Market outlook Global liquidity snapshot

Key takeaways

• Highlights:

  The quarter was marked by higher-for-longer rate expectations across major markets as central banks balanced persistent inflation pressures against slowing growth. In the US, the Federal Reserve remained on hold as Kevin Warsh assumed the Fed Chair role. The Bank of England also left rates unchanged amid softer inflation and weakening activity data, while the European Central Bank (ECB) shifted to a more hawkish stance, raising rates in June as energy-driven inflation broadened beyond the energy sector.

• Key areas to watch:

  Inflation remains the key variable across regions. In the US, investors are focused on labor market cooling, funding conditions, and the impact of geopolitical developments on inflation expectations. In the UK and Europe, attention is centered on whether higher energy prices generate broader wages and services inflation, and whether weakening economic activity ultimately limits the scope for additional policy tightening.

• Investment implications:

  Elevated front-end yields continue to support cash and short-duration strategies, while ongoing policy uncertainty reinforces the importance of liquidity, flexibility, and active duration management. We continue to favor high-quality, liquid securities, with selective exposure to short-dated credit opportunities and floating-rate instruments where attractive carry remains available.