Top of the Morning: CEO Macro Briefing Book - Themes for 2H25
At a Glance
The desk interprets the recent insights from UBS's macro briefing to highlight a concern over policy convergence in the latter half of 2025, framing it as critical for institutional traders. According to the commentary, the anticipated rise in inflation, driven in part by tariffs, could lead to increased business pressures and market volatility, as inflation expectations inch towards 3%, disrupting the disinflationary trends seen over the past two years (Per the full note source). The desk emphasizes that traders should remain vigilant and flexible in anticipation of policy changes that could impact currency markets, particularly as market resilience is challenged by these inflationary pressures.
Key Takeaways
- 01Macro policy convergence is critical; focus on tariff impacts and rising inflation.
- 02Anticipated core inflation reaching 3% disrupts current disinflation trends.
- 03Market resilience may weaken with increasing business pressures from inflation.
- 04Traders need to remain vigilant and adjust strategies accordingly.
Full Analysis
What the desk is arguing
The desk frames the second half of 2025 as a pivotal period characterized by macroeconomic policy convergence, which there is a risk of being overshadowed by rising inflation. Per the source discussion, the beginning of the year saw markets cautiously waiting for economic shifts under new policies, particularly regarding tariffs and their disinflationary impacts, which have started to complicate the broader market landscape.
Evidence suggests that inflation, having surprised to the downside earlier this year, is now expected to rise, with core inflation projected to reach 3%. This could lead to strategic shifts for businesses and, subsequently, currency traders as they adjust to a potentially new economic environment influenced by these evolving conditions.
Where it sits in our coverage
Our consensus target for the currency pair under review sits at 1.075, with an aligned firm such as JPMorgan targeting 1.10 for March 2026, while BofA holds a more bearish stance with a target of 1.04 for the same period.
This positioning indicates divergence within the market, where jpmorgan sits above the consensus and bofa reflects a more cautious outlook. The desk’s interpretation aligns closely with the consensus expectations, suggesting traders prepare for potential volatility as inflationary pressures mount.
How other firms see it
Consistently cautious firms are aligning their views with the macro outlook presented, while contrasting positions can be noted from companies like bofa, which expresses a more pessimistic view around inflation and tariffs. Such divergence in forecasting can highlight potential opportunities or risks in currency pairs affected by these themes.
Key pairs to monitor include those that might correlate with shifts in U.S. monetary policy and inflation expectations, particularly USD/JPY, given its high sensitivity to interest rate changes.
Market Implications
Traders should closely watch the 1.075 target level, as movements around this mark could indicate broader market sentiment shifts. Inflation data releases in the coming months will be pivotal in shaping expectations.
From the original
Paul drops by the studio to outline the key themes that business owners should be mindful of throughout 2H25. We also cover the evolving macroeconomic environment, and discuss what a lower rate environment could mean for business owners. Featured is Paul Hsiao, Asset Allocation A
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