G3 central bankers have been on parade with messages around the risks of easing prematurely after watching the cocktail of 1) higher freight rates, 2) sticky wages and 3) easing financial conditions, especially in the US.

We have seen front-end back paddling in rates space ever since New Years accordingly and the almost bizarre uniformity in views and positioning has been blown into pieces in a matter of weeks.

I don’t think I have ever seen the level of complacency and laid-backness around the direction of travel for USD rates as the one I recorded towards the end of 2023. No one even dared to think of a scenario where Powell had to pivot on his pivot. The direction seemed to be carved in stone.

The mere pushback I received when I traveled a few handfuls of hedge funds with the pitch that the next move from the Fed could still be a hike back in early December last year was very telling, and even if it admittedly felt like a scenario painted by a mad man a few months ago, it no longer seems as outrageous. 

Chart 1: The positioning in USD rates was as crowded as ever in late Dec or early Jan