The pressure is mounting in USD vs Asian FX and if the BoJ disappoints JPY bulls, the PBoC action is probably imminent. The main culprit remains the USD side of the equation.
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Something for your Espresso is the Daily morning research letter from Steno Research. Occasional morning letters for the US based audience is also send out under the name Good Morning America
Something For Your Espresso: The higher for longer ghost is crawling back..
Equities are back on track amidst rates traders agreeing on 0 Fed cuts being increasingly more likely. Our short and sweet morning post here.
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Something for your espresso: Equities to reverse the trend?
Busy week in macro spiced up by reporting season. Will earnings provide some awaited relief for equities. We tend to think so.
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Something for your Espresso: Waiting for the dust to settle..
The embedded value in risk assets is improving, but the USD wrecking ball will continue into this week. The question is whether we have imminent action ahead from the BoJ/MoF or the PBoC as a consequence.
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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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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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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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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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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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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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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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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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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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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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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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Something for your espresso: Manufacturing on a roll (almost) globally
Manufacturing is on a roll globally, and the case for continued Chinese pick-up was emboldened during Easter. Is the strong US unequivocally good news though? Inflation is not done and dusted!
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Something for your Espresso: A bridge over troubled waters
Is the collapse of the Baltimore key bridge a biggie for global macro? Let’s have a look at the numbers ahead of an inflation packed Easter.
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Something for your Espresso: From China with love
USDCNH keeps trading with a premium to the USDCNY rate, while discussions are ongoing on whether Japan will face >2% inflation forever from here. Meanwhile, German assets are trading out of sync with fair value.
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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!
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Something for Your Espresso: China move confirmed!
The crossroads for the Chinese economy we highlighted earlier in the week has been decided (at least intermediately) with the recent JUMP in Li Keqiang. Our early conviction in pro-cyclical trends keeps getting confirmed.
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Something for your Espresso: Head fake reflation incoming!
Powell will allow things to run hot even if inflation is not fading as fast as hoped for. Raising inflation forecasts and keeping three cuts in the projections at the same is REFLATIONARY.
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Something for your Espresso: Wen taper?
We suspect that the market will care more about QT tapering than the exact timing of the first rate cut from the Fed, allowing for a decently dovish take-away from the meeting today.
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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!
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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?
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Something for your Espresso: Unions paving the way for Ueda
>5% wage gains for the Rengo union members in Japan, which paves the way for policy action from the BoJ. Meanwhile, the PBOC refrained from cutting. Possibly as rate cuts are off the table in the US given the PPI developments?
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Something for your Espresso: Time for commodities to shine?
Are we approaching the point in the cycle where commodities start to reflate? We have seen interesting break-outs of Copper, Silver and Oil.
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Something for your Espresso: Let’s all start cutting in June, while the BoJ hikes
Strong and firm signals from Japanese wage rounds solidifying the hiking case, while markets have honed in on June as the timing for the first cut from ALL other central banks of major size. Should make for an interesting macro environment.
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Something for your Espresso: Running on a broken Chinese engine?
Suddenly markets have shifted towards repricing the Chinese outlook markedly versus the rest of the World. Is the global narrative suddenly running on a broken Chinese engine? Meanwhile, USD inflation is out!
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