It’s a swoosh! The global data flow continues to point upward but the pace of normalisation is slowing down. See for instance the deceleration in US private payroll growth and retreat in Euro area PMIs (although still in expansion territory 1/8
This calls for policy support beyond the emergency packages. The French recovery plan participates to this. But at the same time we are surprised by fiscally disciplinarian noises emerging here and there 2/8
The UK is breaking ranks with a debate heating up on tax hikes next year already. We interpret this as the concerns in some segments of the UK government about the status of the UK in international markets post hard Brexit 3/8
On this front what is remarkable is that one of the main bones of contention with Brussels is on state aid. The interventionist school of thought is winning in London. Quite a remarkable side-effect of Brexit. It’s looking less and less like a libertarian project 4/8
In the Euro area the ECB is explicitly supporting more fiscal action. On Mon Pol we don’t expect hard announcements this week. But the central bank’s strategy will need some clarification. 5/8
The 2-step approach - PEPP as a temporary intense stimulus to offset the immediate impact of the pandemic, then some openness to recalibrating (we hear “increasing”) PSPP down the road is elegant, but as of today PSPP remains more constrained than PEPP. 6/8
It’s probably understandable that the ECB doesn’t want to get into a debate on extending the “limits relaxation” from PEPP to PSPP too early, but the deterioration in the inflation trajectory + Euro appreciation may speed things up 7/8
Full musings here. axa-im.com/content/-/asse… 8/8
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