FICC

This report flags near-term risks for gold. Yet we remain optimistic about the prospects for its long-term bull market.

What’s driving government bond yields, and how do different bond markets impact each other? In today's Strategy Insight, we decompose yield moves into global drivers and idiosyncratic local drivers.

The ECB is about to make its first policy mistake in the current cycle by being complacent about the downside risks to inflation. The confluence of base effects, a stronger euro, food and energy deflation, and rapid services disinflation will push headline inflation closer to 1% in the first half of the year. This significant undershoot will force the ECB to deliver reflationary cuts. Go long the September 2026 3-month Euribor futures and tactically reduce exposure to inflation-linked bonds in the Eurozone.

This week’s central bank meetings are a good reminder that monetary policy can still surprise. The Bank of England sounded more dovish, and the European Central Bank sounded complacent about the inflation undershoot. Meanwhile, the Reserve Bank of Australia hiked rates earlier this week. Investors should remain overweight UK Gilts, position for more ECB easing by going long the September 2026 3-month Euribor futures, and fade further rate hikes priced in Australia.

Our Portfolio Allocation Summary for February 2026.

South Africa’s commodity boost is fading, but its cyclical headwinds remain. As growth weakens and capital inflows dry up, the rand looks increasingly vulnerable to a reversal.

The metals mania is fueling extreme volatility. In particular, the price of copper has become detached from fundamentals and is vulnerable to the downside.

Special Report

Global liquidity has been the decisive macro variable in 2025, and should stay broadly supportive through most of 2026. We therefore stay neutral equities versus bonds (valuations are stretched), keep a positive bias toward metals (especially gold), and prefer European and Japanese equities over US ones. The key risk is a late-2026 volatility regime shift as overheating fears force a repricing in rates.

FX markets have dominated headlines over the past week, with a meltdown in the dollar and a surge in the yen. This week’s note unpacks the forces behind these moves and assesses whether recent price action marks a temporary dislocation or the start of a more durable FX shift.

The Fed will keep rates on hold in H1 2026, but dovish policy surprises are likely in the second half of the year.