With the release of the SLOOS survey and the ISM Services data, we can conclude that meltdown fears are massively overstated. Here is how the Fed will handle the situation should the market continue to sell off.
Scandi Watch: Norges Bank -> A hawk flying among doves?
The very mechanical rate path setup of Norges Bank allows us to track the rate path live, and in sharp contrast to elsewhere, it looks like we are ripe for another hawkish revision of the path in September.
The highly systematic rate path setup of Norges Bank allows us to track the rate path live. In sharp contrast to other regions, it appears that we are poised for another hawkish revision of the path in September.
Something for your Espresso: Trading the cycle..
We are starting to see some compelling risk/rewards in betting on higher interest rates again, not least in Europe. We will get news from the US Service sector today setting the scene for the nationwide PMIs later this month.
Something for your Espresso: The Trump trade is on, but for how long?
The Trump trade is currently gaining traction, but for how long? There is still a long way to November and Biden remains in power for now. Retail Sales numbers from the US will be interesting today.
Portfolio Watch: Short metals and Europe but long (US) liquidity sensitive assets
The French election risks leave Europe uninvestable from an equity perspective for now, which leaves opportunities ahead in USD markets. We continue to see strong performance in USD liquidity sensitive trades paired with softness in commodities.
Something for your Espresso: Things you do not see during a disinflationary slowdown
If we are indeed experiencing a slowdown, it is not the typical one characterized by clear disinflation. The job report from the UK this morning reminds us that this is not an ordinary disinflationary slowdown.
Something for your Espresso: Are we back discussing EU politics?
EU politics have not been in the limelight for a long while but the parliamentary elections serve as a reminder that the EU project is fragile.. But is the result good or bad news for the EUR?
Steno Signals #101 – Introducing the Washington DC Crypto Put!
The full-blown underpinning of crypto by Donald Trump increases the probability of pro-cyclical fiscal- and monetary policy. Ensuring a floor under Crypto developments is of utmost relevance ahead of the election for Biden.
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Something for your Espresso: Is Bailey making a “Powell”?
The GBP rates case is heating up again as both price plans- and wages are probably re-accelerating. Have markets completely mispriced the GBP rates case? It feels VERY reminiscent of late Q4 in the USD rates space.
Something for your Espresso: Enjoy the breathing space while it lasts..
The weakness in Asian FX is back and there are signs of a bottoming in Oil prices. Will the breathing space only last until next week’s CPI report? Meanwhile, the UK could prove to be a US case T+6.
The Week At A Glance: ISMs, NFP, FOMC & QRA to put even more pressure on USD rates?
Loads of USD key figures and we mostly lean in a hawkish direction. This could re-fuel strong flows into the USD and paid USD rates positions. Here is why in our “the week at a glance” publication.
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!
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.
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?
Steno Signals #88: Anyone left willing to bet on rate cuts in H1?
Fed and ECB doves have ultimately killed the last market hopes of rate cuts during the spring from the big three central banks. What does it take to bring back the receiver case and the hopes of April/May cutting action?
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Something for your Espresso: Davos pushing back!
Central bankers across the G10 space currently push back against market pricing. The market will likely eventually force their hands but chubby markets will be seen until.
USD Liquidity Watch: Trading the end of QT
As Lorie Logan hinted on Friday, the QT policy is running on fumes at the Fed, which leads us to ask the question; “How do we trade the QT taper and the subsequent more benign bank reserve bank case?”
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US Rates Nugget: More stagflation confusion from the NFIB
This cycle has been notoriously tricky to navigate and there are odd signs of a cyclical pick-up in prices, wages and growth momentum, while certain recession indicators flash red. NFIB adds to the stagflationary confusion ahead of 2024.
Portfolio Watch: How we play the last FOMC meeting of 2023
We have made adjustments to our portfolio in preparation for the FOMC decision week,. Read our full take of the current macroeconomic landscape and see our new positions below
Inflation Watch: Another deflation shocker from Europe? UK, Sweden and Norway are under the loop!
Another set of soft inflation numbers is set to be released from Europe in the coming weeks. We see both GBP and NOK inflation surprisingly low for November, while Swedish evidence is a tad more mixed.
EM by EM #33: Early Hikers = Early Steepeners?
Forward curves continue to trend lower in the US and Eurozone. The early adopters are leading the way, but perhaps Yellen’s spending spree will pose another challenge for her EM colleagues. We have taken a look at potential receiver/steepener cases in EM space.
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5 Things We Watch: CBs, Eurflation, OPEC, Ifo, Dutch Politics
It’s Wednesday and that means time for another 5 things we watch where we hone in on the things that we have been most interested in over the last week.
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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
USD’o’meter: Is King USD about to reverse?
The soft inflation report from the US led to a substantial sell-off in the USD alongside weaker real rates, but is the tide turning for the USD? Our models are not convinced yet.
Positioning Watch – Positioning for lower yields and weaker USD
Markets have been all about lower yields and a weaker dollar over the past weeks, but positioning data remains pretty upbeat on the greenback.
Positioning Watch – The cocktail of heavy logs in both equities and bonds
After today’s soft inflation report from the US, we have a look at how markets are positioned at current junctures. Find out if you have your eggs in the right basket, and what consensus is currently.
Portfolio Watch: Time to consider (EUR) bonds?
We barely dare suggest it. But are bonds finally reap for entry on the long side? We are definitely getting there. Read our latest Portfolio Watch below
Positioning Watch: Seeking Shelter in the Fog of War
In the wake of this tragic situation that is still unfolding, investors are grappling with the need to understand and navigate the turmoil. See our main Positioning takeaways here
Rates Watch: Are we all still chasing that cutting cycle too early?
Rising manufacturing PMIs, sticky labour markets and re-accelerating services inflation in some categories. Have we all underestimated the risk of the Fed continuing on a path of higher(er) for longer again?
Portfolio Watch: No Quarter and No Surrender
The EIA report indicates demand drop, Non-farm payroll signals a soft landing, and we’ve taken a spread trade loss. We’re in challenging waters. How should we position ourselves, and how are we doing? Read our weekly Portfolio review below