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Central Banks
The FX: Has the Fed dropped the ball?
We have been discussing Sahms’ law for the last few weeks. This is the regression indicator that signals the possibility of recession. For those that can't remember, Sahms' recession indicator is when the three-month moving average of the unemployment rate has risen by more than 0.5 per cent from the previous 12 month low. Every time this has hap...
September 9, 2024Read More >Jackson Hole leaves a hole heap of questions about employment
We now have a post-Jackson Hole set of questions – will the data stick up to what was preached. Reviewing the reactions to Jackson Hole treasury yields declined on a ramp up in bets around the Federal Funds rate after Federal Reserve Chair Jerome Powell's dovish remarks, which were in line with what we forecasted last week. His dovish remarks ...
August 27, 2024Read More >Jackson Hole Symposium – When doves try
Jackson Hole Symposium – When doves try Market pricing of the Federal Funds rate currently sits at 93 basis point of easing by year-end. Let us put that into perspective it was 110 basis points of easing at the peak of excitement, yet despite the increase in yields DXY has sold off and now trades sub-102.00 and is still falling like a stone. W...
August 21, 2024Read More >Hold tight: trading the RBA
With core CPI missing expectations and some slight deceleration in other areas such as retail sales an overall service economic activity. The RBA is likely to hold tight and not raise rates on Tuesday. We say this with some confidence, based on the communication coming from RBA governor Bullock. She had emphasised the importance of the second qu...
August 5, 2024Read More >One of two ways: Trading Australia’s CPI data
Australia's second quarter CPI due out on the 31st of July could go one of two ways so let's dive into how it will move and how to trade it. First way - Coming in line or below Currently 24 of the 30 surveyed economists see inflation coming in line or below expectations. That is June quarter CPI coming in at 1% quarter on quarter and 3.8% yea...
July 30, 2024Read More >US trading thematics Part 2: Data Confirming
Will June be the turning point? The market thinks it is – and its reaction to the CPI data not only signalled how it will trade in the coming months. It also showed that traders are primed to rotate to even more bullish positions. Because from the market’s perspective September is now more than live its near enough to a lock for the Fed to cut ...
July 12, 2024Read More >US trading thematics: Part 1 “When Powell talks”
Over the coming 48 hours and then over the coming 2 weeks, Fed speak and US data is going to be some of the best trading opportunities in 2024. It’s been a pretty low-vol year despite several events that would under normal circumstances be triggers for much larger fluxes in FX and bonds. But to date: that has not been the case. Let's look at t...
July 10, 2024Read More >Trading the inflation bumps Part 2: Narrow to non-existent
First – let us just say that as we suspected the AUD jolted all over the place on the release of the May CPI – the read was much stronger than consensus and the fallout from the read ongoing. But, and it’s a but, we predicted the AUD’s initial bullish reaction was counted by once again point to the fact parts of the monthly read can be expl...
June 28, 2024Read More >Trading the Inflation bumps – The May surprises and what to do with it
The consensus for the monthly Consumer Price Index (CPI) is for a rise to 3.8% annually in May, the range being 3.6% to 4.0%. This would be the fourth consecutive rise in yearly inflation and would show that not only is inflation ‘sticky’ it could be considered ‘entrenched’ Monthly CPI indicator YoY% This headline will cause large...
June 25, 2024Read More >A frightened Hawk – The RBA needs to come clean
We know that this is slightly contrary to the consensus views but we think it needs to be said. The communication from the RBA (Reserve Bank of Australia) is unusually unclear, confusing and conflicted. The view conveyed in statement, press conference and minutes currently we would argue counter each other. And the reason for this we believe i...
June 20, 2024Read More >When less is more – Why one cut in 2024 was good news?
We have been scratching our heads as to what exactly drove some of the strong price action in pairs, equities and bonds off the back of a further hawkish turn from the Fed at its June meeting. So, what exactly has promoted the moves on markets and what else should we as traders acknowledge from the Fed meeting First Powell has pointed to a po...
June 14, 2024Read More >The race has begun – who is left holding the rates bag
FX and indices traders are now on notice – the race to restart economies is upon us. We have to-date seen Riksbank and SNB move policy but with the Bank of Canada (BoC) now entering the rate cut movement – the race is now well and truly on and the interest rate differentials that come into play with currencies will ramp up. Potential for Fur...
June 6, 2024Read More >Plateauing is just another way of saying ‘stuck’
Let’s make things very clear – Australia’s inflation rate is plateauing in fact I would argue it’s starting to reaccelerate in areas Australia can least afford. From a trading and momentum perspective this needs explaining. Stronger Than Expected Print April's CPI data exceeded expectations and was at the very top of the surveyed ra...
May 30, 2024Read More >Reading between the lines for the USD
Last week I highlighted Governor Chris Waller’s speech – however the more I look into his talk the more it needs greater emphasis as it contained both hawkish and dovish elements. The Hawk Waller indicated that he would need at least three more months of "good" inflation data before considering a rate cut. He was suggesting this might h...
May 28, 2024Read More >Where’s the Federal Reserve at?
Slowing Growth and Potential Rate Cuts: Recent economic data suggests a slowdown in growth, contrary to earlier expectations of reaccelerating growth and inflation. Federal Reserve Chairman Jerome Powell's statements and recent economic indicators point towards the possibility of lower policy rates in the near future. Key indicators, such as the so...
May 22, 2024Read More >
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