WEBVTT - Daybreak Weekend: U.S Retail Sales, BOE Meeting, China Data Dump 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.520 --> 0:00:11.960 This is Bloomberg day Break Weekend, our global look at 0:00:12.000 --> 0:00:14.040 the top stories in the coming week from our Daybreak 0:00:14.040 --> 0:00:16.720 anchors all around the world. And straight ahead on the program, 0:00:16.760 --> 0:00:19.760 a look ahead to the latest US retail sales and 0:00:20.000 --> 0:00:22.720 housing starts data what they tell us about the health 0:00:22.720 --> 0:00:26.400 of the consumer and the US economy. I'm Tom Busby. 0:00:26.079 --> 0:00:26.720 In New York. 0:00:27.040 --> 0:00:29.560 I'm Caline Hepkit in London, where we're asking how the 0:00:29.640 --> 0:00:32.879 UK's politics could crossover with monetary policy. 0:00:33.200 --> 0:00:35.800 I'm Brian Curtis in Hong Kong. We look ahead to 0:00:35.840 --> 0:00:38.440 a slew of data in China to see if some 0:00:38.680 --> 0:00:41.160 nascent signs of growth can be extended. 0:00:42.479 --> 0:00:46.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg, 0:00:46.479 --> 0:00:48.960 E Loove, the three Own, New York, Bloomberg ninety nine 0:00:49.000 --> 0:00:52.400 to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:52.479 --> 0:00:57.280 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 0:00:57.440 --> 0:01:00.280 XM one nineteen and around the world on Blue Bomberg 0:01:00.400 --> 0:01:03.000 Radio dot com and via the Bloomberg Business App. 0:01:07.080 --> 0:01:09.360 Good day to you. I'm Tom Busby. We begin today's 0:01:09.360 --> 0:01:11.880 program with some key economic data here in the US. 0:01:12.280 --> 0:01:15.320 On Tuesday, we get US retail sales for the month 0:01:15.360 --> 0:01:18.520 of May at eight thirty am Wall Street Time, and 0:01:18.600 --> 0:01:20.480 for more on what this will tell us about the 0:01:20.480 --> 0:01:23.680 health of the consumer, we're joined by estell O US 0:01:23.760 --> 0:01:27.959 economists with Bloomberg Economics. So, Estelle, what do you expect 0:01:27.959 --> 0:01:30.679 to see in the May retail sales number? The question is, 0:01:30.720 --> 0:01:32.600 are consumers still spending? 0:01:33.080 --> 0:01:38.360 Yeah? So, Tom, we're expecting a tippet rebound in consumers 0:01:38.360 --> 0:01:42.520 spending next week, where we're expecting a point two percent 0:01:42.680 --> 0:01:46.640 increasing the headline retail sales figure and also one point 0:01:46.720 --> 0:01:49.800 two percent in the more important control group figure. And 0:01:49.840 --> 0:01:53.800 this is a very modest rebound from last month's almost 0:01:53.840 --> 0:01:58.080 flat headline figures and also a negative zero point three 0:01:58.120 --> 0:02:02.360 percent decline in the control group. Basically, this is just 0:02:02.760 --> 0:02:05.680 last month we saw a good amount of pullback and 0:02:05.760 --> 0:02:09.480 discretionary spending from consumers as they feel more squeezed from 0:02:09.880 --> 0:02:13.600 higher interest rates. This month, we're expecting a little bit 0:02:13.600 --> 0:02:16.280 more of a rebound, but we're still expecting quite weak 0:02:16.320 --> 0:02:20.520 consumption basically because we're no longer seeing consumers dipping into 0:02:20.560 --> 0:02:23.840 their savings for their purchases, and we're also no longer 0:02:23.840 --> 0:02:27.320 seeing them barring as much in order to finance their 0:02:27.360 --> 0:02:33.200 purchases either. So overall we're expecting modest rebound but still 0:02:33.240 --> 0:02:34.000 weak spending. 0:02:34.280 --> 0:02:37.760 But people are still buying, and so my question is 0:02:37.840 --> 0:02:39.800 what are they buying? I mean, they have to eat, 0:02:40.120 --> 0:02:43.960 so the obviously they have to buy groceries, they dine out, 0:02:44.240 --> 0:02:48.360 but maybe are people going to lower price point restaurants. 0:02:48.440 --> 0:02:50.800 Are they going to discount stores instead of you know, 0:02:50.840 --> 0:02:54.760 the big supermarket. How have the high prices changed things 0:02:54.760 --> 0:02:55.239 for people? 