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Since the Russian army’s full-scale invasion of Ukraine on 24th February most equity markets, government and corporate bond yields, commodity prices (energy, metals and agriculture), CDS spreads and major currencies have recorded significant intra-day volatility and outsized daily moves. Moreover, for all the “noise”, the current geopolitical crisis has accentuated multi-week trends in a number of financial market and economic
Read moreThe Fed is widely expected to hike its policy rate 25bp to 0.25-0.50% (its first since December 2018) at its meeting on 16th March, by which point it is due to have ended its asset purchases. Some FOMC members will likely push for a larger 50bp hike. Markets, as of 4th February, were pricing in a total of 120bp hikes
Read moreThe US Bureau of Labor Statistics will release US CPI-inflation data for December today at 13.30 London time. Consensus forecast is for another set of record-breaking data but US CPI-inflation figures have been volatile since Spring 2021 and thus more difficult to accurately predict. Our take is that US companies have been rapidly raising the prices they charge consumers, particularly
Read moreMarkets’ focus has in the past three weeks understandably been on the Omicron variant and the reaction function, present and future, of governments and central banks. The multiplication of social distancing restrictions and acceleration in booster jab programs in many major economies since late-November suggest that policy makers’ conviction that the Omicron variant will prove benign is still quite low.
Read moreThe spike in US Treasury yield volatility last week, following the release of gangbuster US CPI-inflation data for October, partly fed through to other asset classes. However, volatility in US asset prices, including Treasuries , the US Dollar and S&P 500, has since subsided while global FX volatility is still low in absolute and historical terms. Depressed volatility in FX
Read moreThe release of record-busting US CPI-inflation data for October has seriously dented the Federal Reserve’s long-standing argument that high inflation will prove “transitory. What has proved transitory is the rally in short-end government bond yields in developed markets, in line with our expectations. Volatile monthly inflation in the US and fleet-footed developed central banks point to government bond yields remaining
Read moreFollowing key central bank policy meetings last week in Australia, the US and UK, short-end interest rate markets have turned more dovish. We had argued back on 2nd November that “hawkish interest rate markets may have got slightly ahead of themselves.” The Federal Reserve and certainly the RBA cooled market expectations of rate hikes while the Bank of England flat-footed
Read moreOur measure of global headline CPI-inflation rose further in September to 3.7% yoy but the 0.17pp increase was entirely due to the 0.27pp rise in CPI-inflation in developed economies to a 13-year high of about 3.9% yoy. Headline CPI-inflation in EM economies was unchanged in September at about 3.3% yoy, with the fall in CPI-inflation in China and in particular
Read moreUS macro data, including measures of US inflation, non-farm employment, retail sales, manufacturing output, ISM PMIs and consumer confidence indices, have been far less volatile since the peak in global risk aversion in March-April 2020 when the first national lockdowns decimated global growth. However, volatility in most of these monthly metrics remains high relative to history. This is particularly true
Read moreFederal Reserve Chairperson Jerome Powell’s pre-prepared opening speech at the Jackson Hole Symposium on Friday afternoon was a key litmus test for the central bank. Powell took yet another small step towards an eventual tapering this year of the Fed’s asset purchases and a tightening of arguably extremely loose monetary policy while pouring cold water on any talk of policy
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