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  1. G10 FX Weekly: USD/JPY on Intervention Watch; US Yields Becoming Stretched

    Richard Jones

    Summary After last week’s US jobs report and yesterday’s CPI data, US yields have exploded higher and have made new year-to-date (YTD) highs across the curve. USD/JPY has also accelerated quickly, closing above 152 for the first time in TKTK years, which greatly increases the probability of JPY intervention by the Japanese Ministry of Finance […]

  2. 3 Ways AI Is Revolutionizing Finance

    Matthew Tibble

    Everyone from Main Street to Wall Street has been scrambling to deploy AI since ChatGPT dropped in late 2022. By one estimate, 2023 saw AI-related sales jump 29% to hit a whopping $166 billion. By 2027, we will be staring at a colossal $400 billion market. And the financial sector will be responsible for a […]

  3. How Smart Am AI?

    Matthew Tibble

    AI is all anyone can talk about since the advent of ChatGPT. From revolutionizing healthcare with personalized medicine to generating trading signals in financial markets, every industry is claiming a new future for itself thanks to the technology. And perhaps rightly so. But how smart is this new technology? And perhaps more fundamentally, how do […]

  1. Brain Power: Is the Key to AI Efficiency Inside Our Heads?

    Matthew Tibble

    AI has a power problem. Even simple graphics processors for AI applications consume several hundred watts. But the most powerful computer we use for machine learning? That award goes to Frontier, which consumes 20 megawatts a year. That is $40 million of electricity. Frontier boasts an exaflop of compute: a billion, billion floating point mathematical […]

  2. Markets to Watch: CPI To Set Forward USD Trajectory

    Bilal Hafeez, Viresh Kanabar

    Summary The US sees CPI and PPI data this week – both likely to be consistent with a June cut from the Fed. In Europe, the ECB sets policy on Thursday. We expect rates on hold with an optimistic tone to prevail until they get March’s final inflation print. New Zealand’s central bank meets on […]

  3. G10 FX Weekly: US Yields, USD Near YTD Highs, But Hold Fire Pre-NFP

    Richard Jones

    Summary US yields across the curve are at or near their year-to-date (YTD) highs, as are the USD Dollar Index (DXY) and most G10 USD pairs. At such levels, we would normally position for retracement lower. However, Friday’s US non-farm payrolls (NFP) report presents major event risk. Market Implications We wait for price action post-NFP […]

The Productivity Pickup Is Cyclical

Dominique Dwor-Frecaut

Summary A key driver of disinflation has been unit labour costs (ULC, i.e., wage costs per unit of output). The ULC growth slowdown largely reflects accelerating productivity growth. Fast productivity growth seems more likely to reflect the recovery and unusual output volatility than a trend shift. Therefore, productivity growth normalization over the next few quarters […]

Equities and the MacroSphere: Pause Time for Upward and Onward

John Tierney

Summary Equities are heading into Q2 with a nice tailwind. The Federal Reserve (Fed) is inclined to cut rates, and the economy and labour market are on solid footing. Analysts project earnings gains of 8.2% for the S&P 500 (SPX) and 14.8% for the NASDAQ 100 (NDX). Still, there are reasons to expect the equity […]

  1. AI Faces Worse Macro Backdrop Than the 1990s IT Revolution

    Dominique Dwor-Frecaut

    Summary IT capex shows the internet revolution has been ongoing since the 1990s. Yet the macro data shows no obvious impact on productivity. This could reflect measurement issues and a falling labour income share that has made for sluggish demand growth and inflation. Investors have still benefitted from the IT revolution through high profits and […]

  2. G10 FX Weekly: Long USD/JPY Under Threat as Japan’s MoF Lurks

    Richard Jones

    Summary Yesterday, USD/JPY traded to its strongest level since 1990 (on an intraday basis). This prompted the Japanese Ministry of Finance (MoF) to verbally intervene (following further pushback earlier this week) to combat JPY weakness. This makes it much more likely that the MoF will buy JPY in the market, as verbal pushback has only […]

  3. Markets to Watch: Will Rates Shrug Off PCE?

    Bilal Hafeez, Viresh Kanabar

    Note: Due to the upcoming holidays, this week’s Markets to Watch covers an extended period, from 25 March to 5 April. Summary US: Friday’s core PCE should support the Fed’s belief in continued disinflation, while NFP (5 April) should show cooling wage growth but strong employment. Europe: preliminary inflation figures out over the next fortnight could […]

Equities and the MacroSphere: Fed Shows Its Cards

John Tierney

Summary The good news is the Federal Reserve (Fed) has all but promised to deliver three rate cuts in 2024 even if inflation remains slow to drop. The bad news is this was already priced into the market. With the 2Y Treasury yield still trading above 4.5%, there is little visibility now on whether or […]

G10 FX Weekly: EUR/CHF Upside Done, USD/JPY Downside Due

Richard Jones

Summary This week saw a torrent of central bank rate decisions, highlighted by the Bank of Japan (BoJ) ending its negative interest rate policy (NIRP). Also, the Swiss National Bank (SNB) surprised markets by cutting rates by 25bps. The US Federal Reserve (Fed) and Bank of England (BoE) kept policy steady with comparably less fanfare, […]

  1. FOMC Review: Fed Sees Disinflation Glass Half Full

    Dominique Dwor-Frecaut

    Summary As I expected, the Federal Reserve (Fed) stuck to its narrative of continued but slower disinflation and kept three cuts in 2024. Fed Chair Jerome Powell also made it clear the Fed would not attempt to cap growth to accelerate disinflation. Powell also indicated a quantitative tightening (QT) taper was likely to start soon. […]

  2. 3 Takes From Our AI Model on Powell’s Press Conference

    Bilal Hafeez

    We have been building a series of AI models that interpret central bank speeches. Unlike many existing models, ours use the full capabilities of ChatGPT (rather than older BERT models), and we go beyond analysing just sentences. It is still a work-in-progress, but here are three takes on yesterday’s Powell presser: Powell’s remarks and Q&A […]

  3. Markets to Watch: USDJPY To Rise Despite BoJ Rate Hike

    Bilal Hafeez, Viresh Kanabar

    Summary We think the Fed will stay on hold and keep three 2024 cuts in their forecast when they meet on Wednesday. The Bank of England will also likely keep rates steady, with CPI dictating the tone. Yet Tuesday’s BoJ meeting could bring the first hike in a generation following the strongest shunto wage negotiation […]

Equities and the MacroSphere: Ides of March Brings More Uncertainty

John Tierney

Summary With the Ides of March over, investors are pondering the implications of last week’s hot inflation prints and another runup in Treasury yields. Our take is that equities stay in a narrow range until either inflation cools or the economy/employment slows, giving the Federal Reserve (Fed) cover to cut rates. Oracle Corp. caught a […]

G10 FX Weekly: Short CHF Stands Out as Central Bank Flurry Approaches

Richard Jones

Summary In the next seven days, six G10 central banks provide monetary policy updates. Excepting the Bank of Japan (BoJ), no interest rate moves are expected. Markets are therefore largely in wait-and-see mode, with most G10 currencies in a range, presenting very few attractive trades. Market Implications One exception to this is being short the […]

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