Hello everyone, and welcome back to our weekly ‘5 Things We Watch’, where we provide 5 of the things we keep an eye out for in global macro in a short and concise format.

This week we are watching out for the following 5 topics within global macro: 

1. Rates Pricing
2. Liquidity Turning
3. Labor Market
4. Commodities
5. China

1) No Fed June cut? 

The market went into the year expecting 7 cuts in total from the Fed, which has now been narrowed down to less than two, all while equity markets have continued their drift higher as the economy is doing better than expected paired with benign liquidity conditions. 

The narrative has for the last couple of weeks been a collective cut in June amongst key central banks , but with economic data and  hotter than expected CPI report today, we are now left with a June cut being a 20/80 event, while an ECB cut in June seems inevitable at this point. We will see whether today’s rates repricing and hot inflation report is enough to turn the mood on equity markets upside down over the coming week, which has been kept high despite rates being materially repriced this year. Markets of course reacted negatively after the CPI report, but before equities can be fully repriced, markets likely need to hear a pivot from the pivot from Powell’s mouth before they believe it, despite a June cut becoming less and less likely. 

Chart 1: June pricing overview