0:02:55.680 --> 0:02:58.760 Right? That's definitely something we're seeing. We've been seeing consumers 0:02:58.800 --> 0:03:02.120 pull back from you know, more expensive, big ticket items 0:03:02.120 --> 0:03:04.720 for a while now, but they have been spending on 0:03:04.840 --> 0:03:09.680 food service and drinking places more so than any other category. 0:03:10.360 --> 0:03:13.360 But we do expect that to pull back as well 0:03:13.360 --> 0:03:17.560 because recently we've been seeing some increases in food services 0:03:17.600 --> 0:03:22.000 prices as well. So overall, consumers will continue to spend 0:03:22.080 --> 0:03:26.359 on services and essential goods. They have been moving towards 0:03:26.560 --> 0:03:30.280 or value goods, but overall we expect a general slow 0:03:30.360 --> 0:03:32.080 down in almost all categories. 0:03:32.840 --> 0:03:35.680 So my next question is what are people not buying? 0:03:35.840 --> 0:03:38.480 I mean, is I know, gasoline is down there's been 0:03:38.480 --> 0:03:41.600 lower demand. How about automobiles a big expense for a 0:03:41.640 --> 0:03:43.840 lot of people, both new and used cars. 0:03:44.360 --> 0:03:48.240 Right, So, actually, consumers had been holding off on automobile 0:03:48.560 --> 0:03:51.480 purchases for quite a while because you know, everyone's waiting 0:03:51.520 --> 0:03:54.040 for interest rates to fall a little bit so that 0:03:54.320 --> 0:03:57.960 automobiles can be a little more affordable. But recently we've 0:03:58.000 --> 0:04:02.320 seen trends where auto deals are actually offering more discounts 0:04:02.360 --> 0:04:05.360 as they noticed that consumers aren't really able to afford 0:04:05.400 --> 0:04:08.440 the sky high prices we saw over the past two years. 0:04:08.560 --> 0:04:12.280 So actually, this month, we're expecting sales in the auto 0:04:12.320 --> 0:04:15.640 sector to pick up quite a bit, but that's mostly 0:04:15.680 --> 0:04:18.440 going to be offset by pull back in other categories. 0:04:18.760 --> 0:04:22.400 So you know, if I'm thinking about my own purchasing trends, 0:04:22.600 --> 0:04:24.719 if I have to buy a car this month, I 0:04:24.880 --> 0:04:27.839 tend to just pull back on my other purchases just 0:04:27.880 --> 0:04:28.560 for this month. 0:04:28.760 --> 0:04:34.160 Yeah, non necessities like clothing you mean, or experiential things. Yeah, exactly, 0:04:34.480 --> 0:04:38.960 not Taylor Swift fans, but concerts, ballgames, movies. I guess 0:04:39.040 --> 0:04:41.440 those things are going to people maybe going to dial 0:04:41.480 --> 0:04:41.960 back a bit. 0:04:42.839 --> 0:04:43.039 Now. 0:04:43.120 --> 0:04:45.520 You mentioned in April we got kind of a nasty surprise, 0:04:45.600 --> 0:04:49.279 retail sales flat that month, but core consumer prices in 0:04:49.320 --> 0:04:52.520 April and May did decelerate a little bit. May's year 0:04:52.520 --> 0:04:54.839 over year price index up just three point four percent. 0:04:54.920 --> 0:04:58.000 What kind of boost do you think that if there 0:04:58.000 --> 0:05:01.480 are signs inflation is moderating, what will it booths? Will 0:05:01.480 --> 0:05:02.320 it give consumers? 0:05:02.760 --> 0:05:07.600 Right? So, I think the slower CPI data we saw 0:05:07.680 --> 0:05:12.880 in May is directly a reflection of retailers slashing prices 0:05:12.920 --> 0:05:16.160 in order to entice consumers to spend more, because, like 0:05:16.200 --> 0:05:20.320 I said, they're noticing consumers being squeezed, so in order 0:05:20.440 --> 0:05:24.000 to bring that demand back up there, a lot of 0:05:24.440 --> 0:05:27.440 retailers are slashing prices and that should be supportive for 0:05:27.520 --> 0:05:30.880 consumers and help them get through this rough patch that 0:05:30.920 --> 0:05:32.080 we're anticipating. 