Market snapshot, theatre of war

Since the Russian army’s full-scale invasion of Ukraine on 24th February most equity markets, government and corporate bond yields, commodity prices (energy, metals and agriculture), CDS spreads and major currencies have recorded significant intra-day volatility and outsized daily moves. Moreover, for all the “noise”, the current geopolitical crisis has accentuated multi-week trends in a number of financial market and economic

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United Kingdom: Inflation without benefits

Consumer demand in the United Kingdom remains modest, which we attribute to a combination of factors. These include still curtailed opportunities to spend on goods (stock constraints) and services (social distancing restrictions), an erosion in real earnings, wealthy households’ low propensity to spend and a paradigm shift in spending habits. We expect falling Covid-19 cases and an ongoing easing of

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Light at the end of long Eurozone tunnel?

The number of new daily cases of Covid-19 has remained at or near record-highs in most Eurozone countries, including Germany, France, Italy and Spain, and the number of deaths since 11th December has either risen materially from the previous corresponding period, albeit from low levels (France, Italy, Portugal and Spain), or been broadly stable (Germany). The majority of Eurozone governments,

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FX round-up – Calm before the next storm

The spike in US Treasury yield volatility last week, following the release of gangbuster US CPI-inflation data for October, partly fed through to other asset classes. However, volatility in US asset prices, including Treasuries , the US Dollar and S&P 500, has since subsided while global FX volatility is still low in absolute and historical terms. Depressed volatility in FX

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Macro data dog not wagging FX market tail

US macro data, including measures of US inflation, non-farm employment, retail sales, manufacturing output, ISM PMIs and consumer confidence indices, have been far less volatile since the peak in global risk aversion in March-April 2020 when the first national lockdowns decimated global growth. However, volatility in most of these monthly metrics remains high relative to history. This is particularly true

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Vaccination and currency immunity

In the past couple of months governments in Asia-Pacific have materially accelerated the administration of Covid-19 vaccines. But because of low starting points, vaccination rates remain low compared to the EU, US and UK and even a number EM economies (including Turkey). The exceptions are Korea, Malaysia and Japan which have now administered a similar number of doses per capita

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Powell Put in play but greater challenges ahead

Federal Reserve Chairperson Jerome Powell’s pre-prepared opening speech at the Jackson Hole Symposium on Friday afternoon was a key litmus test for the central bank. Powell took yet another small step towards an eventual tapering this year of the Fed’s asset purchases and a tightening of arguably extremely loose monetary policy while pouring cold water on any talk of policy

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Low global FX vol: maturity or complacency?

Global FX volatility – as measured by the 5-day Standard Deviation (SD) in the daily percentage change in the spot (closing) price of a turnover-weighted basket of 32 major currency pairs against the US Dollar – remains depressed by historical standards. While global FX volatility rose slightly on 11th August to about 0.32 SD following the release of US CPI-inflation

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