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16/03/17
Eurozone
Eurozone bond bombshell

Eurozone bond yields continue to lag the improvement seen across the economy and the improvement in the global inflation outlook.…

07/03/17
Emerging Markets
The greenback and EM FX

We have argued that the greenback’s multi-year bull-run might last a couple more months. But it is over or ending.…

16/02/17
Europe
ECB – defending the old ground

While we don’t think we’re on the cusp of persistently fast Eurozone inflation, the ECB’s price forecasts materially understate the…

Eurozone: Eurozone bond bombshell

Eurozone bond yields continue to lag the improvement seen across the economy and the improvement in the global inflation outlook. That will force the ECB to move towards policy normalisation next year. This year’s European election cycle will pass without the feared populist victory (already seen in the Netherlands) which will reinforce this theme. We add French bond shorts to our existing German, Italian and Irish positions to position for this.

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Emerging Markets: The greenback and EM FX

We have argued that the greenback’s multi-year bull-run might last a couple more months. But it is over or ending. The result will be a major turning point in the euro starting mid-year. It is likely to reach EUR/USD 1.14-1.20 within a year after that. It is also time to look for some emerging market positions where yields are high, fundamentals not too awful and a declining US dollar might boost the price of their exports. Brazil, Russia and Argentina stand out.

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Europe: ECB – defending the old ground

While we don’t think we’re on the cusp of persistently fast Eurozone inflation, the ECB’s price forecasts materially understate the impact of current trends. While that’s fine for now, by the time the ECB’s current asset purchase programme expires, changes to the medium-term inflation outlook will warrant a more hawkish appraisal. Short-rates look too low on that basis. This should also continue to feed into higher long-term rates. We remain short bunds and Italian and Irish 10yr bonds. This will also become positive for the euro at a time when the supremacy of the US dollar is at risk from the uncertainties of Trumpism.

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