UK CPI Inflation Preview (May 22): Inflation to Fall Further and More Broadly

May 13, 2024 12:10 PM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even existence if any start to an easing cycle.  But perhaps the CPI data is the most crucial making the looming April data all the more important for markets as they weigh the chances of an initial rat

Asset Allocation 2024: Tricky Seven Months Remaining

May 10, 2024 1:06 PM UTC

Fed easing expectations for 2025 and 2026 can shift from a terminal 4% Fed Funds rate towards 3%, as the U.S. economy slows due to lagged tightening effects.  Combined with Fed easing starting in September this should mean a consistent decline in 2yr yields.  However, 10yr U.S. Treasury yields wil

UK GDP Review: Clearer Growth Momentum But Mainly Import Led?

May 10, 2024 6:26 AM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m in March accentuating the upgraded boun

BoE Review: Data Dependent Easing Bias Clearer?

May 9, 2024 12:52 PM UTC

There was little surprise that Bank Rate was kept at 5.25% for the sixth successive MPC meeting, nor that the dissent in favor of an immediate rate cut doubled to two as a result of Dep Gov Ramsden confirming more dovish leanings.  The updated projections at least validated the rate path discounted

BoE Preview (May 9): Easing Bias Clearer?

May 2, 2024 11:06 AM UTC

In flagging no need to be dominated by Fed policy, we think that the BoE is not only moving towards rate cuts but the MPC majority may be overtly advertising such a likelihood.  But we do not see any move at the looming May 9 verdict, with Bank Rate again likely to remain at 5.25%. But the accompan

UK GDP Preview (May 10): Fragile Sideways-Moving Activity Continues?

April 30, 2024 2:19 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

UK Consumers: Rent the Growing Hit to Spending Power

April 29, 2024 2:02 PM UTC

The UK has faced a series of cost-of-living shocks in the last few years.  Some such as the surge in food prices may even be reversing, while it now looks likely the BoE hiking cycle may also start to reverse, although rising market rates may mean little further fall in effective mortgage rates in

Headwinds To Long-term Global Growth

April 26, 2024 9:30 AM UTC

Bottom line: While much focus is on the cyclical economic position to determine 2024 monetary policy prospects, the 2025-28 structural growth trajectory differs to the pre 2020 GDP trajectory for major economies.  While global fragmentation has a role to play, aging populations are already having a

Short-end European Government Bonds Following U.S. But June Decoupling

April 22, 2024 1:15 PM UTC

The Fed’s shift to higher for longer has spilled over to drag European government bond yields higher through April.  This now looks overdone as a June ECB rate cut is not fully discounted and ECB officials/data clearly point towards a 25bps cut.  UK money markets are more out of line, with a Jun

UK: Services Inflation Resilience – An Alternative Perspective?

April 22, 2024 10:03 AM UTC

Although still with three members openly resistant to cutting Bank Rate, it does seem as if an MPC majority is nevertheless edging toward easing policy conventionally.  This reflects a view among the less hawkish and more pliable MPC members that risks to persistence in domestic inflation pressures

Markets: Fed Rather Than Middle East Worries

April 17, 2024 12:34 PM UTC

Global markets are being driven by a scale back in Fed easing expectations and we see a 5-10% U.S. equity market correction being underway.  However, with the market now only discounting one 25bps Fed cut in 2024, any downside surprises on U.S. growth or better controlled monthly inflation numbers

UK CPI Inflation Review: Inflation Fall Further, But Services Momentum Still Evident

April 17, 2024 6:52 AM UTC

UK headline and core inflation have been on a clear downward trajectory in the last few months, the former having peaked above 10% in February last year and the latter at 7.1% In May. After a pause in the preceding three months, this downtrend seemingly resumed in the February CPI numbers and clearl

UK GDP Review: Less Fragile Recovery to Fuel BoE Hawks?

April 12, 2024 6:50 AM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

How Durable are Better UK Housing Market Signs?

April 11, 2024 9:45 AM UTC

Amid some mixed remarks from one the MPC hawks, the BoE will be noting more positive housing market signs.  The latest RICS survey very much points to a clear pic-up in housing demand, something that chimes with the results in the just-published BoE Credit Conditions Survey (CCS), which also sugges

UK CPI Inflation Preview (Apr 17): Inflation to Fall Broadly Further, But Momentum Still Evident

April 8, 2024 2:12 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly going to feel much better with GDP growth hardly positive.  Admittedly, coming in as largely expUK headline and core inflation have been on a clear downward trajectory in the last few mont

BoE Forecast Report: Uncertain How to Assess Uncertainty?

April 5, 2024 8:14 AM UTC

A long-awaited review of BoE forecasting techniques and goals is due on Apr 12 with a report commissioned by the BoE but authored by ex-Fed Chair Ben Bernanke.  It is set to offer alternatives to the way the MPC currently produces and communicates its outlook and has been prompted by marked forecas

UK GDP Preview (Apr 12): Fragile Recovery?

