Equity markets advanced again and bond yields fell yesterday, helped by rate cut talk from Fed and ECB members, though there wasn’t a whole lot of movement in the main currency pairs. The euro is a touch softer against both the dollar and sterling this morning, at around $1.1350 and £0.8530 respectively, while sterling is holding its own against the dollar, trading at around $1.33.
Yesterday’s Events
The short-end led the decline in bond yields with US and German 2-yields falling by 6-8bps, while 10-year yields were 5-6bps lower on the day. European stocks added almost 0.5% and US indices closed with gains of up to 3%, while Asian equities are higher overnight.
Fed members Waller and Hammack said they are prepared to lower interest rates if the US economy and labour market weaken due to the impact of tariffs, with Hammack suggesting the Fed could move as soon as the next but one meeting in June if the data pointed in that direction. Meanwhile, ECB member Rehn said that if forecasts show inflation falling “below our 2% inflation target, then the right reaction is to cut rates further,” adding that a 50bps reduction shouldn’t be ruled out.
Retail sales data released in the UK a short while ago show volumes rose by 0.4% in March (the consensus forecast was for a decline of around 0.4%), while the February outturn was revised down to a gain of 0.7% (from 1%). For Q1 as a whole, sales volumes rose by 1.6% from Q4’24 and by 1.7% on the corresponding quarter last year. The increase in spending will contribute positively to Q1 GDP growth, which looks to have picked-up quite strongly from the final quarter of 2024.
The Day Ahead
It’s a quiet end to the week in terms of economic data, with final readings for the University of Michigan measures of April consumer confidence and inflation expectations due in the US.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
24 Apr 2025
Market Commentary
It was another generally positive session in markets yesterday. Stocks advanced again albeit the main US indices finished off their very best levels of the day. The dollar also recovered some more ground although its gains were fairly modest. The euro is trading at about $1.1375 against the US currency this morning, while the pound is hovering around the $1.33 level, leaving EURGBP little changed from this time yesterday morning at £0.8550.
Yesterday’s Events
In government bond markets, 2-year yields rose (+5-8bps) amid some paring back of central bank rate cut expectations. The market is currently pricing in about 65bps of cuts from the ECB by the end of this year, almost 90bps from the Bank of England (including a very high probability of a 25bps reduction at next month’s meeting), and some 75bps from the Fed (with a 25bps cut not fully priced until the July meeting). In equity markets, European stocks gained almost 3%, while the Nasdaq led the way in the US advancing by 2.5%.
Flash PMIs for April show growth slowing in the US, a stagnant economy in the Euro area, and declining output in the UK, with tariffs and tariff-related uncertainty weighing on activity in all three. Similarly, the Fed’s latest Beige Book reports that the economic outlook in the US has “worsened considerably as uncertainty, particularly surrounding tariffs”, has increased. It also notes that firms expect “elevated input cost growth resulting from tariffs,” with “most businesses” expecting to pass through additional costs to customers.
ECB President Christine Lagarde says the impact of US tariffs on the Euro area economy is “probably…going to be disinflationary more than inflationary,” noting (once again) that – given its trade war with the US – China “will want to reroute its exports somewhere, possibly to Europe (which) would have a dampening impact on prices.” Meanwhile, her Bank of England counterpart, Andrew Bailey, says “we have to take very seriously the risk to growth” from increased tariffs, noting that “it’s not just the relationship between the US and the UK, it’s the relationship between the US, the UK and the rest of the world that matters because the UK is such an open economy.”
The Day Ahead
For the day ahead, economic data include weekly jobless claims, capital goods orders, and second-hand homes sales in the US, while a number of ECB members are due to speak over the course of the day.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
23 Apr 2025
Today's Talking Points 23.04.2025
Market Commentary
There was a positive tone to markets yesterday as trading got back into full swing following the Easter holiday, helped by comments by the US Treasury Secretary who said the ‘trade war’ with China needed to “de-escalate”. Donald Trump also chipped in late in the day, saying he had “no intention” of firing Fed Chair Powell (though it’s not clear he can in any case) while again calling for the central bank to lower interest rates. US stocks rallied strongly, US bond yields eased back from Monday’s highs, while the dollar recovered substantial ground. The euro is trading back at $1.14 and sterling has slipped to around $1.33, both well off Monday’s best levels, while EURGBP is a touch softer this morning at around £0.8550.
Yesterday’s Events
US equities closed about 2.5% higher on the day, reversing a large portion of Monday’s fall, and Asian stocks have chalked up solid gains overnight, while European indices have opened well in positive territory (+2%) this morning having added around half a percent yesterday. In bond markets, US 10- and 30-year yields have fallen back by around 5bps and 10bps respectively from Monday’s close.
