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.
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!
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.
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!
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.
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?
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!
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.
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.
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.
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.
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.
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.
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.
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.
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..
Trade Alert: Profiting in Energy
With the rebound in manufacturing coming through, our energy bet has enjoyed the mix of greater demand and geopolitical tensions.
Steno Signals #93 – Material stealth QT upcoming during a war economy
The US is effectively running a war economy and the ultimate headache is typically not seen until the production pace is slowed. Meanwhile, Yellen allows for stealth QT in upcoming weeks and months.
Portfolio Watch: Inflation DIVERGENCE is growing
The inflation divergence theme is growing in importance, while the Rest of the World is catching up (or down) to the US in terms of financial conditions. Here is how we position for it..
Trade alert: Stopped out of SEK and Nat Gas
Procyclical tilt has taken a hit over the past days
Energy Cable #62: Biden is selling crude straddles, while something is cooking in China
This week we hone in on the consequences of the Ukraine’s successful attacks on Russian refiners and how to play it along with some thoughts on our profit taking in metal space as something BIG is cooking in China!
EUR-flation watch: Spain is the dovish hawk
We see relatively soft numbers out of Germany and France, while Spanish numbers will look hot due to electricity VAT adjustments. June cut is ON..
Something for your Espresso: You shall not pass!
We see intervention in Asian FX markets from the morning, but could such activity turn into a headache for the Fed? Meanwhile, European inflation data is key during the shortened Easter week!
Steno Signals #92 – The head fake reflation?
After having traveled to London last week, I am left with a vibe of a head fake reflation narrative. We are truly late in the cycle, which opens the door for super interesting bets.
Norway Watch: Cheat sheet to assessing Norges Banks rate path
The mechanical adjustments are likely going to lead to a hawkish revision of the Norges Bank rate path tomorrow unless the subjective layer is used to send another signal. Risks tilted towards a hawkish take-away.
UK CPI Watch: Softer than priced in..
We see UK CPI coming in soft relative to expectations and generally find the BoE to be priced too hawkishly compared to peers. Read along why here..
Something for your Espresso: A BoJ classic
The BoJ has once again managed to move the needle without moving the market and there are few clues on the direction from here. Well played Ueda!
G5 Rates Watch: Mirror mirror on the wall, who’s the biggest interest rate cutter of them all?
We sum up a yuge week ahead in this brief and chart-heavy update on the big central banks. Where’s the value to be found in rates space this week?
Something for your Espresso: Yuuuuuuuge week ahead!
We have an action-packed week ahead with action from almost all key countries for the global economy. Will volatility return as a consequence?
Steno Signals #91 – No more recessions ever!?
Recession chasing is getting increasingly weak as an investment strategy with fewer and fewer recessions around. Is the business cycle still alive and is it big enough to matter for markets?