0:05:32.520 --> 0:05:36.479 Also, sales are good now if employment remains solid, we 0:05:36.520 --> 0:05:39.080 continue to see inflation moderate like we saw in April 0:05:39.080 --> 0:05:41.160 and May. Do you think that sets the stage for 0:05:41.200 --> 0:05:44.080 the Fed to begin cutting interest rates as early September? 0:05:44.160 --> 0:05:47.239 And with that, how do you expect to see retail 0:05:47.279 --> 0:05:49.320 sales the rest of the summer. I mean, we're just 0:05:49.360 --> 0:05:52.320 getting into it now, it's the middle of June. What 0:05:52.360 --> 0:05:53.960 does it look like for the rest of the summer 0:05:53.960 --> 0:05:54.320 to you. 0:05:55.040 --> 0:05:57.440 Essentially big picture is that the tail winds we've been 0:05:57.480 --> 0:06:01.640 seeing from consumers dipping into their savings should fad as 0:06:01.680 --> 0:06:04.719 we go through the summer. In terms of rate cuts, 0:06:04.839 --> 0:06:08.159 as long as inflation continues to trend lower. We do 0:06:08.279 --> 0:06:11.000 think that the Fed will cut rates in September and 0:06:11.080 --> 0:06:16.760 that will obviously alleviate some of the financing pressures consumers 0:06:16.800 --> 0:06:17.479 have been feeling. 0:06:17.839 --> 0:06:20.159 Well, a lot to look forward to. Then, retail sales 0:06:20.240 --> 0:06:22.120 data for the month of May out on Tuesday in 0:06:22.160 --> 0:06:26.920 our thanks to Estello US economists with Bloomberg Economics. We 0:06:27.000 --> 0:06:29.720 turn now to housing, where home buying has been hampered 0:06:29.720 --> 0:06:32.599 by record high home prices, mortgage rates at are above 0:06:32.640 --> 0:06:35.680 seven percent, and a limited supply of homes on the market. 0:06:35.960 --> 0:06:38.000 With so few existing homes for sale, a lot of 0:06:38.000 --> 0:06:41.320 would be buyers have resorted to buying new homes with 0:06:41.440 --> 0:06:44.920 mixed results. And this Thursday we get existing home sales 0:06:44.920 --> 0:06:48.120 for May and housing starts for that same month. And 0:06:48.160 --> 0:06:50.960 for more on what to expect, we're joined by Drew Redding, 0:06:50.960 --> 0:06:54.880 Bloomberg Intelligence US home building analysts. Well, Drew, let's start 0:06:54.920 --> 0:06:58.400 with housing starts for May. How are the homebuilders firing. 0:06:58.760 --> 0:07:01.360 What's the market right now for the those newly constructed homes. 0:07:01.800 --> 0:07:05.120 Sure, so, as you would expect, housing starts data continues 0:07:05.160 --> 0:07:08.280 to be volatile month to month, which is partly reflective 0:07:08.320 --> 0:07:11.040 of the demand environment. You know, the strategy for many 0:07:11.080 --> 0:07:14.480 builders out there has been to match supply measured by 0:07:14.520 --> 0:07:17.000 starts with demand. So you've kind of seen that EBB 0:07:17.040 --> 0:07:19.280 and flow with interest rates, and I think some of 0:07:19.280 --> 0:07:22.760 the weakness that we've seen more recently is probably due 0:07:22.800 --> 0:07:25.520 to some of the smaller builders who are getting more cautious. 0:07:26.080 --> 0:07:28.800 That being said, the big builders continue to increase production. 0:07:29.200 --> 0:07:31.040 The other thing that you have to consider is, you know, 0:07:31.040 --> 0:07:33.640 when you look at that headline number, it continues to 0:07:33.680 --> 0:07:37.320 be impacted by weakness in the multifamily sector, where starts 0:07:37.360 --> 0:07:41.200 are falling as completions continue to build. So your to 0:07:41.280 --> 0:07:44.320 date starts are still twenty six percent higher. Of course, 0:07:44.360 --> 0:07:47.520 the comps get a little bit more difficult, but broadly speaking, 0:07:47.560 --> 0:07:50.760 we think that the trajectory for single family housing is 0:07:50.800 --> 0:07:51.440 still higher. 