It is no surprise at all that the IMF in its latest projections has lowered its forecasts for the global economy, noting than an “abrupt increase in tariffs (and) a surge in policy uncertainty will slow growth significantly.” It expects world GDP growth of 2.8% this year and 3% next year, a cumulative downgrade of around 0.8 percentage points relative to its January 2025 forecasts but “still well above recession levels”. For the US, the IMF says tariffs represent a supply shock that will reduce growth and increase price pressures “temporarily”. It has revised down its forecast for growth this year by almost 1 percentage points to 1.8%, and raised up its forecast for CPI inflation from 2% to 3%. For US trading partners, tariffs act mostly as “a negative external demand shock” that will weaken growth, including in the Euro area economy which the IMF sees expanding by 0.8% this year, revised down from around 1% previously.
The Day Ahead
Looking to the day ahead, economic data releases include the flash PMIs for April in the main economies; construction output in the Euro area; and new home sales in the US. The Fed publishes its latest Beige Book, a summary of economic and business conditions across the US.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
22 Apr 2025
Today's Talking Points 22.04.2025
Market Commentary
US equities, bonds and the dollar sold off in tandem during yesterday’s session. This followed comments by Donald Trump strongly criticising the Fed (and its Chair Jerome Powell in particular) for not lowering interest rates, which obviously raises concerns about the central bank’s independence in setting monetary policy and in turn erodes already fragile confidence in US assets. The euro is trading just north of $1.15 against the dollar this morning (levels last seen in late 2021), and sterling is up to around $1.34 (matching its 2024 highs last September), having closed out last week at around $1.14 and $1.33 respectively. This in turn sees EURGBP hovering just below £0.86, little changed from last week’s close.
Yesterday’s Events
US long-dated bond yields rose sharply yesterday with 10-and 30-year yields both increasing by more than 10bps, though 2-year yields fell by about 5bps. European yield curves are also steeper at the start of play today, with 2-year yields lower but yields further out flat to marginally higher. In equity markets, the main US indices shed around 2.5%, while European equity markets have opened slightly lower this morning.
As widely expected, the ECB lowered the deposit rate by 25bps to 2.25% following last Thursday’s Governing Council meeting. It said that “downside risks to economic growth have increased”, with the “major escalation in global trade tensions” likely to lower euro area growth by dampening exports, and also cited a number of downside risks to inflation, including falling global energy prices, the appreciation of the euro, and adverse financial market reactions to global trade tensions (which could weigh on domestic demand and hence also lower inflation). Rate cut expectations firmed post the meeting, with the market pricing in the best part of a further 75bps reduction in the deposit rate by the end of this year.
The Day Ahead
Looking to the week ahead, the main releases of note are the flash PMIs for April in the main economies, due tomorrow (Wednesday), while Euro area consumer confidence is scheduled for today and UK retail sales for Friday. The IMF publishes its latest World Economic Outlook later today.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
17 Apr 2025
Today's Talking Points 17.04.2025
Market Commentary
US equity markets fell yesterday, led by a 3% decline in the Nasdaq, extending their losses after Fed Chair Powell reiterated that the central bank will keep interest rates on hold for now as it assesses the inflationary consequences of Trump’s tariffs. US bonds rallied (yields fell) as stocks sold off, while the dollar lost ground to the yen and Swiss franc but held its own against the euro and gained ground against sterling. Ahead of the ECB rate announcement later today – a 25bps cut in the deposit rate looks a near certainty – the euro is trading a little north of $1.1350 against the dollar and just below £0.86 against sterling. The pound is trading at around $1.3250 against the dollar, up from yesterday’s low of about $1.32.
Yesterday’s Events
US bond yields fell by 5-8bps amid the decline in equity markets, while UK and German yields were flat to marginally lower on the day. European stocks are a touch at the start of play this morning having ended largely unchanged yesterday, while US stocks look set to open in positive territory later according to the futures market.
In his remarks yesterday, Powell said “tariffs are highly likely to generate at least a temporary rise in inflation”, but acknowledged that the “inflationary effects could also be more persistent”. He said the Fed’s “obligation” is to “make certain that a one-time increase in the price level does not become an ongoing inflation problem,” while also admitting that it is likely to find itself “in the challenging scenario” (in terms of setting interest rates) where inflation and unemployment are both rising at the same time.
The Day Ahead
Today’s ECB rate decision seems fairly straightforward. The tariffs imposed by the US on the EU will dampen growth and inflation in the Euro area, at a time when the former is already subdued and the latter is already running very close to the 2% target, while the recent appreciation of the euro, which may have taken the ECB by surprise, will exacerbate these effects. So another 25bps cut in the deposit rate (to 2.25%) looks a near certainty, with further reductions likely over the coming months.
It’s relatively quiet in terms of economic data today, with housing starts/building permits and the regular weekly jobless claims due in the US.
