It is tricky to time the drones flying back and forth in the Middle East, which is why we are sitting on our hands. We see an increasing latent potential in risk assets paired with higher rates when the dust settles.
CEO at Steno Research. Macro afficionado, investment analyst and Madridista. Host/Editor @ Real Vision. Hosting "The Macro Trading Floor" podcast @ Blockworks.
Shipping Watch: No news is bad news (for inflation)
Headlines in the beginning of 2024 were dominated by shipping and logistic troubles but over the last months that has almost died completely down. With “no news” we continue to see spill-overs to goods inflation in coming months.
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Trade alert: Scandi RV
We see a strong RV case between the Scandis!
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Something for your Espresso: Here we go again..
It remains our base-case that we are on a de-escalatory path but the tit for tat strikes continue. Risk assets will likely become cheap when the dust settles.
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Scandi Watch: Assessing the path for SEK and NOK rates
The Norwegian rate path is likely to look dovish in June in contrast to expectations. Here is our “cheat sheet” to assess the NOK rate path daily. At the same time, NOK/SEK remains too cheap as the global reflation narrative is positive for NOK versus SEK.
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Something for your Espresso: USD liquidity back in the driver’s seat
Our quant PCA tool flags USD liquidity as the most important macro driver so far in April, which is interesting given the ongoing tax season. The worst is probably already behind us even if the tax season runs for another 10-12 days.
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Something for your Espresso: “A lack of further progress so far this year on returning to our 2% inflation goal.”
Powell admitted to the lack of progress on inflation in recent months, but the implicit bias is still dovish. The debate is still centered around WHEN rates will come down, not around IF rates will come down.
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Trade Alert: Weakness in Asia…
Despite initial succes, our long Asia bet did not turn out in our favor
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Something for your Espresso: More USD strength is coming!
The strong Chinese GDP numbers were overshadowed by a continued weakness in Asian FX trends. Energy and metals typically continue to perform in such an environment.
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Trade Alert: Stopped out of our NOK technicality bet
The USD wreckingball has overshadowed the bullish technicalities in the long NOK bet, and we were stopped out today.
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Something for your Espresso: Was it an eye for an eye?
Markets will remain on high geopolitical alert this week as we are awaiting whether Israel accepts the “eye for an eye” logic put forward by both Iran and the US. We see moderately upbeat markets ahead.
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Steno Signals #95 – Is the next move a hike?
The market keeps lagging in this re-inflation cycle and while forward pricing and economists are backpaddling on 2024 expectations, the next battlefield is 2025. Could the Fed hike after the election?
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Portfolio Watch: The USD wrecking ball is back
King USD is back and portfolio rebalancing flows will likely emphasize the move into next week. We are at crossroads in FX markets as energy commodities are starting to impact price action.
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UK Inflation Watch: A dovish surprise upcoming
The early consensus for UK inflation next week looks relatively hot given typically benign patterns in March, which are likely underpinned by the Early easter timing. We see a downside surprise of roughly 10-12 bps to consensus.
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Something for your Espresso: The latent inflation build-up
The PPI inflation report looks soft on the surface, but is relatively hot when you look beneath the hood. The release valve of this latent inflation build-up is found in precious metals space.
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G3 Rates Watch: No one’s got a clue on R*, yet the market is convinced that it does!
High for longer vibes are once again impacting the EUR- and USD rates forward pricing. Is the market wrong to assume that equilibrium rates have to be lower than current spot levels? None of us knows, yet the market is hellbent on assuming it knows!
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Something for your Espresso: Another input cost SHOCKER upcoming?
On the back of the hawkish surprise in the CPI, we find PPI consensus amazingly low ahead of the release later. The resurgence of USD inflation is likely going to impact the reaction function of the ECB even if the outlook is diverging fast.
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EM Watch: China is preparing something BIG!
The strategic shift from Real Estate to Green-tech manufacturing in China is very evident and it will likely impact Europe to a much larger extent than the US. Counterintuitively, it means that two of the strongest inflation hedges stem from China and Mexico simultaneously. Here is why!
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US CPI Review: Inflation is accelerating, no return to 2% in sight
US core inflation printed only a few bps away from our forecasts in another report showing the firm price pressures in the US economy. Inflation is accelerating right when Powell and his ilk want to start cutting rates.
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Something for your Espresso: What if the dual mandates move in opposite directions?
The NFIB survey made for worrying reading for the Fed as the dual mandates seem to move in opposite directions. How to balance weaker employment growth and higher prices in an election year?
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Something for your Espresso: Going global and real!
Former FOMC member Jim Bullard still sees a three cut base-case for 2024 despite the re-inflationary trends as commodities continue up. Going global/real in your allocation makes increasing sense!
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The week at a glance: US CPI to surprise hawkishly paired with a surprise rate cut?
CPI numbers from the US, Norway and Sweden paired with ECB and BoC action. Here is what to expect in a short and sweet format.
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Something for your Espresso: Chinese deflation arriving in Europe but not in the US
The gap is growing between the US and peers. Both on inflation and unemployment. Will this lead to surprising rates decisions already this week? Meanwhile, we don’t think energy prices will drop because of Israel pulling out troops.
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Steno Signals #94 – Trading the FAKE business cycle
The fake business cycle keeps surprising markets and central banks and the volatility in the cyclical components of the economy will likely keep markets trading from one extreme to another in coming years.
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Something for your Espresso: An eye for a head?
Fears of an outright war between Israel and Iran increased markedly yesterday, and markets sold-off. We were not convinced (of the risks), but also took notice of Neel Kashkari’s interest rate warnings.
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Trade Alert: Playing the last reflation saloon and NOK technicalities
The final reflation melt-up may be right in front of us during Q2. Position accordingly.
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Scandi Watch: More NOK liquidity coming, but with positive FX spot effects?
The money market working group in Norway has presented its early results. Here are the main take-aways for the NOK and NIBOR.
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Something for your Espresso: Softness now also feeds reflation
Given the current feedback loop, softness feeds through to increasing reflation expectations, which is an interesting dynamic that will continue until it’s broken by an exogenous event.
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Macro Regime Indicator: From Stealth QE to Stealth QT
The macro regime model has gone from ALL-IN on risk to a much more moderate scenario as the liquidity tide is turning. Find the allocation thoughts here.
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Something for your Espresso: Last chance reflation saloon?
The sudden melt-up trend in commodities has a late cyclical head fake vibe to it, but commodities and steepeners probably offer the best macro value in Q2. Here is why..
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