Today we are witnessing a redefinition of international relations and a new, although likely unstable, global equilibrium. The trade dispute unfolding today between the US and China should be seen in light of shifting structural trends that have developed over the last few decades. We expect rationality will eventually prevail, but the outlook is muddled […]
Our EM FX scorecard, which ranks 10 EM currencies according to key criteria (such as growth and vulnerability to external shocks) saw few changes over the past month. The Fed’s current hawkish attitude remains a headwind for EM currencies, as it increases funding costs. That said, the weakest EM currencies have seen some stabilisation, particularly […]
Italian bond prices regained some ground after Moody’s cut Italy’s credit rating by one notch on Friday, keeping it within investment grade, while upgrading its outlook from negative to stable. Investors welcomed this as positive news while they anticipate Italy’s response to Brussels’ criticism of its proposed 2019 budget due later today. This could prove […]
In two decades, Portugal has gone through a boom (1996-2001), a slump (2002-2007), a deep recession (2008-2013), a timid recovery (2014-2016) and now a robust economic expansion. In 2017, real GDP grew by 2.8%, its fastest pace since 2000. This is even more remarkable when considering that the country exited its bailout programme only in […]
The Italian government has submitted its 2019 draft budget plan (DBP) to the European Commission. The proposed DBP is not in line with EU rules and sets the government on a collision course with the European authorities. Several elements within the Italian government’s budget plan have been raising eyebrows. First, the plan’s economic assumptions seem […]
We particularly like job openings data as an indicator for a turning point in the US macroeconomic cycle, even though this series has not much history (data start in December 2000), and in spite of its long lag to release (we just had data for August, i.e. it is more than two months old now). […]
While widening interest rate differentials are supportive of the US dollar against the yen, if rates rise too far and too fast, they can help the yen against the dollar, as recent financial market volatility has shown. In October, the Japanese yen appreciated by 1.9% against the dollar and outperformed all other major currencies. Coupled […]
The headline consumer price index (CPI) in China picked up slightly in September, rising by 2.5% year-over-year (y-o-y) compared with 2.3% in August, driven by higher food and fuel prices. Excluding food and energy, core inflation in China actually eased to 1.7% y-o-y in September from 2.0% in August. Looking forward, we see some moderate […]
US equities declined roughly 7% over six days up to last Thursday. While the decline is in line with the median drawdown level since 2007, it was notable for its length, given the average drawdowns over the same time period lasted 40 days, rather than six. Most likely, investors were reacting to the higher risk […]
Each EU member state is currently preparing 2019 budget plans for formal submission to the European Commission (EC) before mid-October. Among them, France and Italy’s budget plans have been raising eyebrows. Why is the EC concerned about Italy’s proposed 2.4% GDP deficit target for 2019 and not France’s target of 2.8%? Is Italy being treated […]
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