Tag Archive: macro

Market Prices in a Fed Cut in Q4 Ahead of CPI, While ECB to may Deliver a 50 bp Hawkish Hike

2023-03-11

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2023-03-11

Three macro events highlight the week ahead. The US February CPI will be reported on March 14. The UK's Chancellor of the Exchequer Hunt will deliver the spring budget on March 15. The ECB meets the following day. A 50 bp hike is discounted not only for this meeting, but that is the bias for the May meeting as well. It seems that US interest rate adjustment that began early February (jobs data and strong gains in the service ISM) and helped fuel...

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US Jobs, Kuroda’s Last BOJ Meeting, and Powell’s Congressional Testimony Highlight the Week Ahead

2023-03-04

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2023-03-04

The dollar peaked last September/October and trended lower until the January jobs report and strong service ISM on February 3. These reports and firm inflation readings, owing, at least in part, to benchmark and methodological changes, helped spur the greenback's recovery. However, we learned last week that auto sales and the service ISM prices paid decelerated in February, and this week, we will learn that job growth has slowed considerably. If...

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March 2023

2023-03-01

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2023-03-01

Price pressures remain elevated, and labor markets are strong, giving most policymakers in the G10 the incentive to continue raising interest interests. There are two exceptions: Japan, the only country still with a negative policy rate (-0.10%), and Canada, where the central bank has indicated it would pause. While half-point hikes or larger were common in the second half of last year, the major central banks have slowed or will slow the pace to...

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Week Ahead: February ISM Services and Auto Sales to Show January US Data were Exaggerated

2023-02-25

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2023-02-25

A key issue facing businesses and investors is whether the US January data reflects a reacceleration of the world's largest economy or whether it was mostly a payback for extremely poor November and December 2022 data and seasonal adjustments and methodological distortions. Given the centrality of the US economy and rates, it is not simply a question for America, the Federal Reserve, and investors, but the implications are much broader. The issue...

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Week Ahead: Market Seeks Proper Balance after Exaggerating in Both Directions

2023-02-18

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2023-02-18

The pendulum of market sentiment swung from fear of a synchronized recession in the US and Europe to optimism that a recession can be avoid. The perceived reduction of downside risks had driven the upside performance of equities and bonds. Just as the data seems to confirm it, the rally in in stocks and bonds faltered. The MSCI Emerging Markets equity index gained 7.8% last month but is off almost 3.8% this month, and has fallen for three...

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Week Ahead: US CPI to Begin Sharper Deacceleration through H1 23

2023-02-11

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2023-02-11

After selling off sharply in the past four months, the dollar rebounded. Since the FOMC meeting on February 1, it has enjoyed one of the strongest bounces since it topped out in late September/early October. The incredible US jobs data, sharp bounce in the January services ISM, speculation of BOJ Governor Kuroda's successor, and some easing of the euphoria over China's re-opening have been notable drivers.

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February 2023

2023-02-04

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2023-02-04

The new year began amid optimism among investors. Equities and bonds rallied in January, clawing back some losses from last year. The dollar traded heavily, falling against most G10 and emerging market currencies. However, after the February 1 FOMC meeting, the dollar's sell-off exhausted the near-term selling pressure. An upside correction may be seen in the first part of February. We see this as a countertrend move and expect dollar weakness to...

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Week Ahead Alchemy: Can Powell Turn a Quarter-Point Move into a Hawkish Hike?

2023-01-28

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2023-01-28

The new year is still young, but the week ahead may be one of the most important weeks of the year. The divergence that the market has been anticipating will materialize. The Federal Reserve will most likely hike by 25 bp on Wednesday, followed by half-point moves by the European Central Bank and the Bank of England the following day. On Friday, February 3, the US will report its January employment situation. It could be the slowest job creation...

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Are We Still on the New Year Honeymoon? A Look at the Week Ahead

2023-01-21

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2023-01-21

There are several macro highlights in the week ahead, during which Chinese markets are closed for the Lunar New Year celebration. The preliminary January purchasing managers surveys pose headline risk. However, the survey data, for example, had the US composite below the 50 boom/bust level every month in H2 22, which likely overstates the case, as the first look at Q4 22 US GDP will probably show. While some improvement is expected, composite PMI...

