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Thoughts From The Divide: Regrets

BY JON WEBB
With the Fed in blackout, the market has been left to its own devices to digest this week’s onslaught of economic data. The inflation data was particularly indigestible. CPI numbers came in hotter than expectations, with both Core and Headline higher than forecasts on a YoY basis at 3.8% and 3.2%, respectively: only slightly worse than expected, but worse than expected. The market also had to deal with PPI that was substantially hotter than expected: the month on month came in at 0.6%, double the consensus forecast. Under the surface, goods inflation appeared to once again be rearing its head, accounting for “about two-thirds of the rise in the headline PPI”, courtesy of “a 1.2% surge in goods prices, the biggest increase since August 2023”. (The Houthis are not helping). While the Fed may have taken a temporary vow of silence, Yellen is under no such constraint. Speaking in an interview on Fox, the Treasury secretary said, “I regret saying it, [inflation,] was transitory”, following up with the jab that “I think transitory means a few weeks or months to most people” (how long is a piece of string? To be fair, predicting inflation is, apparently, tricky: “there are clear limitations to how far into the future we can forecast inflation”). Read more →

Thoughts from the Divide: Which Way Is Up?

BY JON WEBB
Trying to understand the Global Economic Impacts of Trump’s Second Term. So far, he has signed more executive orders on his first day than the last ten presidents combined. As of this writing in the middle of the Friday trading day, US markets initially seem impressed, with the S&P reaching an all-time high earlier this week and the Nasdaq 100 and Solactive 200 both higher. There is a bit of pullback today, but we are higher for the week overall. And US markets aren’t alone, Japanese and European equities have had their best performance this year. Maybe Japan and Europe aren’t going to be affected by the Trump tariffs? Last time we looked, they made a whole lot of automobiles, but what do we know? Read more →

C8 Currency Compass – September 2024

BY JON WEBB
We are firmly in the 50bp rate cut camp – if  the Fed is worried about employment, they need to get ahead of the curve.  This is likely to put further pressure on the USD in the near term.  USDJPY has hit its downside target (see below) so the benefit is more likely to accrue to the EUR and GBP.  We also see the BoJ on hold this week, which adds weight to this view.  However, we note our systematic models still point to EURUSD and GBPUSD weakness over time, so any bounce may prove a good opportunity to add EUR and GBP hedges.  Read more →
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