National Bank (SNB) decided to leave its monetary policy unchanged at its quarterly meeting on 16 June. The main messages were unchanged from its March meeting. The target range for the three-month Libor was kept between -1.25% and -0.25%; the interest rate on sight deposits with the SNB was maintained at a record low of -0.75% and the SNB reiterated its...

A generally more cautious Fed emerged from its 14-15 June meeting. We continue to expect just one Fed rate hike in 2016, probably in September Read full report hereFollowing a very weak job report for May, and just one week before the EU referendum in the UK, it should be no surprise that the Fed is in no rush to tighten monetary policy, or to send a strong signal about the timing of the next rate hike. Indeed the Federal Open Market Committee (FOMC) statement struck a more cautious tone,...