Viresh Kanabar
Key Events G10 In the US, our focus will be on the consumer confidence survey: Mich. Consumer confidence (Friday): Consensus expects no change. We agree based on inflation stickiness (the survey tends to reflect HH inflation perceptions). We expect little change in short- and long-term inflation expectations, with the latter stable but higher than pre-pandemic. […]
Richard Jones
Summary USD/JPY briefly printed above 160 on 29 April, a public holiday in Japan, before quickly falling back below 155. Money market data suggested the Japanese Ministry of Finance (MoF) bought about 5.5tn yen that day. A second bout of intervention, following the Fed policy update on Wednesday, saw the MoF buy 3.5tn yen, leading […]
Dominique Dwor-Frecaut
Summary The Fed signaled less confidence on disinflation but did not change its policy outlook. The Fed still believes there may be further supply side gains to come and will not necessarily attempt to cap strong growth. The central bank is likely to react more slowly to positive or negative inflation changes than to broad-based, […]
John Tierney
Summary This earnings season is a lot about messaging. Meta Platforms (META), Alphabet (GOOG), and Microsoft (MSFT) all beat expectations and promised AI spending. However, META collapsed for saying it will be a while before realizing a return on its investment. There are signs industrial companies are finally running down inventories and will have to […]
Bilal Hafeez, Viresh Kanabar
Summary The Fed is likely to maintain interest rates this week, emphasizing caution on inflation targets and readiness to hike if necessary. We get April’s preliminary inflation in the Eurozone. Our model predicts downside in headline and core vs market expectations. The rest of G10 sees ANZ Business Survey and labour market data, Canada GDP […]
Richard Jones
Summary Long EUR/CHF was one of our strongest conviction trades in Q1 2024. The pair topped out earlier this month, but pullbacks have been shallow and short-lived. We think the Swiss National Bank could sell CHF during its easing cycle, while the BEER valuation for EUR/CHF sees the pair as 8.5% undervalued. Both factors would […]
John H. Welch
Summary Brazil’s fiscal health continues to deteriorate at break-neck speed. The government has abandoned the original, extremely relaxed fiscal targets, and the market is catching on. The Banco Central do Brazil has lowered the SELIC policy rate 300bps since it started easing but has already turned more cautious in discourse if not yet action. Now […]
John Tierney
Summary Last week’s selloff in the semiconductor sector most likely opens opportunities to establish positions in the AI hardware sector. Commodity chip producers will continue struggling. The Federal Reserve (Fed) may not be cutting rates for now – but we see zero likelihood it will raise rates. And if the economy slows, we expect rate […]
Richard Jones
Summary The Japanese Ministry of Finance (MoF) has continued verbal intervention, warning the market it is unhappy with USD/JPY price action and is prepared to push back against the JPY selloff. USD/JPY has continued rallying this week, breaking 154 for the first time in 34 years. The US Dollar Index (DXY) has had its strongest […]
Bilal Hafeez, Viresh Kanabar
Summary In the US, this week will be all about how Fed speakers react to the hot inflation print. We think September is now the earliest they can cut rates. The UK and Europe will get inflation figures this week. For both the BoE and ECB, we expect June remains the most likely time for […]
John H. Welch
Summary The new Milei administration signalled plans to dollarize the Argentine economy. Some think the central bank must accumulate USD to make this happen. The solution, however, is just a simple exercise in arithmetic: find the USD/ARS that equates gross foreign exchange reserves to the central bank’s monetary liabilities. The calculation comes to 885 Argentine […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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