May, 26 2016 by lsr team

The surprise rise in the yen and the less surprising rise in the euro this year have removed Ms. Yellen’s international concerns about why she should not be hiking interest rates. Specifically, a dollar spike now seems least of our concerns… Our Chief Economist, Charles Dumas talks us through the domestic conditions in the US and Euro area and the risks of rising bond yields by next year. These issues will be further discussed in our upcoming LSR View, stay tuned!  

September, 22 2015 by lsr team

In a recent note, we highlighted increasing EM political risk. Emerging markets constitute the ‘deflationary’ leg of our ‘deflationary boom’ forecast for the global economy. But heightened political risk is not just an emerging markets issue. Greece, for example, just held its third election in nine months. In Spain the rise of two new reformist parties, Podemos and Ciudadanos, effectively ensures that a coalition government will emerge from November’s election. Australia has had four prime ministers in 27 months whereas the previous four premi...

September, 01 2015 by lsr team

The yuan’s relatively small depreciation cannot explain its huge impact on investors’ attitudes. Rather, it served as a reminder of the persistent, powerful global deflationary trend. In the UK context, sterling strength has amplified global deflationary pressure on UK economy. Our analysis suggests that currency strength alone will have been sufficient to push annual CPI inflation around 0.5% lower today than it otherwise would have been. Along with large falls in energy prices, global deflation has done more than enough to contain any pick-up in inflation t...

July, 30 2015 by lsr team

Recent comments by various MPC members and last week’s MPC minutes make next week’s Quarterly Inflation Report an interesting event to watch. Since the recovery began in mid-2013, policy discussions have centred on the debate between the economy’s cyclical strength and structural weakness in the labour market. Labour market conditions, however, have improved over the past year with a sharp rise in employment and wage inflation picking up. The UK’s domestic recovery is becoming increasingly solid, but is still vulnerable to external weakness, mostl...

July, 27 2015 by lsr team

The minutes from July’s RBA meeting confirmed a cautiously dovish monetary stance. Given the subdued inflationary pressures- reflecting sluggish growth and a weak labour market, the downward pressure on policy rate should persist, at least in the near term. At the same time, Governor Stevens is under pressure to protect the economy from a lack of fiscal drive. The end of Australia’s commodity supercycle has far-reaching fiscal implications: government finances are stuck in chronic deficit and foreign debt build up is accelerating. Click below to find out...