Read on the Trading Floor - 06 June 2024
Today’s focus… wake me up at NFP tomorrow
Macro Themes At Play
Theme 1 - Lagarde's in charge
Theme 2 - Cross assets recover/stabilize
What's being read on harkster.com
Theme 1 - Lagarde's in charge
Lagarde delivers the first 25bps cut, very much as expected... If you only looked at a chart of EURUSD spot it would be hard to comprehend that a meeting even took place!
She said the ECB are increasingly confident in “the path ahead”....
Their updated quarterly outlook raised their 2025 inflation forecast to 2.2% from 2%. "policy will slow towards 2% later than previously thought"
Lagarde went out of her way to flag the inflation forecast for Q4 2025, which has been fluctuating consistently between 1.9% and 2.0%
As expected, the board are data dependent going forward. The mkt believes we can see a Sept and Dec cut but the former could easily slip into Oct if inflation remains elevated / sticky. In fact, it wouldn't take too many negative inflation surprises for the ECB to slow the cycle or even reverse today’s cut.
Given everything was pre-announced, priced and the hawks had communicated their view, it's the data that will drive the decision whether the ECB will cut in Sept or Oct.
Lagarde's necklace was probably the greatest surprise. #incharge
Bloomberg - ECB Delivers Landmark Rate Cut With No Signals on Next Steps
Rabobank - A cut based on confidence, not data?
Raiffeisen - ECB Watch: Rapid ascent, slow descent
Livesquawk - ECB Cuts Rates By 25bp, Lagarde Cagey On Next Steps
Econostream - ECB Insight: Lagarde, as Data-Dependent as It Gets, Scrupulously Avoids Hints on Timing of Future Moves
Reuters - Lagarde comments at ECB press conference
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Theme 2 - Cross assets recover/stabilize
All-time highs in stocks, as DM CB’s deliver on promised cuts and Nvidia maintains its driving force, clearing $3trillon mkt cap (and now exceeding Apple's).
The political shocks in EM have also subsided. In particular, MXN is rallying off it's wide’s and settles back at 17.50. The Sheinbaum fear factor lasted less than 48hours and as the dust settles the carry, continuation of policy, stability in cross assets and cleaner positioning have Peso back in vogue... Blink and it was easy to miss the opportunity. VAR shocks are easy to trade in hindsight ...
Axios - Nvidia passes Apple as world's second-most valuable company
WSJ - Robinhood Doubles Down on Crypto With Deal for Bitstamp
Notayesmanseconomics - Why are equity markets seeing so many new highs in 2024?
Purity Macro - Macro Notes
Nautilus Research - The Cuckoo Sings
What's being read on harkster.com
ING - Zero chance of rate cut this year, says Poland’s Glapinski
Brent Donnelly - Quick NFP Thoughts
The NY Times - Regulators Take on Nvidia, Microsoft and OpenAI
Axios - Biden officials warn Israel "limited war" with Lebanon may draw Iran to intervene
St Louis Fed - Three ways to measure the US economy : A guest post with perspectives from the Bureau of Economic Analysis
Fortune - Generative AI copilots could promise ‘a workplace utopia’
JPM - A Piece of the Action
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