Dealer Comments
Today's Talking Points 25.04.2025
Market Commentary
Equity markets advanced again and bond yields fell yesterday, helped by rate cut talk from Fed and ECB members, though there wasn’t a whole lot of movement in the main currency pairs. The euro is a touch softer against both the dollar and sterling this morning, at around $1.1350 and £0.8530 respectively, while sterling is holding its own against the dollar, trading at around $1.33.
Yesterday’s Events
The short-end led the decline in bond yields with US and German 2-yields falling by 6-8bps, while 10-year yields were 5-6bps lower on the day. European stocks added almost 0.5% and US indices closed with gains of up to 3%, while Asian equities are higher overnight.
Fed members Waller and Hammack said they are prepared to lower interest rates if the US economy and labour market weaken due to the impact of tariffs, with Hammack suggesting the Fed could move as soon as the next but one meeting in June if the data pointed in that direction. Meanwhile, ECB member Rehn said that if forecasts show inflation falling “below our 2% inflation target, then the right reaction is to cut rates further,” adding that a 50bps reduction shouldn’t be ruled out.
Retail sales data released in the UK a short while ago show volumes rose by 0.4% in March (the consensus forecast was for a decline of around 0.4%), while the February outturn was revised down to a gain of 0.7% (from 1%). For Q1 as a whole, sales volumes rose by 1.6% from Q4’24 and by 1.7% on the corresponding quarter last year. The increase in spending will contribute positively to Q1 GDP growth, which looks to have picked-up quite strongly from the final quarter of 2024.
The Day Ahead
It’s a quiet end to the week in terms of economic data, with final readings for the University of Michigan measures of April consumer confidence and inflation expectations due in the US.
24 Apr 2025
Market Commentary
It was another generally positive session in markets yesterday. Stocks advanced again albeit the main US indices finished off their very best levels of the day. The dollar also recovered some more ground although its gains were fairly modest. The euro is trading at about $1.1375 against the US currency this morning, while the pound is hovering around the $1.33 level, leaving EURGBP little changed from this time yesterday morning at £0.8550.
Yesterday’s Events
In government bond markets, 2-year yields rose (+5-8bps) amid some paring back of central bank rate cut expectations. The market is currently pricing in about 65bps of cuts from the ECB by the end of this year, almost 90bps from the Bank of England (including a very high probability of a 25bps reduction at next month’s meeting), and some 75bps from the Fed (with a 25bps cut not fully priced until the July meeting). In equity markets, European stocks gained almost 3%, while the Nasdaq led the way in the US advancing by 2.5%.
Flash PMIs for April show growth slowing in the US, a stagnant economy in the Euro area, and declining output in the UK, with tariffs and tariff-related uncertainty weighing on activity in all three. Similarly, the Fed’s latest Beige Book reports that the economic outlook in the US has “worsened considerably as uncertainty, particularly surrounding tariffs”, has increased. It also notes that firms expect “elevated input cost growth resulting from tariffs,” with “most businesses” expecting to pass through additional costs to customers.
ECB President Christine Lagarde says the impact of US tariffs on the Euro area economy is “probably…going to be disinflationary more than inflationary,” noting (once again) that – given its trade war with the US – China “will want to reroute its exports somewhere, possibly to Europe (which) would have a dampening impact on prices.” Meanwhile, her Bank of England counterpart, Andrew Bailey, says “we have to take very seriously the risk to growth” from increased tariffs, noting that “it’s not just the relationship between the US and the UK, it’s the relationship between the US, the UK and the rest of the world that matters because the UK is such an open economy.”
The Day Ahead
For the day ahead, economic data include weekly jobless claims, capital goods orders, and second-hand homes sales in the US, while a number of ECB members are due to speak over the course of the day.
23 Apr 2025
Today's Talking Points 23.04.2025
Market Commentary
There was a positive tone to markets yesterday as trading got back into full swing following the Easter holiday, helped by comments by the US Treasury Secretary who said the ‘trade war’ with China needed to “de-escalate”. Donald Trump also chipped in late in the day, saying he had “no intention” of firing Fed Chair Powell (though it’s not clear he can in any case) while again calling for the central bank to lower interest rates. US stocks rallied strongly, US bond yields eased back from Monday’s highs, while the dollar recovered substantial ground. The euro is trading back at $1.14 and sterling has slipped to around $1.33, both well off Monday’s best levels, while EURGBP is a touch softer this morning at around £0.8550.
Yesterday’s Events
US equities closed about 2.5% higher on the day, reversing a large portion of Monday’s fall, and Asian stocks have chalked up solid gains overnight, while European indices have opened well in positive territory (+2%) this morning having added around half a percent yesterday. In bond markets, US 10- and 30-year yields have fallen back by around 5bps and 10bps respectively from Monday’s close.
