Tag Archives: Macroview

The Federal Reserve cut rates by 25bps on 31 July for the first time in 10 years. We continue to expect another rate cut in September.As expected and as telegraphed, the Fed cut rates by 25bps on 31 July – the first rate cut since December 2008 – and it ended prematurely its quantitative tightening programme (in August instead of September).Chairman Jerome Powell justified the rate cut as an “insurance” cut, i.e. to insure against the downside risks to US growth, mostly coming from weak...

Slowing economic momentum in the euro area means that we are lowering our GDP forecasts for this year. The euro area economy grew by 0.2% q-o-q in Q2, down from 0.4% in Q1. While 0.2% is still a decent pace of growth, concerns about the economy in the second half of the year have increased. Recent data have shown that the industrial slump has started to leave some marks on the domestic economy. Tentative signs of...

Slowing economic momentum in the euro area means that we are lowering our GDP forecasts for this year.The euro area economy grew by 0.2% q-o-q in Q2, down from 0.4% in Q1.While 0.2% is still a decent pace of growth, concerns about the economy in the second half of the year have increased. Recent data have shown that the industrial slump has started to leave some marks on the domestic economy.Tentative signs of weakening domestic demand, the possibility of a hard Brexit, potential US tariffs...

With a lot of good news already priced in, but technicals painting a less rosy picture, equities could struggle to make headway in the short term.The world economy and financial markets are being influenced by two opposing forces engaged in a tug of war. On one side are trade tensions and an ageing economic cycle, factors that are eroding business confidence and holding back corporate investment, raising questions about an impending recession. On the other are central banks, which are...

Before any rate cut, intervention in the forex market is likely to remain the Swiss National Bank’s first line of defence to counter any appreciation of the CHF.Data published on Monday revealed that commercial banks’ sight deposits at the Swiss National Bank (SNB) rose by CHF1.7bn last week (see chart), the largest weekly increase since May 2017. The amount suggests the SNB intervened in the FX market, probably ahead of the ECB’s meeting last Thursday.Weekly releases of commercial banks’...

The CIO Office's view of the week ahead.There is a new sheriff in London Town and he is not shy with bold statements. So far as prime minister, Boris Johnson has not only pledged to take the UK out of the EU by 31 October – “no ifs or buts” – but has also signalled new tax cuts and spending plans, ranging from the police and the national public health service, to nationwide full-fibre broadband. While certainly popular issues, they also come with considerable price tags that government...

We expect the BoE to cut rates in November, even if a Brexit deal is reached by October. UK sovereign bond (gilts) yields have fallen this year, with the 10-year yield dropping by 59 basis points (bps) to 0.69%1, in concert with other core sovereign bond yields. The Brexit saga, along with the global slowdown forcing many central banks to turn dovish, are the main factors behind this steep fall. Taking stock of this...

We still see the Fed's expected July rate cut as fundamentally of a “recalibration” nature.We expect the Federal Reserve (Fed) to cut its fed funds target rate range by 0.25%, and leave the door open for another cut later, after its two-day policy meeting ending on 31 July.Chairman Jerome Powell has a lot of explaining to do as to why the Fed is making this rate cut, only six months after the last rate hike: this explaining could condition the path of future interest rate moves.The Fed will...

We expect the BoE to cut rates in November, even if a Brexit deal is reached by October.UK sovereign bond (gilts) yields have fallen this year, with the 10-year yield dropping by 59 basis points (bps) to 0.69%1, in concert with other core sovereign bond yields. The Brexit saga, along with the global slowdown forcing many central banks to turn dovish, are the main factors behind this steep fall.Taking stock of this context, we now expect the Bank of England (BoE) to cut rates by 25 bps at its...

Despite the impressive year-to-date performance of corporate credit, we remain prudent about prospects in the remainder of 2019. Corporate bonds have posted stellar total returns year to date, thanks to the positive combination of lower sovereign yields and tighter credit spreads. While high yield (HY) bonds have performed slightly better than investment grade (IG) ones on both sides of the Atlantic, the additional...