Some early indicators of inflation have started to show worrisome signals 4-6 months down the road, which may lead to a resurfacing of inflation trends before the first battle is even won. Is the double-top inflation narrative warranted? Let’s have a look at pros and cons.
The ISM Manufacturing was the worst possible cocktail on the surface but remember the time-lags from the survey to actual activity. Inflation is likely to rebound later in the year, but not for now.
Service inflation is feeding through to Europe in size now, which makes the case for further ECB tightening compelling. Here are 7 charts on EUR inflation ahead of the Euro-zone print on Thursday and what it means for markets
Spanish and French inflation numbers are out, which will guide Euro zone inflation numbers later this week. Markets are currently rebounding, but not in an impressive way.
Watch ISM Manufacturing and European inflation this week. Another test of the January/February narrative of higher activity and higher prices.
PBoC injected almost “war-like” liquidity on Friday. Is this another sign of Chinese authorities really trying to pump liquidity into the system? This week we watch RBNZ, PCE prices and Japanese inflation.
Mester and Bullard have brought back the 50bp chatter and the market is now slowly opening the door for more than 25bps in March. We continue to find the bar to be VERY high for a 50bp hike and no important members have so far mentioned such a hike.
Equity markets keep performing despite a front-end repricing of interest rates. If the consumer is really doing better than feared, then we are in for a different type of inflation compared to 2021/2022. And this time it is not as bad..
Midweek has arrived and that calls for a rundown of the five things we watch the closest. As is the custom every Wednesday, we will take you through these most important themes (and charts) in macro and summarize how we interpret them. Dig in!
The disinflationary vibes are not tattooed all over this inflation report despite a cooling yearly inflation pace for the seventh consecutive month. BUT.. do note that Powells target variable keeps cooling!
We are standing at cross-roads. Will waning inflation allow the market to speculate in a soft landing after Tuesdays numbers again?
With the recent almost farcical economic data coming out of the US, we bet economists and traders are on the edge of their seats awaiting the coming CPI-print. In this ‘preview’ we’ll turn to our charts trying to align expectations to select indicators.
Chinese inflation is re-increasing, which rhymes with our APAC inflation story for H1-2023. The question is just how strong the Chinese momentum really is.
German inflation surprised on the low side of expectations and meanwhile Villeroy from the ECB also confidently talks about waning inflation. The bar remains high for a further hawkish repricing of central banks.
It is safe to say by now that Powell has been a key person behind orchestrating the coordinated global central bank message of “peak inflation”. The bar is VERY high to price the Fed more aggressively than now.
Tokyo inflation solidifies our theory that Asian inflation (Japan, China, Taiwan and parts of Oceania) will continue to rally during Q1-Q2, while the actual production is BACK in the West.
The market is doing exactly what it should do, if US/Western inflation is falling and China is fueling the global economic growth momentum again. The question is whether it is sustainable to bet on that cocktail. We doubt it.
Morning folks Smoking hot CPI report out of Australia. Good news for our AUD longs and a cementation of a too dovish pricing of RBA currently peaking at 3.75% in Q3. If the RBA were to copy/paste the playbook of the Fed or the ECB and aim for positive real rates… Oh boy a repricing that would prompt. We wouldn’t rule out such a repricing since we find that the APAC inflation cycle lags Europe and the US. Europe’s energy woes increased price pressures on Natural Gas in the APAC region with a time-lag, and this is one of the reasons why this region is now under inflation scrutiny. This is of relevance for Bank of Japan as well. Australian CPI empirically leads Japanese CPI by 3 months, which leads us to the conclusion that Japanese inflation is headed for 5-5.5% in the next 3-4 months. Quite a backdrop for a new Governor in BoJ and a HISTORICAL chance to at least partly scrap the YCC. Bring on speculation about a change of policy via the JPY release valve again. Chart 1. Australian CPI leads Japanese CPI We saw a decent bounce in both US and European S&P PMIs, but no one really cares about them, since the Leading Economic Indicator (LEI) out earlier this week points to ISM Services clearly below 50… Yesterday’s market reaction was also telling with no positive reaction to the rebound in PMIs, since the crowd was CLEARLY leaning that way ahead of the PMIs. […]
Inflation printed right on consensus despite another jump in shelter costs. Several goods categories cooled quicker than anticipated by many. This is net/net a dovish report after all. USD remains a sell.
Every Wednesday, our Head of Research Andreas Steno, goes through the 5 most important themes/charts in global macro right now and how we assess them. Enjoy!
It is now that time of month again. As economists anxiously await the coming CPI-print, we will in this ‘preview’ turn to our charts in an effort to align expectations according to select indicators.
Lagarde starred in the role as the slightly more tanned Grinch as central banks decided to ruin Christmas. Structural liquidity doesn’t look too bad and 2023 is not necessarily the year of the bear.
Is it really a possible scenario that the Fed will do stealth-QE by summer 2023? And are equities still a sell based on USD liquidity plumbing? Get the answers here!
US CPI printed at 7.1% – smack dab at our forecast – but it is not necessarily a signal to buy risk assets. Margins increased when inflation was hot. The opposite will happen now.
Given the rumors surrounding the Chinese reopening story we thought that we would do a deep dive into the China story and look at what is moving. Can we even expect to see a reopening?
In my base-case, we are going to see a double-top inflation picture, but I sincerely hope that we don’t resummon our inner financial illiterates, if rates drop towards 0% due to temporary disinflation
It is time to be humble about inflation. It is tricky to time the peak, why a basket with embedded windshields, should inflation re-accelerate, may be the best choice.
Is this a return to a 70s-like fight between inflation and recession? The energy supply scarcity is likely to bring about yuge business cycle volatility in coming years until the situation is settled.
Inflation runs markets currently as it seems as if growth has become irrelevant for policy makers, but will such a narrative pass a reality test? I doubt it. Growth will re-enter the limelight soon!
Inflation is not going to peak in Q1 as the most recent price developments in energy- and food prices will lead inflation much higher in Q2. So, the question is now; How do you trade stagflation?