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Macroeconomic & Geopolitical

May Macro Dashboard

24 May 2019 - 14 min read

Global growth activity is slowing, but remains healthy. Global central banks appear to be aligned in either a dovish or neutral mode. Recent risk-off market activity has pushed the USD higher, putting downward pressure on commodity pries. Trade war is still top of mind.


Global growth activity is slowing, but remains healthy. The OECD lowered its global growth forecast to 3.2% in May from 3.5% in November.

  • U.S. – Above consensus GDP growth in 1Q19 has forecasters looking for some give back in 2Q19, but the economy remains supported by solid consumption, tax cuts and fiscal spending. The U.S. economy is leading global growth, while the Eurozone and China continue to look for stabilization. Leading indicators, though weaker, and a robust employment situation signal continued expansion, yet rates markets hint at future growth concerns.
  • Europe – Growth momentum in the Eurozone appears to be stabilizing, but downside risks remain. Domestic demand and services have been resilient amid a solid labor market, while external demand and manufacturing remain weak. Ongoing trade uncertainty weighs on the outlook as does the still unresolved Brexit issue.
  • Japan – 1Q19 GDP unexpectedly grew, however, the strong headline number masked underlying weakness as the biggest growth contributors were net trade (reflecting a drop in imports, not strength in exports), higher public investment and inventory building. Personal consumption and investment declined. Downside risks are still present from trade uncertainty and weakness in other Asian economies.
  • China – Growth surprised to the upside in 1Q19, driven by expansionary monetary and fiscal policy. Recent economic data has been weaker than expected and trade tensions have risen, elevating concerns that the lower growth trend may resume.


Global central banks appear to be aligned in either a dovish or neutral mode.

  • Fed – Neutral policy stance as they await resolution on uncertainties. Persistent low inflation could increase chances of a rate cut.
  • ECB – Policy to remain on hold as financial conditions are easy. Balance of risks are tilted to the downside.
  • BOE – Would like to tighten policy to combat rising domestic cost pressures, but still on hold with outlook clouded by Brexit uncertainty.
  • BOJ – No change in yield curve control targets, but inflation goal remains elusive. Pace of JBG purchases is expected to slow.
  • PBOC – Monetary policy stance shifting to neutral following fiscal and credit stimulus aimed at boosting economic growth.


Rates markets are currently pricing in a ~75% chance of a Fed rate cut in December 2019. The 2s/10s UST spread has flattened to 17 bps from
23 bps at the end of April. 10-year Bund and JGB yields are still in negative territory. Global inflation remains low, providing central banks time
and flexibility on policy moves.


Recent risk-off market activity has pushed the USD higher, putting downward pressure on commodity prices. The burden is on China to
depreciate its currency and a breach of 7 on the CNY/USD exchange rate is widely viewed as a key level to monitor as China adjusts policy to
counter trade tensions and growth issues. The recent decline in oil prices has been driven by expectations of lower demand, rising inventory
levels and limited supply disruptions. Weakness in industrial metals prices reflect USD strength and increasing global growth worries.


  • Trade war escalation between the U.S. and China via additional tariffs creates new downside risks and should delay a potential resolution.
  • White House officials and congressional leaders need to reach agreement on a budget deal to suspend the debt ceiling and lessen the chance of a government shutdown later in the year.
  • U.K. PM May is introducing a new plan to resolve the Brexit impasse, but skepticism still reigns.
  • Wild Cards: New Russian sanctions; Iran, North Korea; Venezuela, EU parliament elections on May 23-26

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