Chartbook: February 27
Slides from this week’s internal trading call:
27 Feb 2023
Treading water
• Holding steady. A quiet start to the week with US bond yields easing back slightly and US equities edging a little higher.• GBP & EUR bounce. UK and EU agreed a new deal on Northern Ireland’s trading arrangements. But GBP continues to face structural headwinds.• Retail sales in focus. AUD has consolidated. After softening into year-end consensus is looking for Australian retail sales to bounce back in January. A quiet start to the week. The adjustment in expectations around how high the US Fed could lift interest rates this cycle and the flow through to bonds have driven markets...
Capitulation
Markets have given up on trying to fight the Fed. Yields and the dollar remain well-supported after Friday’s date showed the central bank’s preferred inflation measure accelerating in January, suggesting policymakers will have to move more aggressively to cool aggregate demand in the months ahead. The core personal consumption expenditures price index climbed 4.7 percent from a year earlier, up slightly from December as consumer spending jumped 1.8 percent month over month. This pushed market-implied terminal rate expectations above the 5.5 percent threshold, with back-to-back quarter-point hikes expected at the next three meetings. If historical price dynamics are any indication,...