0:07:51.760 --> 0:07:54.400 And is the boom still going on in the Sun 0:07:54.440 --> 0:07:56.880 Belt States more than anywhere else or is this a 0:07:57.080 --> 0:07:58.800 nationwide building boom. 0:07:58.960 --> 0:08:01.280 That's a great question. I mean the performance within the 0:08:01.320 --> 0:08:04.160 new home market has been pretty solid across much of 0:08:04.200 --> 0:08:06.800 the US, But as you look around the country of 0:08:06.800 --> 0:08:09.120 the last year year and a half, you have seen 0:08:09.200 --> 0:08:12.560 markets kind of cycle in and out of favor. For example, 0:08:12.680 --> 0:08:15.440 when Race really started to rip higher back in the 0:08:15.520 --> 0:08:18.160 second half of twenty two. Some of the higher cost 0:08:18.280 --> 0:08:22.640 markets in the West, like California, Washington, Arizona, Colorado, we're 0:08:22.720 --> 0:08:25.480 very hard hit, and we're starting to see them rebound 0:08:25.520 --> 0:08:28.640 more solidly. On the other hand, you have some of 0:08:28.680 --> 0:08:32.360 the markets with leaders and you know, Florida comes to mind, 0:08:32.760 --> 0:08:35.400 and we're starting to see, you know, some signs of 0:08:36.080 --> 0:08:39.280 yellow lights flashing, if you will, with rising inventories and 0:08:39.320 --> 0:08:42.240 slowing sales. So we are seeing markets kind of go 0:08:42.360 --> 0:08:44.880 in and out of vogue here. And some of those 0:08:44.880 --> 0:08:46.800 hardest hit markets, as I mentioned, are the ones that 0:08:46.840 --> 0:08:48.840 are doing the best. And then there's there tends to 0:08:48.840 --> 0:08:51.320 be a little bit more stability in those in the 0:08:51.360 --> 0:08:55.360 Midwest and Northeast, which are comparatively smaller from a new 0:08:55.640 --> 0:08:56.920 home construction perspective. 0:08:57.200 --> 0:09:00.720 Now you mentioned some of these smaller builders, the big ones, 0:09:00.720 --> 0:09:01.880 the Lenaar's and the d R. 0:09:01.920 --> 0:09:02.360 Horton's. 0:09:02.720 --> 0:09:06.680 What's the challenge for them. Is it the high land prices, 0:09:06.840 --> 0:09:10.760 the high cost of labor, is it finding enough skilled workers? 0:09:10.920 --> 0:09:12.040 What are the big challenges? 0:09:12.320 --> 0:09:18.000 It's all you nail head, you know, the private home builders, 0:09:18.520 --> 0:09:20.920 and just take a step back. You have to remember 0:09:21.000 --> 0:09:24.400 that home building has historically been a very fragmented market. 0:09:24.520 --> 0:09:27.320 Now you have the large public builders for about fifty 0:09:27.360 --> 0:09:29.800 percent of the market, so there has been a share 0:09:29.800 --> 0:09:32.240 shift that's been going on over the last couple of years. 0:09:33.040 --> 0:09:36.040 One of the main issues, in addition to the things 0:09:36.080 --> 0:09:38.640 you cite it for the private builders is really their 0:09:38.679 --> 0:09:42.920 access to capital. You know, they typically work with local 0:09:43.400 --> 0:09:46.559 or regional banks in order to access growth capital, whether 0:09:47.400 --> 0:09:51.360 that's for purchasing land or developing developing that land or 0:09:51.400 --> 0:09:53.640 construction the home. And you know, when you have a 0:09:53.679 --> 0:09:56.800 more uncertain economy as you would expect, there's been somewhat 0:09:56.800 --> 0:09:59.840 of a pullback in lending which has inhibited their ability 0:10:00.280 --> 0:10:02.880 to grow. So it's kind of a scenario where you 0:10:02.880 --> 0:10:06.720 have the haves with the large, well capitalized, publicly traded 0:10:06.800 --> 0:10:12.160 homebuilders who have access to land, labor, and then you 0:10:12.240 --> 0:10:15.480 have the have nots, which is the smaller private piers 0:10:15.559 --> 0:10:18.040 who are struggling to get that growth capital. You know, 0:10:18.080 --> 0:10:20.320 we think that that this dynamic is going to continue 0:10:20.320 --> 0:10:22.560 to play out, and we think that you'll continue to 0:10:22.600 --> 0:10:25.600 see more M and A activity in the space. As 0:10:25.640 --> 0:10:27.480 a result of that, M and A has been pretty 0:10:27.480 --> 0:10:30.319 strong in twenty twenty four, So we would think that 0:10:30.360 --> 0:10:34.280 some of those smaller private companies will continue to you know, 0:10:34.360 --> 0:10:35.920 look to sell as a way to get out