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On Our Radar Screen for the Week Ahead

2023-01-14

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2023-01-14

The week ahead is chock full of data, including Japan, the UK, and Australia's CPI. The UK and Australia report on the labor market. The US, UK, and Canada also report retail sales. The early Fed surveys from New York and Philadelphia for January will be released.

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January 2023

2022-12-29

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2022-12-29

The US dollar's bull market appears to have come to a climactic end late in Q3 22 and early Q4. In the last three months of 2022, the G10 currencies, except the Canadian dollar, rose by more than 5% against the greenback. In addition, six of the G10 currencies appreciated more than 7.5%. Such significant moves are often followed by consolidation and corrections. These countertrend moves can offer new opportunities to adjust currency exposures.Three...

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December 2022 Monthly

2022-12-01

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2022-12-01

As the year of aggressive monetary tightening winds down, the Federal Reserve, the European Central Bank, and the Bank of England will likely slow the pace of rate hikes. All three delivered 75 bp hikes in November and will probably hike by 50 bp this month and moderate the pace again in the first part of next year.Price pressures remain elevated even if near or slightly past the peaks. The G10 central banks are not finished tightening, though...

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Capital Flows Outstrip Trade Flows and that is Where to Look for Drivers of FX

2022-11-12

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2022-11-12

Policymakers have often said that exchange rates should reflect fundamentals. What does that really mean? Can they do anything but that? It begs the question of which fundamental factors they should reflect.

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The Week Ahead: How Sticky is US Inflation and How Soft is China’s?

2022-11-05

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2022-11-05

There are three potential inflection points. The first is a pause from the Fed; if nothing else, Powell signaled it was too early to think about it. The second is for the Bank of Japan to change monetary policy. Governor Kuroda has signaled that it is not time. Conventional wisdom is there will not be a change until Kuroda's term ends next April. However, we note that the surveys suggest economists and BOJ inflation forecasts for next year have...

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November 2022 Monthly

2022-10-30

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2022-10-30

With this month's hike, the Federal Reserve would have raised overnight rates by 300 bp while doubling the pace that its balance sheet is shrinking over the past 100 days. The US economy is the largest in the world, and US interest rates and the dollar are vital benchmarks.

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No One Wants a Recession, but Central Banks are willing to Take the Risk to Demonstrate Anti-Inflation Resolve

2022-09-17

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2022-09-17

The week ahead is busy. Three G7 central banks meet, the Federal Reserve, the Bank of Japan, and the Bank of England. In addition, Japan and Canada report their latest CPI readings, and the flash September PMI are released.  There are three elements of the Fed's meeting that are worth previewing. First is the interest rate decision itself and the accompanying statement. Ironically, this seems to be the most straightforward. Even before the August...

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RBA, BOC, and ECB Meetings and more in the Week Ahead

2022-09-03

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2022-09-03

All three major central banks that meet in the coming days will hike rates. The question is by how much. The Reserve Bank of Australia makes its announcement early Tuesday, September 6. One of the challenges for policymakers and investors is that Australia reports inflation quarterly. The Q2 estimate was released on July 27. It showed prices accelerating to 6.1% year-over-year from 5.1% in Q1. The trimmed mean rose to 4.9% from 3.7%, and the...

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September 2022 Monthly

2022-09-01

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2022-09-01

The highlights of September include continued substantial rate hikes by the major central banks, save Japan. The Tories will pick a new leader, who will become the next prime minister of the UK. Italy looks determined to have a right-wing government. Sweden goes to the polls in mid-September.

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The Week Ahead: Dollar Bulls Still in Charge

2022-08-27

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2022-08-27

The poor preliminary PMI readings, the ongoing European energy crisis, and the recognized commitment of most major central banks to rein in prices through tighter financial conditions are risking a broad recession. These considerations are weighing on sentiment and shaping the investment climate. Most high-frequency data due in the days ahead will not change this, even if they pose some headline risk.  

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Inflation

2022-08-06

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2022-08-06

(Traveling and unable to provide a technical overview this week.) Rising price pressures, stronger and more persistent than generally expected, has been the main challenge for consumers, businesses, and policymakers. It will stay top of mind in the week ahead as both the world's two largest economies, the US and China, report July consumer and producer prices.  During the Great Depression, the central governments discovered their balance sheets,...

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