Read on the Trading Floor - 20 June 2024
Today’s focus… England vs Denmark, sorry I meant Super Thursday of CB decisions
Macro Themes At Play
Has the mkt been reading about today's CB meetings (given it was a relatively quiet "Super" Thursday) or the team news for this evenings England vs Denmark European championship game?
Theme 1 - 3 European central banks, 3 different messages.
Theme 2 - US data dump
What else is being read on harkster.com
Theme 1 - 3 European central banks, 3 different messages.
SNB - cut now, why wait...
Oh, and by the way, we're ready to intervene (looking at you EURCHF shorts...). Back-to-back cuts from the SNB, with a clear message that the 2% Franc rally since Macron's shock announcement was not something that they were happy about. EURCHF shorts also got squeezed by the unwind of the safe haven bid after a resilient French auction. The first time the government have come to mkt since the election was announced. The combination has stalled the trend, but not quite reversed it yet as we've run into the 1month downslope (chart below). Maybe the real squeeze only comes after the French elections and we see want co-habitation is like in Paris, what policies are indeed implemented.
Bloomberg - Strong Franc Sways SNB Again as French Tumult Spurs Inflows
Bloomberg - France’s First Bond Sale Since Vote Called Goes as Planned
Marc to Market - SNB Surprises the Market (Again)
ZeroHedge - SNB Unexpectedly Cuts Rates Again As Swiss Inflation Continues To Ease
EURCHF channel still in tact despite the dull impact of today's CHF negative news
Source: Tradingeconomics.com
Norges - unchanged and not confident they can cut this year
Stubborn inflation cited as the reason to keep rates at their highest level since 2008. Pushing their previous projection of a Sept cut out the curve. Norges now one of the most hawkish CB's in G10, if not the hawkish.
BoE - another meeting closer to a cut
After the 2% drop in headline inflation dominated the press. Little news to cheer today as the BoE enticed the mkt with a potential cut but is still wary of service inflation and wage increases. I think this chart says it all, headline maybe 2%.... But services inflation is 5.7%!!!! That's what drives wage demands and keeps inflation fuelled... The battle is not won, especially as everyone will be asked to pay £7.50 for a pint of Spanish beer brewed in Yorkshire during this evening's match.
ING - Bank of England hints that the first rate cut is drawing nearer
NY Times - Bank of England Holds Rates Steady, Despite Slower Inflation
ZeroHedge - Bank of England Keeps Rates Unchanged In "Dovish Hold", August Rate Cut On Deck
Source: Reuters
Theme 2 - US data dump
Housing starts, building permits at a 4yr low, a key engine in the economy continues to single softening in the US consumer as initial claims were also higher than forecast. Pressure on the Fed to "hike" has dissipated, if it wasn’t for the elections, would the mkt be more comfortable in them easing in Q4 2024?
Advisor Perspectives - Housing Starts Drop to Lowest Level Since June 2020
ZeroHedge - Continuing Jobless Claims Keep Rising, California Initial Claims Crash
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