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5 Things We Watch: USD-flation, Global Inflation, US Labor Market, Japan, Bitcoin

Things are starting to look a little troublesome for the US economy in the mid-term as re-accelerating inflation and a weakening labor market is no easy cocktail for the Fed. Read more here together with some notes on freight rates, Japan and the new BTC ETF.
2024-01-10

Global macro never sleeps, and this week is no exception. The new year has started off with a blast, and it looks like dynamics all of a sudden have changed with sentiment going from full risk-on to risk-averse as the calendar has turned. 

The US will be the overshadowing region to watch in the coming weeks as they look troubled the most with prices looking to stay hawkish for some time to come, while the labor market is weakening, but increasing growth due to easier financial conditions could keep the US away from stagflation.

Read along as we have a look at the 5 things we look out for currently, which include the US, freight rates, Japan and the new BTC ETF.

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

  1. USD-flation
  2. Global Inflation
  3. US Labor Market
  4. Japan
  5. Bitcoin

1) USD-flation

The inflation release on Thursday is the most important release of the week and we find consensus to be decently aligned with the underlying trends in US inflation.

Core inflation is trending around 0.3% MoM in the US and we see no reason for a sharp change in that trend given our price observations and models, and we only see a minor hawkish tilt in our models compared to consensus, but expect the MoM core inflation to print accurately above 0.3%. The consensus change for the MoM core inflation is very close to 0.25% given the expectation of 3.8% YoY inflation. Only a very minor surprise is needed to bring the YoY number to 3.9%, which we find likely.

Relative to the monthly inflation developments in November, ‘Used Cars and Trucks’ will be less inflationary, while ‘Commodities less food and energy commodities’ will not be a major disinflationary impulse. Transportation services is the “hawkish dark horse” as December is typically a firm month for that cost category.

We especially observe a price bump in public transportation and taxi/riding-share services in December. Transportation services will likely increase at least 0.8% MoM, rent of shelter will likely print around 0.38% MoM, while used cars will likely print around -0.3% MoM and the insurance cost rise is likely also material in December.

Food costs are likely to look soft, while energy is almost flat on the month. All in all, it has a slightly hawkish vibe, but the consensus is (for once) decently in line with reasonable observations and assumptions.

Chart 1: US CPI decomposed 

Things are starting to look a little troublesome for the US economy in the mid-term as re-accelerating inflation and a weakening labor market is no easy cocktail for the Fed. Read more here together with some notes on freight rates, Japan and the new BTC ETF.

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