October Economic Update: Winter is coming

• Winter is coming

As the days grow colder and darker in the northern hemisphere, so too, does the economic outlook

• US: Decision time

The US economy has responded well to the reopening with output likely expanding at a 30%+ annualised rate in the third quarter, but challenges remain and there is evidence that the vigorous momentum is fading. The case for more fiscal stimulus is strong, with the 3 November election critical to determining how quickly a full recovery comes

• Eurozone: Second wave balancing act

With coronavirus measures being tightened again, the eurozone recovery is likely to lose steam. At the same time, inflation remains stubbornly low, increasing the pressure on the European Central Bank to act again

• UK: Economic challenges mount as Covid-19 and Brexit collide

A renewed spike in Covid-19 cases and the growing likelihood of new restrictions suggests the economy will have a difficult winter. A 'no deal' Brexit scenario would only add further challenges, and that's putting pressure on the UK government to reach an agreement with the EU

• Central and Eastern Europe: No hiding from the slower growth pace

Restrictions are back as Covid-19 cases are on the rise. But as measures will be less draconian than in the first half of the year, we look for a slower pace of recovery in the fourth quarter without dipping back into recession.

• China’s “internal circulation” is working

With internal tourism at its heart, President Xi's promotion of "internal circulation" is quickly delivering a recovery in Chinese GDP growth

• Asia: 50 shades of swoosh

The recovery continues in Asia, but it certainly cannot be described as a "V"-shaped recovery, more of a Nike swoosh, with the depth of the drop and speed of subsequent uptick largely determined by the extent of the pandemic within each country

• FX markets: Betting on Biden

With less than a month to go until the US presidential election, it is fair to say that FX markets are starting to behold a vision of a Joe Biden presidency. That has seen FX volatility levels fall and the dollar soften against those currencies driven by global activity

• Rates: Born in the USA

While the Covid-19 drama surrounding the White House presented a distracting background, in the foreground the rates market is sniffing an eventual stimulus bill, and week-by-week seeing macro data that has had a shinier-than-expected veneer on it. The consequent uptick in core market rates globally has a clear US stamp on it. This is good for Europe too

• Central banks: What’s left in the toolbox?

The resurgence of Covid-19 across Europe and elsewhere is sparking fears of a reversal in the global recovery over the winter. While fiscal policy will continue to do much of the heavy lifting, economic uncertainty is putting renewed pressure on central banks to act. Here's what we expect from them over the coming months

• A second eurozone wave should be a wake-up call for policymakers

The rise of new Covid-19 cases has led to concerns about an early end to the rebound of the eurozone economy. While we don’t see much of an impact in terms of mobility data just yet, the risk of a double-dip recession in 4Q should not be underestimated.