in 0:10:36.000 --> 0:10:38.480 a more challenging market, and we think that the large 0:10:38.520 --> 0:10:40.199 publics will scoop some of those guys up. 0:10:40.440 --> 0:10:40.720 Wow. 0:10:40.840 --> 0:10:43.800 Yeah, the rich get richer, the big get bigger. Let's 0:10:43.800 --> 0:10:47.360 switch now to existing home sales. Elevated prices. Interest rates 0:10:47.360 --> 0:10:49.800 have really hurt the market, but what are you looking 0:10:49.880 --> 0:10:51.760 for in those numbers for may. 0:10:51.840 --> 0:10:53.679 So in the near term, we think that the existing 0:10:53.679 --> 0:10:56.000 home market is going to continue to be challenged by 0:10:56.160 --> 0:10:59.640 higher rates. You know, one of the disadvantages the resale 0:10:59.679 --> 0:11:02.520 market has had not only you know a lack of 0:11:02.559 --> 0:11:06.960 inventory at the national level, but the higher rates have 0:11:07.040 --> 0:11:09.040 impacted them greater than it has the new home mark. 0:11:09.080 --> 0:11:11.160 And that's because the builders have been able to buy 0:11:11.240 --> 0:11:14.000 down rates. So you know, we're when we're looking at 0:11:14.480 --> 0:11:17.280 contract signings, we're going to continue to see you know, 0:11:17.320 --> 0:11:20.080 we had rates climb up over seven and a half percent, 0:11:20.200 --> 0:11:22.800 so we think that existing home sales will continue to 0:11:22.840 --> 0:11:25.920 be muted probably through much of the year. That being said, 0:11:25.920 --> 0:11:28.640 as rates start to pull back, you know, we're actually 0:11:28.920 --> 0:11:31.240 have a six handle once again, so you know, a 0:11:31.240 --> 0:11:34.319 lot of volatility. But if rates kind of stabilize in 0:11:34.360 --> 0:11:36.480 that mid six and a half, you know, mid six 0:11:36.520 --> 0:11:38.600 percent range as we get through the year, we think 0:11:38.600 --> 0:11:41.360 that you could build a little bit of momentum, albeit 0:11:41.440 --> 0:11:43.960 off a low base, heading into twenty twenty five. 0:11:44.320 --> 0:11:46.679 So for realtors it may be a tough summer, but 0:11:46.960 --> 0:11:50.360 there is hope on that the FED in September may 0:11:50.440 --> 0:11:52.839 dial back rates a little bit, and you think that'll 0:11:52.840 --> 0:11:54.080 have a big impact on housing. 0:11:54.280 --> 0:11:56.280 Yeah, I mean rates have really been the story and 0:11:56.600 --> 0:12:00.880 buyer's ability to afford home. So, you know, our kind 0:12:00.880 --> 0:12:02.839 of outlook suggests that we could get to that mid 0:12:02.920 --> 0:12:05.800 six percent range by the end of the year if 0:12:05.800 --> 0:12:08.160 we see some stability, which is what I think a 0:12:08.160 --> 0:12:10.680 lot of buyers need in this market, kind of certainty 0:12:10.760 --> 0:12:12.640 that you know, when they're going to look for a home, 0:12:12.679 --> 0:12:14.520 they know what kind of rate they're looking at. You know. 0:12:14.559 --> 0:12:17.600 The other thing to consider is the fact that we've 0:12:17.600 --> 0:12:19.920 been at this elevated rate level for a couple of 0:12:20.000 --> 0:12:22.640 years now, so I think at some point, you know, 0:12:22.720 --> 0:12:26.480 buyers have just become increasingly accustomed to a higher rate. 0:12:26.559 --> 0:12:28.680 So I think over time that starts to help. And 0:12:28.720 --> 0:12:31.400 what it also does is it starts to gradually loosen 0:12:31.840 --> 0:12:34.559 the grip of the mortgage rate lock and effect, which 0:12:34.600 --> 0:12:37.520 has been widely documented where since you're starting to have 0:12:37.600 --> 0:12:40.800 transactions at these higher rates, that starts to loosen a bit, 0:12:40.800 --> 0:12:43.520 which should free up the market gradually into next year. 0:12:43.760 --> 0:12:47.040 Oh boy, well, existing home sales housing starts for the 0:12:47.040 --> 0:12:49.439 month of May, both out on Thursday, are thanks to 0:12:49.559 --> 0:12:54.040 Drew Redding, Bloomberg Intelligence US home building analyst, coming up 0:12:54.080 --> 0:12:56.439 on Bloomberg day Break weekend to look at how politics 0:12:56.480 --> 0:13:00.960 in the UK could impact that country's monetary pol I'm 0:13:00.960 --> 0:13:15.200 Tom Busby and this is Bloomberg. This is Bloomberg day 0:13:15.200 --> 0:13:17.440 Break Weekend, our global look ahead at the top stories 0:13:17.440 --> 0:13:20.160 for investors in the coming week. I'm Tom Busby in 0:13:20.200 --> 0:13:22.760 New York. Up later in our program a look ahead 0:13:22.760 --> 0:13:25.959 to the slate of Chinese economic data out this week 0:13:26.040 --> 0:13:29.240 and what it means for that nation's economic recovery. But first, 0:13:29.520 --> 0:13:32.520 with Prime Minister Rishi Sunak calling for a snap general 0:13:32.520 --> 0:13:36.560 election on July fourth, could Bank of England policymakers really 0:13:36.600 --> 0:13:38.920 be willing to lower borrowing costs for the first time 0:13:38.960 --> 0:13:42.679 since the pandemic as many expected they would? And if not, 0:13:43.280 --> 0:13:45.400 what would a further delay and a rate cut mean 0:13:45.520 --> 0:13:47.960 for investors? For more, let's go to London and bring 0:13:48.000 --> 0:13:51.160 in Bloomberg Daybreak europe Banker Caroline hepgar. 0:13:51.520 --> 0:13:54.560 Tom government and the Bank of England in the UK 0:13:54.679 --> 0:13:57.520 have been separate since nineteen ninety seven, when the Prime 0:13:57.520 --> 0:14:01.840 Minister Tony Blair granted the central bank operational independence. But 0:14:01.960 --> 0:14:07.000 as the markets now adjust to this political general election campaign, 0:14:07.040 --> 0:14:09.800 there could be some crossover in the campaign, or at 0:14:09.880 --> 0:14:13.720 least just after. I've been discussing monetary policy and political 0:14:13.800 --> 0:14:16.240 risk with Jeremy Stretch, who is head of G ten 0:14:16.480 --> 0:14:20.280 FX Strategy at CIBC. He says that what happens in 0:14:20.320 --> 0:14:23.320 government has a big impact on the sort of action 0:14:23.440 --> 0:14:24.800 that central banks can take. 0:14:25.040 --> 0:14:27.440 There is an enormous degree of political uncertainty which is 0:14:27.520 --> 0:14:30.080 playing out in a sense. We've seen obviously something like 0:14:30.080 --> 0:14:32.880 Euri Sterling, where we've seen a substantial move lower in 0:14:32.920 --> 0:14:35.000 the context of the last few sessions, because of course 0:14:35.080 --> 0:14:38.479 the UK political system on a comparative basis, seems remarkably 0:14:38.520 --> 0:14:41.520 resilient compared to what we're seeing elsewhere. Now, that hasn't 0:14:41.520 --> 0:14:43.680 been always the case over the course of the last 0:14:43.720 --> 0:14:47.200 one to five eight years, so in a sense, that's 0:14:47.280 --> 0:14:49.440 quite interesting in that context. But I think what we 0:14:49.520 --> 0:14:51.880 have seen is that US exceptionalism has been the key 0:14:51.960 --> 0:14:54.280 theme over the course of the last year or two. 0:14:54.680 --> 0:14:57.280 The question whether that exceptionalism is going to persist into 0:14:57.320 --> 0:14:59.280 the back end of this unit into twenty twenty five 0:15:00.320 --> 0:15:02.120 up for debate, and I think actually we're going to 0:15:02.120 --> 0:15:05.840 see significant narrowing of growth differentials, and I think that 0:15:05.880 --> 0:15:09.840 plays more positively into the growth and or cyclically correlated currencies. 0:15:09.880 --> 0:15:12.440 But for now, at least, those political risks I think 0:15:12.480 --> 0:15:15.200 are still real and realistic. So that's the reason why 0:15:15.200 --> 0:15:17.400 if you're training Euro over the course of the next 0:15:17.600 --> 0:15:20.280 one two, three, four weeks, you have to look at 0:15:20.280 --> 0:15:22.800 what's happening in the political dynamics and looking at those 0:15:22.840 --> 0:15:25.440 bond spreads relative to buns, and if they push wider, 0:15:25.440 --> 0:15:26.560 then the euro will go lower. 