The Morning Hark - 08 Sept 2023
Today’s focus... No US data so a day spent reading US CPI and ECB previews (on harkster.com)
There was no data of note overnight, with the China fix the principal news worthy event. CNH traded greater than 7.35 as PBoC eased back the fix, indicating a comfort in slowing but not reverting the deprecation trend. (BBG: China Budges in Fight With Bears, Sending Yuan Toward Record Low)
*EUROPE #GAS JUMPS AS MUCH AS 11% AFTER CHEVRON LNG DEAL FAILS (BBG). It is not good news for the ECB, BoJ, NBH and those CB's of energy importers fighting inflation but it is also not the same terms of trade shock that we saw in 2022.
German Final CPI was in line with expectations ... 0.3% MoM and 6.1% YoY
Looking for real rates, MXN remains the crown jewel... base rates 11.5% and Core CPI now 5.96%.
A lot has been written this week on US data resilience, duration weakness, German recession, BoE near terminal, China property stocks, but when all is said and done we've had little net displacement in assets as @HarksterHQ wakes up again this morning to see EURUSD 1.0720, AUDUSD just below 0.6400, USDJPY 147.20 (no closer to 150) and ESA futures 4450. Higher yields, weaker stocks and USD strength has been the broad but small trend week to date. The market is trying to find its clearing rate ahead of the all-important CPI print next week as well as Lagarde's pivotal ECB meeting.
Central Bank's (Almost) Declaring Victory:
The wave of Fed speak yesterday has supported a September pause, Williams highlighting data dependence, Logan open to a skip plus a hike, Goolsbee remaining on the dovish side and indicating that they're almost done (FT: Federal Reserve officials back rate rise pause in September)
Have we finally reached peaked rates? Away from the Fed we’ve heard from some key Central Bankers like Gov Bailey (almost done with rate hikes) and now yesterday, BoC’s Macklem (almost declaring victory on inflation). BBG: BOC Governor Macklem Says Victory Over Inflation Is ‘In Sight’.
Conflicting signals from the US as we try and find "restrictive" territory... are we slowing or is the US exceptional?
10yr real rates are bumping up against 2% and their highest levels since 2009 at the same time the market is focused on a recession and March 2024 cut
ING FX Daily: Resistance to dollar strength is futile
Walmart, the US largest private employer has changed its wage structure for new hires ... WSJ: Walmart Cuts Starting Pay for Some New Hires...
Chicago Fed: Past and Future Effects of the Recent Monetary Policy Tightening ... "the policy tightening that’s already been done is sufficient to bring inflation back near the Fed’s target by the middle of 2024 while avoiding a recession."
America's Weakening Labor Market - by Joseph Politano (apricitas.io)... Job and Wage Growth Have Decelerated Substantially This Year—Signalling a Likely End to Exceptionally Strong Pandemic-Era Labor Markets
Christophe Barraud: Initial jobless claims dropped well below expectations to the lowest since February while continuing claims also fell more than expected to a 6-month low.
Source Bloomberg via @C_Barraud and the Daily Chartbook
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Daily Chartbook: Daily Chartbook #275
The Gryning Times: Fighting Inflation Perceptions
GS Exchanges Podcast: The Fed is likely finished hiking rates as the U.S. avoids recession
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All times in British Summer Time (BST)
CAD (13:30): Employment data
USD: no top tier data
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