Bitcoin & Crypto | Commodities | Monetary Policy & Inflation | US
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Summary
- Housing and Transport are driving EU inflation.
- Energy EPS poised to rise.
- Ethereum has it just as bad as bitcoin.
- High but falling US inflation?
Supply-Side EZ Inflation Has Policymakers Worried
Energy has played a large role in pushing Eurozone HICP higher and continues to be the major driver of price rises in the near term. By component, the overwhelming driver of inflation has been the Housing and Transport. We see this clearly in Charts 1 and 2, and Henry Occleston unpacks the possible ECB response here.
Energy EPS May Take Off
Oil prices drive energy sector share prices because oil prices drive earnings (Chart 3). In the coming year, equity analysts are forecasting the earnings per share (EPS) for the energy index to jump 48%, compared with 14% for the SPX. The energy sector projections reflect continued high energy prices and the trend to deemphasise CAPEX in favour of free cashflow. John Tierney explores more as part of his bullish energy equities argument.
Ethereum Suffers Alongside Bitcoin
You would have expected ethereum to have performed better amid this bitcoin selling. After all, it did during the BTC selloff of mid-2021. Yet ethereum has suffered a similar 40% drawdown from late March to mid-May (Chart 4). Moreover, the correlation between ethereum and bitcoin remains at the highs. This suggests the broader macro backdrop is likely driving crypto weakness, rather than specific flows. Unpack the details here.
US Inflation Expected to Peak in Q2
Despite last Wednesday’s high US core CPI print (+0.6% m/m vs cons. +0.4%), near-term inflation expectations are declining. This marks a new phase in the inflation story. We were previously in an environment of very high and rising inflation, but now we are in a high but falling inflation phase (Chart 5). We explore more in our Rates Weekly.