The “Watch Series” is a collection of individual series such as Europolitics Watch, Inflation Watch, Real Estate watch and much more. Stay tuned for in-depth coverage of your favourite subjects.
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.
Volatility was more or less muted in the beginning of the year, but the cocktail of less dovish statements from Fed officials, strong economic data and the USD wreckingball has sent volatility in the other direction. Has it moved positioning? Not really, but that doesn’t mean that it’s not important.
Despite initial succes, our long Asia bet did not turn out in our favor
The reflation will likely continue as long as Powell and his ilk keeps an implicit dovish bias intact. Energy markets will likely remain bid, but the broader commodity story seems more interesting to play than oil at these levels.
The USD wreckingball has overshadowed the bullish technicalities in the long NOK bet, and we were stopped out today.
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.
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.
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!
Exiting some suration trades and moving on in the reflation trades
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.
As the cyclical survey-based comeback seems to be priced in fully by markets, new fan-favorites have emerged: inflation hedges.
While we have booked profits in our long oil bets, we are getting increasingly bullish on the broader commodity complex. Especially a couple of metals look extremely interesting here.
Our portfolio cheers on the broadening commodities rally! We delve into the risks and opportunities of this surge, its reflationary impact on strategic allocation, and present our convictions going forward.
Another ‘Out of the Box’ with some food for thought on Fed’s rate path and the most un-appreciated risk scenario, namely more hikes.
The final reflation melt-up may be right in front of us during Q2. Position accordingly.
The money market working group in Norway has presented its early results. Here are the main take-aways for the NOK and NIBOR.
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.
Manufacturing sensitive assets have generally been outperforming broad-market benchmarks over the past weeks, despite some signs that the manufacturing boom could be short-lived. Some markets have started to agree, lowering exposure in both commodities and cyclical FX.
With the rebound in manufacturing coming through, our energy bet has enjoyed the mix of greater demand and geopolitical tensions.
Solid numbers out of China over Easter solidifies the commodity case including in Energy. If China is actually moving, commodities remain too cheap.
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..
Procyclical tilt has taken a hit over the past days
The Li Keqiang Index witnessed its most robust monthly surge since 2005 but consumer confidence is rotten?
Understand the paradoxes of the Chinese consumer in this explainer.
We called out the cyclical rotation a couple of weeks ago, and while our trades have performed according to plan, we are starting to see signs of the trade getting too crowded to our taste.
The full Ifo report was released yesterday, and here is the summary with the most important charts from our models. Overall, there is not a lot of fuel to the reflation story in Germany.
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!
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..
China has been in the limelight recently, and the attention from clients match the evident rotation in managed positioning. While tremendously yielding, we’ve decided to de-risk in metals but keep overall cyclical exposure.
We have closed a position. Read which and P&L below
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.
