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Powell provides some clues to Fed thinking

Chairman Jerome Powell’s congressional testimony on 17 July contained limited new information about the Federal Reserve’s monetary policy intentions. Conveying the impression that he maintained a steady hand on the tiller, Powell seemed unfazed by the recent escalation in trade. Instead, Powell remained positive about the global economy. He also highlighted the robustness of US […]

Weekly View – opposing forces

A new list of US tariffs was unveiled last week. These tariffs, which could be implemented in September, will undoubtedly trigger countermeasures by the Chinese. But markets chose to look past these tensions to a US economy that still appears robust. Consumer and corporate confidence remain high and Q2 GDP growth is likely to be […]

US high yield is looking suspect

US high yield (HY) is one of the few segments in the fixed income space that has posted a positive total return since the beginning of the year. Thanks to lower duration, US HY has so far suffered less from the surge in US Treasury yields than its investment-grade counterpart. Moreover, some index-heavy sectors have […]

Fresh tariffs on Chinese imports would fall disproportionately on furniture

This week, the Trump administration announced it would slap a 10% tariff on USD200 billion of imports from China, on top of the USD50 billion already announced. After a consultation period, the tariffs could come into force as soon as September (see our Flash Note ‘US-China trade update’, 11 July 2018). The US imported USD506 […]

Europe chart of the week – UK GDP growth

The Office for National Statistics (ONS) published this week a new rolling monthly estimate of UK GDP. The release pointed to a rebound of growth in Q2 (quarterly data will be published on August 8). According to the ONS, the rolling three-month growth to end-May was 0.2%, compared with 0% in the three months to […]

Underlying US inflation remains moderate

Leaving aside energy prices (up 24% y-o-y), core CPI inflation in the US remained moderate in June rising 0.16% m-o-m, which pushed the y-o-y reading slightly up, to 2.3% from 2.2% in May. A print of 2.3% y-o-y, while above the one-year average of 1.9%, is a relatively tame reading in light of the very […]

Risk of trade war grows

The Trump administration has stepped up its trade actions further by increasing the net of Chinese imports that will be subject to US tariffs: on top of the USD50 billion of Chinese imports subject to a 25% tariff already announced, the US Trade Representative has prepared a list of a further USD200 billion of imports […]

No EM currency looks attractive for now

Despite a relatively stable US dollar index and 10-year US Treasury yield since the end of May, emerging market (EM) currencies have remained under pressure, especially as a result of the recent escalation in trade tensions and a significant decline in the renminbi. The two latter factors have particularly weighed on Asian EM currencies. Since […]

Close to neutral

After seven quarter-point rate hikes in the US since the end of 2015, we reckon we are close to a neutral rate of interest – the rate of interest consistent with trend growth, stable prices and full employment. We calculate that the current neutral rate is 2.1%, compared with a Fed funds rate of 2.0%. […]

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