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!
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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FX Watch: Tough times ahead for king USD?
2024 has been better than feared for the USD, with hotter inflation data and better economic conditions paving the way for a stronger dollar, but what happens if the Fed cuts into sticky (or even rising) inflation?
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Something for your Espresso: A head-fake in Manufacturing?
Some Manufacturing gauges struggle to get out of the gates despite cyclical tailwinds. Is the lack of progress related to the Red Sea? Major revisions are needed from the ECB on Thursday.
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Something for your Espresso: The party is still ongoing!
Big tech keeps surprising on the upside despite heightened expectations, while the Fed is moving closer to a tapering of QT. This makes for a benign scenario for the business cycle despite a lack of imminent rate cuts.
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Something for your Espresso: Food for hawks or doves?
The NFP spooked rates markets, but there are reasons to believe that technicalities were behind the spike in job creation and wage growth. Time to receive again?
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G3 Watch: Timing the first rate cut
The first rate cut is a timing question from both the Fed, the ECB and the BoE now. How do we trade the first cut and why are seasonality issues important to bear in mind? Read along here.
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Something for your Espresso: March 23 PTSD
The NYCB scare made for an almost PTSD like reaction in cross-asset markets. So far, we consider the story a non-event and put more emphasis on the guidance from Powell.
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5 Things We Watch: Iran, China, Crypto, Inflation and the Fed
Macro is on the move and we have diverging trends in inflation. Find our brief overview of the five themes that move markets the most this week in global macro.
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US Liquidity & Debt Watch: Yellen to decide the QT tapering timing tomorrow
Yellen holds the keys to an early end to QT. At the surface, she holds all the incentives to get the QT tapering process started sooner rather than later. Will it be reflected in the QRA details tomorrow?
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US Inflation Watch: Methodology Matters – Upside surprise in PCE according to CPI?
CPI, PPI, HICP, or PCE? The inflation measures are plenty and each best serves different purposes. However, the varying methodologies and emphases on components prompt clearly deviating prints – AND allow for logical predictions.
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Something for your Espresso: EUR-flation to print below consensus again
Inflation evidence keeps coming in soft in Europe and early evidence from Germany and France support another dovish surprise. Meanwhile, rates are coming down again.
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Something for your Espresso: Phew..
A big central bank week is approaching its end and the Fed is back as the biggest dove in town. Does it make sense? Meanwhile, Oil demand dynamics keep delivering.
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EM by EM #34: Xi’s whip and Powell’s kneeling
After tonight’s press conference, any doubt about who is driving monetary policy should be dispelled. Powell appears to be allowing the market to dictate and is hesitant to provide significant guidance, in stark contrast to Xi and China, which seem somewhat immobilized yet hesitant to acknowledge reality
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Steno Signals #76: The Fed has lost control of liquidity trends
It is amusing to watch the flow of 2024 outlooks coming in. Suddenly hopes/expectations of soft landings are revised up left, right and center after an immaculate November. Price always leads the narrative, also in this case.
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Steno Signals #75 – The 2007/2008 playbook is useful again
The “soft landing” narrative has gained material momentum in the mainstream coverage ahead of 2024, which is a clear risk to the outlook. It always looks like a soft landing until the nosedive.
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Out of the Box #24 : Too little too late Powell?
A “hump” may be on the way in the US economy but can the Fed steer clear of the gathering storm, while Chairman Powell has left the market in front of the monetary policy wheel? We remain skeptical
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Something for your Espresso: Is something wrong with the oil?
Either oil rebounds here or else we probably have to accept that this is one of the steep declines in demand that we cannot explain in real time – also known as a recession. We are at a critical juncture and markets don’t care.
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Something for your Espresso: How to deal with the new Fed feed-back loop?
Powell sounded dovish yesterday, but also opened the door for a potential unconstructive feedback loop by allowing market conditions to dictate the policy rates. If market rates drop and equities perform, the FOMC will have to act in December.
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Fed Watch: Why should the Fed abandon the planned year-end hike?
Why should Powell abort the planned hike from the dot plot when everything is improving relative to the base case in the US economy? We are not writing off a Q1-Q2 recession, but the soft/hard evidence is not there for the FOMC members.
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Liquidity & Treasury Watch: The ramifications of the quarterly refunding report
The quarterly refunding report will likely allow the Fed to be hawkish for longer as the liquidity outlook is decently benign, while the bond-zooka was avoided (for now). Find the details here.
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ECB & Fed Watch: Closing in on ECB rate cuts, while the Fed is not done hiking
If the PPI is any guide, we will soon see the EUR inflation printing below target again, which will allow the ECB to ease since the growth picture remains lackluster as well. The Fed is not close to claiming victory compared to the ECB.
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Central Bank Watch: The Fed has gone from QE to QT to QB
The Fed no longer does QT in practice as they likely fear the repercussions for the yield curve should they allow USD liquidity to truly dwindle. The ECB on the other hand remains steady in bringing liquidity down. EUR-flation will drop faster than USD-flation.
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CPI Reaction Watch: Cementing a hike in November/December?
A small upside surprise in today’s CPI report led by energy and shelter, while broad commodities, transportation and food prices continue to disinflate. A nothing burger or something to worry about? Read our take here.
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Something for your Espresso: “We will carefully hike rates (at least) once more”
Ultimately markets got the memo from the Fed. The rate hikes are not necessarily over, but they will not promise anything at this stage. USD bullish (again).
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5 Things We Watch – Fed, BoE, Energy, GDI/GDP & BoJ
With Central Bank rate decisions taking headlines this week, we have a look at the 5 things we watch in global macro, and give you our take on FOMC, BoE and more.
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Fed Nugget: Why the Fed dot plot will remain hawkish
Given the information received since the last update of the dot plot in June, inflation has surprised to the upside, the growth gauges have surprised to the upside, while the labor market has surprised to the downside. Net/net no reason to alter the dot plot.
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Services Nugget: How do the Central Banks react?
We are well under way in our Services Week with our focus on Services and in this note we wanted to highlight the issues central banks could face in a scenario in which manufacturing outpaces services.
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5 Things We Watch – Fed overtightening, Curve steepening, US CPI, BoJ & China
Ahead of the CPI release tomorrow we zoom out to provide you with the bigger picture and what to watch out for in global macro over the next weeks.
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Consumer Watch: Is the FED & ECB nudging the same herd? 5 charts we watch
We’re skeptical of the “data-dependent” rear-view mirror approach by the FED & ECB. Refuting to provide guidance is one thing but are they listening to their crowds and acknowledging the differences?
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