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China - April data show hit from trade war pre-Geneva
April data confirm hit from trade war escalation last month. Growth momentum expected to pick up again following Geneva truce, but uncertainty remains.
The Week Ahead - 19 - 23 May 2025
These are the Key Macro Events for the upcoming week.
FX Weekly - New USD/CNY forecasts
Tariff de-escalation supports US dollar versus FX majors. This comes at a time when the dollar was already recovering. The recovery could continue, but we expect the long-term downtrend in the dollar to remain in place. We downgrade USD/CNY from 7.80 to 7.30 for end-2025.
Macro Watch - Well, that de-escalated quickly
This morning, China and the US announced a significant de-escalation in the trade war, bringing the bilateral tariffs of 145% (on Chinese exports) and 125% (on US exports) down to 30% and 10% respectively.
ESG Economist - Increasing our security could come at an environmental cost
As geopolitical fears mount, EU countries are discussing options to ramp up defence spending. Currently, there are three options: finance it with debt, raise taxes and/or cut spending elsewhere, or use EU programmes.
The Week Ahead - 12 – 16 May 2025
These are the Key Macro Events for the upcoming week.
Bank of England – High inflation expectations to keep rate cuts slow and gradual
The Bank of England lowered interest rates today by 25bp, taking Bank Rate to 4.25%, as was widely expected. More surprising was the vote split, with two members voting for a larger 50bp cut, and two others voting for no change at all. We expect the BoE to continue cutting at a quarterly pace for the time being, with Bank Rate to settle at an elevated 3.5% in 2026.
Fed Watch - No rate cut in sight
As expected, the Federal Reserve kept rates on hold today, maintaining the upper bound of the federal funds rate at 4.50%. The key update in the policy statement was that uncertainty about the outlook has increased further. Risks of higher unemployment and higher inflation have risen. Powell acknowledged that Trump's tariffs were higher than anticipated but noted that tariff talks are currently in a new phase of negotiations, which could change the picture materially, or not. Powell reiterated that the only response to this level of uncertainty is to wait and see, and that the Fed is well-positioned to react in a timely manner.
ESG Economist - EU mulls softening climate ambitions
The European Commission is considering softening its 2040 emission reduction target according to reports. The EC may stick to a proposal for a 90% reduction by 2040, but make the emission reduction back-loaded with a slower pace to 2035. This target would be consistent with a carbon budget of around 1.7 degrees, even assuming an improbable collapse in emissions post 2035. In fact, even a 95% reduction would no longer be consistent with a 1.5 degree pathway given current emission trends. Meanwhile, the use of carbon credits to meet targets may also be allowed, which could push down on ETS prices, blunting incentives. It also seems likely that targets for 2030 and beyond will in any case be missed, which would make any 2040 ambition more difficult to be met.
China steps up support, trade talks coming up
China Macro: PBoC cuts policy rates and bank RRRs, and presents some targeted lending measures. US-China trade talks to start soon.