It is no surprise at all that the IMF in its latest projections has lowered its forecasts for the global economy, noting than an “abrupt increase in tariffs (and) a surge in policy uncertainty will slow growth significantly.” It expects world GDP growth of 2.8% this year and 3% next year, a cumulative downgrade of around 0.8 percentage points relative to its January 2025 forecasts but “still well above recession levels”. For the US, the IMF says tariffs represent a supply shock that will reduce growth and increase price pressures “temporarily”. It has revised down its forecast for growth this year by almost 1 percentage points to 1.8%, and raised up its forecast for CPI inflation from 2% to 3%. For US trading partners, tariffs act mostly as “a negative external demand shock” that will weaken growth, including in the Euro area economy which the IMF sees expanding by 0.8% this year, revised down from around 1% previously.
The Day Ahead
Looking to the day ahead, economic data releases include the flash PMIs for April in the main economies; construction output in the Euro area; and new home sales in the US. The Fed publishes its latest Beige Book, a summary of economic and business conditions across the US.
22 Apr 2025
Today's Talking Points 22.04.2025
Market Commentary
US equities, bonds and the dollar sold off in tandem during yesterday’s session. This followed comments by Donald Trump strongly criticising the Fed (and its Chair Jerome Powell in particular) for not lowering interest rates, which obviously raises concerns about the central bank’s independence in setting monetary policy and in turn erodes already fragile confidence in US assets. The euro is trading just north of $1.15 against the dollar this morning (levels last seen in late 2021), and sterling is up to around $1.34 (matching its 2024 highs last September), having closed out last week at around $1.14 and $1.33 respectively. This in turn sees EURGBP hovering just below £0.86, little changed from last week’s close.
Yesterday’s Events
US long-dated bond yields rose sharply yesterday with 10-and 30-year yields both increasing by more than 10bps, though 2-year yields fell by about 5bps. European yield curves are also steeper at the start of play today, with 2-year yields lower but yields further out flat to marginally higher. In equity markets, the main US indices shed around 2.5%, while European equity markets have opened slightly lower this morning.
As widely expected, the ECB lowered the deposit rate by 25bps to 2.25% following last Thursday’s Governing Council meeting. It said that “downside risks to economic growth have increased”, with the “major escalation in global trade tensions” likely to lower euro area growth by dampening exports, and also cited a number of downside risks to inflation, including falling global energy prices, the appreciation of the euro, and adverse financial market reactions to global trade tensions (which could weigh on domestic demand and hence also lower inflation). Rate cut expectations firmed post the meeting, with the market pricing in the best part of a further 75bps reduction in the deposit rate by the end of this year.
The Day Ahead
Looking to the week ahead, the main releases of note are the flash PMIs for April in the main economies, due tomorrow (Wednesday), while Euro area consumer confidence is scheduled for today and UK retail sales for Friday. The IMF publishes its latest World Economic Outlook later today.
17 Apr 2025
Today's Talking Points 17.04.2025
Market Commentary
US equity markets fell yesterday, led by a 3% decline in the Nasdaq, extending their losses after Fed Chair Powell reiterated that the central bank will keep interest rates on hold for now as it assesses the inflationary consequences of Trump’s tariffs. US bonds rallied (yields fell) as stocks sold off, while the dollar lost ground to the yen and Swiss franc but held its own against the euro and gained ground against sterling. Ahead of the ECB rate announcement later today – a 25bps cut in the deposit rate looks a near certainty – the euro is trading a little north of $1.1350 against the dollar and just below £0.86 against sterling. The pound is trading at around $1.3250 against the dollar, up from yesterday’s low of about $1.32.
Yesterday’s Events
US bond yields fell by 5-8bps amid the decline in equity markets, while UK and German yields were flat to marginally lower on the day. European stocks are a touch at the start of play this morning having ended largely unchanged yesterday, while US stocks look set to open in positive territory later according to the futures market.
In his remarks yesterday, Powell said “tariffs are highly likely to generate at least a temporary rise in inflation”, but acknowledged that the “inflationary effects could also be more persistent”. He said the Fed’s “obligation” is to “make certain that a one-time increase in the price level does not become an ongoing inflation problem,” while also admitting that it is likely to find itself “in the challenging scenario” (in terms of setting interest rates) where inflation and unemployment are both rising at the same time.
The Day Ahead
Today’s ECB rate decision seems fairly straightforward. The tariffs imposed by the US on the EU will dampen growth and inflation in the Euro area, at a time when the former is already subdued and the latter is already running very close to the 2% target, while the recent appreciation of the euro, which may have taken the ECB by surprise, will exacerbate these effects. So another 25bps cut in the deposit rate (to 2.25%) looks a near certainty, with further reductions likely over the coming months.
It’s relatively quiet in terms of economic data today, with housing starts/building permits and the regular weekly jobless claims due in the US.