0:15:27.040 --> 0:15:30.440 Is that then an opportunity is regards Sterling, and I'm 0:15:30.440 --> 0:15:33.520 also thinking about where your expectations are around the BOE Well. 0:15:33.520 --> 0:15:35.600 I think Sterling is interesting because, as I say, we've 0:15:35.600 --> 0:15:38.400 seen Sterling gains, but I think the market is perhaps 0:15:38.440 --> 0:15:40.960 to my mind, of for our perspective to c IBC 0:15:41.240 --> 0:15:44.520 underplaying the risks of policies and from the Bank of England. 0:15:44.560 --> 0:15:47.200 So I think we're still underplaying the not the pricing 0:15:47.240 --> 0:15:49.840 for next week's meeting, I think that is realistic or 0:15:50.040 --> 0:15:53.040 far more realistically priced. But I think come the August 0:15:53.080 --> 0:15:55.680 and PC, I think there can and should be a 0:15:55.720 --> 0:15:58.360 strong case for the bank to be starting to ease 0:15:59.080 --> 0:16:01.880 rates at that time. That's not necessarily priced by the 0:16:01.880 --> 0:16:04.400 market at this particular juncture. So I think that's one 0:16:04.440 --> 0:16:07.440 factor which could imply that the Sterling rally that we're 0:16:07.440 --> 0:16:10.720 seeing has and will provide opportunities to start to fade 0:16:10.720 --> 0:16:14.280 that because yes, the political backdrop looks more benign compared 0:16:14.320 --> 0:16:16.640 to what we've seen historically, but I think the data 0:16:16.760 --> 0:16:18.880 and all the Bank of England narrative I think will 0:16:18.880 --> 0:16:21.960 play into the presumption that Sterling long positions I think 0:16:22.000 --> 0:16:24.200 will start to look vulnerable as we go into the 0:16:24.200 --> 0:16:24.840 second half. 0:16:24.680 --> 0:16:28.720 Of the year, Okay, on sterling. Also, we should think 0:16:28.720 --> 0:16:31.160 about the Bank of Japan. It's expected to unwind its 0:16:31.200 --> 0:16:35.240 balance sheet, so basically effectively tightening policy. I mean, this 0:16:35.480 --> 0:16:37.600 is also a kind of major story in terms of 0:16:37.640 --> 0:16:40.960 the carry trade in the Japanese yen doomed to weaken 0:16:41.840 --> 0:16:44.840 under pressure to weaken. We've obviously seen so much policy 0:16:44.840 --> 0:16:46.680 intervention as well, which we've tracked. 0:16:46.960 --> 0:16:49.560 Ultimately, the en has obviously been a consequent all the 0:16:49.560 --> 0:16:51.600 weakness of the end has been a consequence of treasury 0:16:51.680 --> 0:16:54.600 JGB spreads in particular, So in a sense, if we 0:16:54.680 --> 0:16:57.560 are going to see some continued ratcheting down in the 0:16:57.560 --> 0:17:01.200 bond purchase strategy, now we're debating to how significant that 0:17:01.280 --> 0:17:03.400 is going to be at this juncture, but nevertheless, we 0:17:03.440 --> 0:17:06.440 are over time going to see that QT working through 0:17:06.440 --> 0:17:10.040 in Japan. How quickly and how aggressively will that course 0:17:10.119 --> 0:17:13.320 spreads to narrow because of course, ultimately the main driver 0:17:13.440 --> 0:17:16.480 of treasury JGB spreads has been the dollar leg in 0:17:16.600 --> 0:17:19.600 terms of treasuries. But ultimately, if the Japanese are going 0:17:19.640 --> 0:17:22.520 to get treasury l or go to witness treasury eels 0:17:22.520 --> 0:17:25.320 coming down, if we're seeing an easier fed strategy and 0:17:25.440 --> 0:17:27.920 always see some degree of typing then that eventually will 0:17:28.600 --> 0:17:30.879 help to cap the dollar yen story. 0:17:31.119 --> 0:17:31.600 But I think. 0:17:31.560 --> 0:17:35.080 It's still the case that the yen will remain relatively weak. 0:17:35.280 --> 0:17:37.520 I don't think we're necessarily in a situation or a 0:17:37.560 --> 0:17:42.000 juncture where we should be anticipating a substantial reversal in 0:17:42.119 --> 0:17:44.640 yen performance over the course of the next few days 0:17:44.680 --> 0:17:46.159 or weeks. I think it is still the case that 0:17:46.400 --> 0:17:49.119 those Treasury JGB spreads and all the cost of funding 0:17:49.119 --> 0:17:51.879 positions are still so extreme that it is still going 0:17:51.920 --> 0:17:54.040 to be evident that the carriy trade still has some 0:17:54.080 --> 0:17:56.080 more mileage in it in the context of the end 0:17:56.200 --> 0:17:56.919 just yet. 0:17:57.040 --> 0:17:59.320 Just going back to the dollar, then I wonder, how 0:17:59.359 --> 0:18:01.760 are you thinking of the November election and what's the 0:18:01.800 --> 0:18:05.720 sort of potential moves or risks involved there. 