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.
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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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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.
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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.
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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
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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.
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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
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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.
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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.
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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.
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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
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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
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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?
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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
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Macro Nugget: Why the price at the pump matters for inflation expectations
With the recent surge in oil prices due to supply constraints, we highlight the contrasting market impact in the US and the Eurozone. Our Monday Macro Nugget available below
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Positioning Watch: Higher for longer vs Lower for longer?
The Fed projects higher rates for longer, while oil production cuts persist. How do markets play the “Higher for longer and Lower for longer” ? Read our weekly report below
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5 Things We Watch – ISM, Energy, German manufacturing, US labor market, Global Rates
Our services week is hot and running, where we share our take on the rebound in manufacturing amidst a weakening in the services sector. Today we will share some of the takes we have looked at, as well as what lies ahead
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Services Week: What to buy if manufacturing rebounds while services weaken?
We have run the numbers on historical correlations between the US PMI spread and various asset classes to find out what you should buy if manufacturing rebounds while services weaken.
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ECB Watch: Damned if you do & doomed if you don’t?
We have argued that risks of a more rapid disinflation in Europe are going under the radar. But as we get poor job opening numbers from the US, how do we assess the growth trajectory of the EZ and how will the ECB likely act?
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Jackson Hole Nugget: “Structural Shifts in the Global Economy”
The Jackson Hole conference is a very binary event with the theme of the conference being “Structural Shifts In The Economy”. Will the Fed take the opportunity to talk about a higher inflation target or will they try to kill all hopes of lower interest rates in to 2024? It is either or!
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Something for your Espresso: Wyoming is not only full of cowboys
How many hawks and doves will arrive in Wyoming for the Jackson Hole conference? The doves have received a perfect excuse from China and the PBoC will hope and pray that Powell announces an explicit pause, but he won’t.
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Portfolio Watch: Catching a Chinese cold?
Summer volatility razor, BoJ and Xi’s real estate malaise have all contributed to headwinds for most asset classes. We are still alive and kicking despite a few knocks and bruises. Read here for full context
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Positioning Watch – The market’s response to another Fed hike
The central bank week is over, and that means it’s time for us to have a look at how Investors and Traders perceived the Fed meeting and how they have adjusted their portfolios in response.
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EM by EM #14 7 EM Charts for the “Central bank Bonanza”
We are back for another big Central Bank week. 7 charts we think are worth paying attention to in the EM space as DM central bankers approach their final hike
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Out of the Box #12: What if the deacceleration of EZ inflation starts to outpace that of the US?
We revisit the eurosceptic case to assess whether we have let our pessimism get the better of us. Or could Euro bulls still be in peril?
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