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Too much pessimism surrounding the US dollar

The euro has significantly appreciated against the US dollar since the start of the year (roughly 7% by 8 June). The single currency has benefited from strong activity in Q1, higher inflation and reduced political uncertainties in the euro area, especially after the French presidential election. Meanwhile, the US dollar has been damped by weak […]

ECB: first (hawkish) move since 2011

  As we expected, the ECB moved to a more neutral stance today by describing the risks to economic activity as “broadly balanced” and by removing its bias to even “lower” policy rates. The symbolic significance of the move should not be underestimated. It is the first time that the balance of risks to growth […]

Rise in our growth forecast for the euro area

Euro area Q1 GDP growth was today revised up to 0.6% quarter on quarter, from 0.5% in the previous estimate. This revision reflects large adjustments in several countries, and mechanically pushes our annual growth forecasts higher. We now expect euro area real GDP to grow by 1.9% on average this year, after 1.7% in 2016 […]

Saudi-Qatari crisis may signal further regional flare-ups

The move by Saudi Arabia and its allies to cut diplomatic relations with Qatar and impose a de facto blockade of the country abruptly deepens a key line of fracture in the Middle East. There is a risk that tensions rise further. If Qatar turns to Iran for support, a direct escalation between Saudi Arabia […]

U.S. job creation softens, but unemployment lowest in 16 years

May was a mixed month for US employment data. Job creation was softer than expected, the figures for the previous couple of months were revised down and average hourly earnings data were somewhat disappointing. However, the unemployment rate unexpectedly fell further, reaching its lowest level since March 2001. Non-farm payroll employment rose by a soft […]

New fixing mechanism limits renminbi depreciation against the U.S. dollar

The People’s Bank of China (PBoC) recently announced the introduction of a “counter cyclical adjustment factor” (CCAF) to calculate the daily USD/CNY reference rate (the “fixing rate”). The previous formula used two factors: the USD/CNY spot close of the previous day and an adjustment factor taking into account overnight changes in demand and supply in […]

Core inflation clouds ECB’s next move

Euro area ‘flash’ HICP inflation came in at 1.4% y-o-y in May (down from 1.9% in April) while core inflation eased to 0.94% (down from 1.2%), both slightly below consensus expectations, as energy-related base effects and Easter distortions faded. We forecast euro area inflation to remain relatively stable in the next few months before core […]

Resilient earnings growth across all regions

Corporate earnings growth for Q1 2017 surprised positively across major economies. Among the key trends of this earnings season has been the synchronisation not only of the macroeconomic cycle, but also the earnings cycle. Indeed, all markets exhibited strong trends in corporate profit growth. In particular, Japan and Europe provided significant positive surprises. The strong […]

China: rising debts a long-term concern, but short-term crisis unlikely

Moody’s announced on 24 May that it had downgraded China’s long-term local currency and foreign currency issuer ratings to A1 from Aa3, due to its concerns about the rising debt in China. According to our estimate, China’s total debt amounted to Rmb203 trillion as of the end of 2016, equivalent to 261% of its nominal […]

Looking to the politicians, ‘Perspectives’, June-July 2017

With the election of Emmanuel Macron as French president, the tide of populism may have been stemmed for the moment in western Europe. Has Europe’s political class found the formula for dealing with the phenomenon? “I wouldn’t bet my investment career on it,” answers Pictet Wealth Management’s (PWM) chief investment manager, Cesar Perez Ruiz, in […]

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