0:18:06.400 --> 0:18:08.640 Well, of course that is the elephant in the room 0:18:08.640 --> 0:18:10.320 in the context of when we've been talking about the 0:18:10.320 --> 0:18:13.280 electoral risks in twenty twenty four. Because as we know, 0:18:13.600 --> 0:18:16.600 or we assume that we have two presumptive nominees who 0:18:16.640 --> 0:18:19.719 have not yet been ratified, but we assume that we 0:18:19.760 --> 0:18:22.480 will be facing off as we did four years ago. 0:18:23.400 --> 0:18:26.200 We can assume that if there were to be ask 0:18:26.320 --> 0:18:29.359 resurgence or a re emergence of Republicans in the White House, I, 0:18:29.480 --> 0:18:32.400 mister Trump, then the tax cuts will be made permanent. 0:18:32.400 --> 0:18:35.160 That will be the substantial fiscal easing at the same 0:18:35.160 --> 0:18:38.679 time as significant tariff in position that obviously will be inflationary. 0:18:38.720 --> 0:18:41.440 Now that would be an obvious challenge for the FED 0:18:41.480 --> 0:18:44.800 in the context of twenty twenty five, so the presumption 0:18:44.840 --> 0:18:48.240 of significant monetary using could be tested. But of course, 0:18:48.400 --> 0:18:52.439 even amidst the political uncertainty being a function of the 0:18:52.520 --> 0:18:56.680 US political dynamic, there is still no significant liquid alternative 0:18:56.720 --> 0:18:58.760 to dollars. So in a sense, when we do have 0:18:58.840 --> 0:19:01.760 periods and episodes of political risks, than the dollar still 0:19:01.800 --> 0:19:04.520 tends to generally perform well, even if the US is 0:19:04.520 --> 0:19:07.560 the source of that risk, which seems completely counterintuitive, but 0:19:07.600 --> 0:19:09.600 I can see from the look on your face, Caroline, 0:19:09.640 --> 0:19:11.120 you will also understand that as well. 0:19:11.200 --> 0:19:13.639 Yeah, so I want you to pin your colors to 0:19:13.680 --> 0:19:16.280 the mask. Do you get a Trump dollar rally on 0:19:16.320 --> 0:19:18.080 the back of the election We're here to win. 0:19:18.240 --> 0:19:20.720 Very briefly, well, if you get the scenario where the 0:19:20.720 --> 0:19:24.159 equity market rallies strongly, then that will provide an underpinning 0:19:24.200 --> 0:19:26.200 for the dollar. We still think that the dollar will 0:19:26.280 --> 0:19:27.960 ultimately be cheaper in twenty twenty five. 0:19:28.600 --> 0:19:31.679 That was jermy stretch from CIBC speaking there to me 0:19:31.880 --> 0:19:35.200 and to Stephen Caroell on Bloomberg Radio. I've also been 0:19:35.240 --> 0:19:39.880 discussing how the UK's political situation might affect the upcoming 0:19:39.960 --> 0:19:43.199 Bank of England policy meeting and what that means for 0:19:43.280 --> 0:19:47.360 markets with Bloomberg's chief UK economist Dan Hanson. I started 0:19:47.359 --> 0:19:50.439 by asking him if a change to borrowing costs is 0:19:50.480 --> 0:19:55.320 completely off the agenda before the general election vote on 0:19:55.400 --> 0:19:56.240 the fourth of July. 0:19:57.400 --> 0:20:00.439 Yeah, because of the election, and also because of April 0:20:00.560 --> 0:20:02.960 CPI data, which came out on the same day that 0:20:03.240 --> 0:20:06.880 Soona called the election. I think we that morning when 0:20:06.920 --> 0:20:08.560 that came out, we looked at that and thought there's 0:20:08.600 --> 0:20:11.680 no way they're going to cut with that. With that data. 0:20:11.800 --> 0:20:14.520 If obviously CPI fell, it's at two point three percent, 0:20:14.600 --> 0:20:17.600