Archive

US vs EU

• European leaders are underestimating Donald Trump’s animus towards the EU and his readiness to do Europe down as part of his zero-sum MAGA agenda. Spurred by the tech titans, he will target the EU’s regulatory strength and trade. Europe’s likely response remains uncertain.

By Alastair Newton

Inflation Peak From Festive Germany

• The final Euro area inflation print for December confirmed the headline rise to 2.4%, albeit with energy contributing a bit more, offset by even less from food prices.
• Germany drove the rise amid much higher package holiday prices this year. Its median increase also remained too high, almost matching the UK's above 3% annualised.
• December still looks set to be the peak. Falls in the following two months may not be enough to regain the target as services inflation persists at uncomfortable heights.

By Philip Rush

HEW: Respite From Hawkish Pressures

• Data releases skewed slightly softer this week, with UK inflation and GDP disappointing on statistical effects. US CPI news was marginal, yet the failure to exceed expectations drove dovish moves. Korea and Indonesia surprised by holding and cutting, respectively.
• Next week’s policy focus is the BOJ, where expectations for a hike were raised by recent guidance. The flash PMIs and UK labour market data are our highlights on the economic data calendar.
• Note: Smartkarma became our research portal in January, so clients should set their login details to maintain smooth access (send queries to transition@smartkarma.com).

By Philip Rush

Korea: Policy Rate Held At 3.0% (Consensus 2.75%) in Jan-25

• The Bank of Korea maintained its base interest rate at 3.00%, defying market expectations of a 25bp cut, citing stabilising inflation and heightened risks from domestic political instability and exchange rate volatility.
• Domestic economic recovery remains fragile, with weak consumption and investment trends, while external challenges, including US protectionist policies and strong dollar dynamics, further constrain growth prospects, projected at 1.9% for 2025.
• Future rate cuts will depend on balancing inflationary stability, financial risks, and economic uncertainties, with the Bank signalling a cautious approach to monetary easing amid volatile domestic and international conditions.