Switzerland not far from being deemed a ‘currency manipulator’ by the US

In the next few days, the U.S Department of Treasury will publish its semi-annual report on International Economic and Exchange Rate Policies. Switzerland is one of six countries on the department’s monitoring list, as it meets two of the three conditions established by the US Treasury to be deemed a ‘currency manipulator’. The country has […]

Core sovereign yields are heading North

In our start-of-the-year scenario for 2017, we thought that inflation, monetary and fiscal policy would push yields on core sovereign bonds higher, except on Japanese ones. In the event, political gridlock in Washington forced us to abandon our expectations for a significant fiscal stimulus in the US that would boost economic growth, while weakness in […]

Messing about in boats

A key question for investors is how to gauge the point we are at in the US business cycle. Some are worried that we have already surpassed the length of the previous expansion. According to data from the National Bureau of Economic Research, we are 99 months into an upward cycle that started in July […]

PBOC aims to stave off potential liquidity shock

The People’s Bank of China (PBoC) announced on 30 September that it would lower the required reserve ratio (RRR) for selected banks by 50-150 basis points (bps) from the beginning of next January. Specifically, banks eligible for a 50 bps cut to their RRR will include those that have at least 1.5% of their existing […]

The declining link between the credit impulse and domestic demand

The ECB’s M3 and credit report for August published this week was pretty strong overall and confirmed the ongoing improvement in lending dynamics in the euro area. Bank credit flows to the private sector (adjusted for seasonal effects and sales and securitisations) amounted to €17bn in August, lower than the July figure of €39bn. In […]

A long way to the finish line for US tax reform

President Trump’s ambitious tax plan, just unveiled, aims to simplify and lower tax rates for households and corporates, with the statutory tax rate for the latter to be reduced to 20% from 35%. We remain sceptical that this plan will see its way through Congress given opposition from Democrats and even some Republicans wary about […]

Shifting prospects for the UK economy and financial assets

  Although the UK macro outlook has not changed much in recent weeks and considerable uncertainty remains in terms of the Brexit negotiations, the BoE’s hawkish shift has led to a material repricing of UK assets, including the currency and rates. In addition to monetary policy considerations, another driver of improved market sentiment has been […]

Corporate America is cash rich, helped by declining competition

We think many keys for understanding the US economy right now – and why it may not be behaving the way textbook economics say it should – are to be found at the microeconomic rather than macroeconomic level. What the microeconomic picture shows is a sharp reduction in the level of market competition due to […]

Political fragmentation means Jamaica coalition is the only option

Angela Merkel looks set to secure a fourth term as Chancellor amid growing fragmentation and a surge in far-right support. The only arithmetically possible options are another Grand Coalition (ruled out by the SPD) and a Jamaica coalition between the CDU-CSU, FDP and the Greens (very difficult due to diverging positions on a wide range […]

Business surveys show strong end to Q3 in euro area

Flash PMI surveys for the euro area ended the third quarter on a strong note. The composite flash PMI increased to 56.7 in September from 55.7 in August against consensus expectations for a stable print (55.6). The breakdown by sub-indices showed pretty strong signals in most forward-looking components, with the sole weak spot manufacturing new […]

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