U.S. economic data remain quite good and upward pressure on inflation appears to increase. Therefore, the Fed will remain cautious about rate cuts this year, and long-term interest rates may continue to rise in the near term. We see this as the prelude to a stock market correction and more downward pressure on economic growth.
 

In our view, financial markets are assuming too many interest rate cuts and equities have discounted (too) many positive developments. These expectations will be adjusted in the relatively short term, resulting in substantial reversals in several markets.

The prospect of additional fiscal stimulus just before the UK elections - likely to be held late this year - increases the likelihood that the Bank of England will not only start cutting interest rates later than the ECB, but will do so at a slower pace. For EUR/GBP, this is negative ...