April 3, 2024 1:26 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly going to feel much better with GDP growth hardly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.2% m/m in January more than reversing th

March Outlook: Europe in Focus, Then Elections Around the World

April 3, 2024 9:00 AM UTC

Asset Allocation: Pausing for Breath

April 2, 2024 9:00 AM UTC

Into Q2, data and policy (actual and perceived) will dominate DM markets. The ECB will likely take the spotlight with a 25bps cut on June 7, as the Fed face a better growth/more fiscal policy expansion and a tighter labor market than the EZ but also with a better productivity backdrop and outlook to

March Outlook: Europe in Focus, Then Elections Around the World

March 27, 2024 9:00 AM UTC

Chartbook: Quarterly Forecasts FX/Rates/Equities For Q2 2024

March 26, 2024 9:23 AM UTC

Our latest quarterly Forecasts FX/Rates/Equities/Commodities for Q2 2024 are now available, see resources at the end.  

Outlook Overview: Europe in Focus, Then Elections Around the World

March 25, 2024 11:15 AM UTC

Equities Outlook: Cyclical Recovery Versus Structural Headwinds

March 25, 2024 9:00 AM UTC

 ·        In the U.S., a tug of war between momentum and U.S. exceptionalism on the one side versus valuations and any deviations from the U.S. goldilocks scenario now means volatility and a risk of a correction.  We feel that the U.S. equity market recovery can push onto 5250 for the S&P5

Continuum Economics Calendar April 2024

March 22, 2024 4:19 PM UTC

Data and Events Calendar April2024.

DM Rates Outlook: Rate Cuts Arriving and Positive Yield Curves

March 22, 2024 2:00 PM UTC

Western Europe Outlook: Easing Cycle Underway?

March 22, 2024 11:26 AM UTC

·        In the UK, downside economic risks may have dissipated but the tighter monetary stance has far from fully bitten. This accentuates and/or prolongs an already weak domestic backdrop into 2025 that will complement friendlier supply conditions in easing inflation. The BoE will likely e

BoE Review: Easing Bias Continues

March 21, 2024 1:12 PM UTC

Although no shock that the BoE vote to keep policy on hold this month, there was some surprise that all hawkish dissents ended, with the one MPC member instead still again calling for a cut.  But despite recent CPI underlying falls, the majority continue to focus on assessing how ‘persistent’ a

UK CPI Inflation Review: Headline and Core Fall More Broadly, But Momentum Still Evident

March 20, 2024 7:44 AM UTC

UK headline and core inflation have been on a clear downward trajectory in the last few months the former having peaked above 10% in February and the latter at 7.1% In May. However, this trend surprisingly stalled in December as the headline rate rose a notch to 4.0%, up from a 27-month low of 3.9%,

BoE Preview: Easing Bias to be Made Clearer?

March 14, 2024 10:23 AM UTC

It would be something of a shock if the BoE was to vote to do anything but keep policy on hold when the MPC gives its next verdict on Mar 21.  More likely than not there will be no further dissents in favor of a further hike, merely one again calling for a cut.  But despite recent CPI underlying f

UK GDP Review: Recovery Emerging but Fragility Persists?

March 13, 2024 7:59 AM UTC

Coming in as largely expected, and despite industrial action, GDP rose by 0.2% m/m in January more than reversing the 0.1% drop in December data, a result that reflected the bounce in retail sales and recovery in construction.  The data does look as if the economy is recovering, albeit with the pic

UK CPI Inflation Preview (Mar 20): Headline and Core to Fall More Clearly?

March 11, 2024 10:59 AM UTC

UK headline and core inflation have been on a clear downward trajectory in the last few months the former having peaked above 10% in February and the latter at 7.1% In May. However, this trend surprisingly stalled in December as the headline rate rose a notch to 4.0%, up from a 27-month low of 3.9%,

UK Budget Review: Demographics Fail to Prevent Ever Smaller Fiscal Headroom?

March 6, 2024 2:53 PM UTC

Chancellor Hunt’s Budget today was an even clearer politically driven affair.  Hence the focus on offering alleged tax cuts, all framed as helping boost growth potential but where the tax as a share of GDP is forecast to rise to a post-war record 37.1% of GDP in 2028-29.  The political question

UK GDP Preview (Mar 13): Fragility to Continue

March 5, 2024 11:34 AM UTC

Coming in lower than expected after taking account of downward revisions, and probably hit by industrial action, GDP shrank by 0.1% m/m in December data, a result that reflected the plunge in retail sales and abnormal weather that meant a Q4 drop in GDP and consumer spending.  We see stagnation in

Russia Frozen Assets, Ukraine Reconstruction and G7-BRICS

February 29, 2024 10:55 AM UTC

Bottom Line: A number of proposals to seize or use Russia frozen assets for Ukraine reconstruction are not getting overwhelming support within the G7 and a decision could be delayed until the G7 summit in Italy June 13-15.  Concerns over the legal standing and reputational risk (China has been shif

Continuum Economics Calendar March 2024

February 26, 2024 11:23 AM UTC

Data and Events Calendar March 2024.

