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Gold boosted by dovish central banks

The gold price soared to a fresh five-year high on 20 June following a dovish Fed monetary policy meeting. Indeed, the dovish shift among major central banks (with the sole exception of the Norges Bank) and high global uncertainty have pushed global yields lower recently, reducing the opportunity cost of holding gold. Indeed, since late-2018, […]

Euro area monetary policy – “Sintrapped”

In Sintra, Mario Draghi signalled the ECB’s unequivocal readiness for further stimulus “in the absence of improvement”. Although the final decision will depend on US-China trade negotiations, the Fed and economic data, the ECB is likely to deliver a comprehensive easing package in September. We now expect the ECB to adjust its forward guidance in July to state […]

Fed update – Driving under the (political) influence

The role of politics including President Trump’s pressure to cut rates (and his call to dismiss Powell) and the anxiety ahead of the G20 summit on 28-29 June – particularly the crucial Trump-Xi meeting – has been even more impactful than we expected (we were wrong!), leading Chairman Powell to signal more firmly an imminent rate cut. This […]

China looks to new policies to boost infrastructure spending

Activity data in May point to continued weakness in Chinese economic momentum, with growth in both fixed-asset investment and industrial production slowing last month. The only positive news came from retail sales, where growth picked up after the slump in April—but this rebound was probably due to seasonal effects. After taking into account special seasonality, […]

The Fed talks the talk, but in no rush to cut

  The Fed should remain on hold on 19 June, but Chairman Powell is likely to mention the possibility of cutting rates in the coming months, especially if trade tensions continue. Potential monetary easing would be framed as ‘insurance’ rate cuts, similar to those pushed through in 1995 and 1998, mostly to backstop confidence in […]

Weekly view—Pre-emptive guidance

As uncertainty continues to run high, so does anticipation around the Fed’s meeting this Wednesday. The Fed is now confronted with a dilemma: economic data is not soft enough to merit rate cuts, as evidenced by last week’s US retail sales data. However, inflation expectations have reached new lows, adding pressure on the Fed to […]

Bund yields — Heading further down?

Four main factors have been driving down the 10-year Bund yield, which reached an all-time low of -0.26% on June 7. Considering changing circumstances, we have lowered our year-end target for the 10-year Bund yield from 0.3% to 0.1% and expect it to remain in negative territory until at least October in our central scenario […]

How dovish can Swiss monetary policy go?

At its meeting on 13 June, the Swiss National Bank (SNB) will face an uncertain growth and inflation outlook. Economic data have been mixed and, more importantly, external risks (intensification of trade disputes, Brexit, Italian budget disagreements…) have increased. Since the last SNB meeting in March, the CHF has appreciated by 1.5% against the EUR […]

Weekly view – Dovish murmurs

ECB president Mario Draghi has gone as dovish as possible without cutting rates, saying for the first time that he is prepared to cut interest rates and redeploy quantitative easing before he leaves the bank this autumn. Any interest rate rise in Europe will not happen until the second half of 2020 at the earliest, […]

Oil prices are reeling

The recent plunge in prices suggests that oil is acting like a leading indicator of global economic growth, reflecting investors’ concerns that lasting trade disputes will dent future growth and risk pushing the world economy into recession. Business sentiment has been deteriorating for some time. By May, the world Purchasing Manager Index for Manufacturing (PMI) […]

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