Inflation: Fade the policy response for now – TDS

Research Team at TDS expects global headline inflation to pick up sharply in 2017H1 primarily via energy-led base effects.

Key Quotes

“We expect central banks to look through this transitory impact and focus on weaker underlying inflation. Eventually, upside risks to inflation will be acknowledged, but not until deeper into 2017.”

“The global growth pickup for 2017 is less about organic growth and more about recovery, and risks for the U.S. outlook are wide on both sides.”

“Market: USD strength against EUR, NZD, and AUD near term as the Trump-fuelled euphoria will fade. Enter broader reflation trades from better levels such as Long EURJPY and short EURSEK, and we look for an extended GBP recovery later in the year. Fade any significant rise in UK & EUR short-end spreads via 1y1y/1y flatteners. Hold GE 5s30s & look to enter 10s30s steepeners. 2y NZ-AU Wideners. Long 10y Tips B/Es.”