Read on the Trading Floor - 26 Jan 2024
Today’s focus… No hawkish surprise from PCE
Macro Themes At Play
Theme 1 - No Hawkish Surprise From PCE
Theme 2 - Assets (ex-FX) Bouncing into the Weekend
Theme 3 - The Week Ahead
Further Reading and Listening of Note
Theme 1 - No Hawkish Surprise From PCE
Higher consumer spending, pending home sales increasing just as core inflation eases, we're landing the plane!!!!! What a glorious job Yellen, Powell and Biden have done (makes you wonder why they're struggling for re-election)... is it too good to be true? Does goldilocks really exist? Where is the bite coming from? Does the data need a cut...?
Tradingeconomics.com "Annual core PCE inflation slowed more than expected last month to below 3% while the PCE rate and monthly measures came in line with forecasts. "
Source Tradingeconomics.com
BMO - U.S. Consumer Spending Growth Accelerates in December, But Core Inflation Eases
ING - Weak inflation and strong growth underscore the goldilocks US economy
Theme 2 - Assets (ex-FX) Bouncing into the Weekend
JPM EM Fixed Income podcast (From giant leaps to small steps) makes an excellent point, FX has not enjoyed the same repricing since the November Fed pivot. Local currency has lagged pretty much every asset class... crypto, SPX, QQQ, semis, oil, gold and of course credit. Like today, USD drifts slightly weaker in-line with the strong cross asset performance but the dispersion struggles to mirror crude/brent up over 5% on the week, Bitcoin has bounced back above 40k after a washout of stops below, and SPX "all time high" continues ... 4905 as London closes. Will FX wake up, when investors are more comfortable looking for total returns, rather than the current mix of long rates and/or long equities with a long USD hedge ... after all long USD hedge pays you 5.25% for insurance.
Theme 3 - The Week Ahead
Brent Donnelly am/FX - Huge weeks awaits
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Top Pieces
Discovered on Harkster.com
Jim Bianco - “No Landing” Economy, Sticky Inflation and Powell Pivot - Episode #149
BlackRock - Is Japan At An Inflection Point
Steno Research - Ifo nugget: smells like disinflation
MS Thoughts on the Markets - Will the US Presidential Elections change Fed policy?
David Woo - How to Trade a Second Trump Presidency
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