24 Rate Easing Reduced and 2025 the Same

February 26, 2024 11:00 AM UTC

Bottom Line: 2024 official interest rate easing expectations in financial markets now look better aligned to baseline prospects from leading DM central banks due to good big picture progress towards inflation targets.   The start of ECB/BOE easing in Q2 and Fed easing in Q3 will likely see markets

UK Budget Preview: Demographics to Boost Fiscal Headroom?

February 21, 2024 10:25 AM UTC

It will be no surprise that with a general election looming almost certainly later this year or so and with the government so far behind in the opinion polls, Chancellor Hunt’s Budget on Mar 6 will be yet another very politically driven affair.  It should see gloomier GDP projections but with som

UK GDP Review: Recession Confirmed

February 15, 2024 7:56 AM UTC

Coming in lower than expected after taking account of downward revisions, and probably hit by industrial action, GDP shrank by 0.1% m/m in December data, a result that reflected the plunge in retail sales and abnormal weather that meant a Q4 drop in GDP and consumer sending (Figure 1).  Admittedly

Markets: ECB/BOE/SNB Before the Fed?

February 14, 2024 11:35 AM UTC

Bottom Line:  We do see 25bps cuts arriving from the ECB/BOE and SNB and most likely these will all be in June.  Whether this is before the Fed will likely be a function of the Fed, as we see these interest rate moves as being driven by domestic fundamentals rather than the Fed being an influence.

UK CPI Inflation Review: Headline and Core Steady But Softer Underlying Pressures Evident

February 14, 2024 8:01 AM UTC

Superimposed over both upside and downside surprises, UK headline and core inflation have been on a clear downward trajectory in the last few months the former having peaked above 10% in February and the latter at 7.1% In May. However, this trend surprisingly stalled in December as the headline rate

UK Labor Market: Further Signs of Clearly Softer Wage Pressure

February 13, 2024 8:57 AM UTC

As we have underscored repeatedly, the BoE has come to regard the official average earnings data with some suspicion; after all, they have implied wage growth being well above other official and survey sources.  But even though they were higher than consensus thinking, the latest data are showing s

UK Housing – Cracks Still Evident, as Transactions Sink

February 7, 2024 2:17 PM UTC

As mortgage rates have started to fall and recent house price data show somewhat unexpected resilience if not gains, there is increasing speculation that the worst is over the for UK housing market.  Regardless, with over half of mortgage holders yet to feel the hits from BoE hikes we feel this vie

UK GDP Preview (Feb 15): Recession to be Confirmed?

February 6, 2024 2:00 PM UTC

Coming in higher than expected, and probably boosted by less poor weather and a correction back in imports, GDP rose by 0.3% m/m in the November data, a result that meant that the surprise drop of the previous month was exactly reversed.  We think this will have been a short-lived reprieve, with a

UK CPI Inflation Preview (Feb 14): Headline and Core to Fail to Fall Again?

February 5, 2024 2:13 PM UTC

With both upside and downside surprises, UK headline and core inflation have been on a clear downward trajectory in the last few months the former having peaked above 10% in February and the latter at 7.1% In May. However, this trend surprisingly stalled in December as the headline rate rose a notch

BoE Review: Persistent Price Pressures or Persistent Policy Errors?

February 1, 2024 1:47 PM UTC

As was widely expected, the BoE kept policy on hold for a fourth successive meeting and abandoned its previous tightening bias.  It even hinted that policy could be eased but more evidence was needed before this could happen.  But clearly the BoE is uncertain, if not confused.  The MPC vote was t

Continuum Economics Calendar February 2024

January 30, 2024 9:35 AM UTC

Data and Events Calendar February 2024.

BoE Preview (Feb 1): Inflation Risks Shift From the Upside to More Balanced?

January 24, 2024 2:48 PM UTC

Bottom Line: As is widely expected, the BoE is likely to keep policy on hold for a fourth successive meeting when it delivers its next verdict on Feb 1. But as with other DM central banks the interest is less on what is done, but more on what is said, especially given the manner in which market inte

UK CPI Inflation Review: Headline and Core Fail to Fall?

January 17, 2024 7:53 AM UTC

Superimposed over both upside and downside surprises, UK headline and core inflation have been on a clear downward trajectory in the last few months the former having peaked above 10% in February and the latter at 7.1% In May. However, this trend surprisingly stalled in December as the headline rate

UK Labor Market: More Signs of Clearly Softer Wage Pressure

January 16, 2024 8:10 AM UTC

There are increasingly clear signs of slowing wage pressures, most discernibly in terms of the manner flagged by weaker bonus growth. The latter is something the BoE will be paying ever clearer attention to and drawing reassurance from as it assesses that signs of more persistent inflation pressures