Jul 13, 20233 min read

Weak China macro / Softer than exp. U.S CPI core, USD takes next leg lower / BoC +25bps / 40c in EU!

USD softer (weaker macro data, core inflation peaked etc, one more hike from FED in Sep most likely and priced - unch pricing, WTI breaking up, USDJPY, USDCHF breaking down and EURUSD, CABLE, AUDUSD even adn GOLD back above $1935, all on cue
U.S CPI is heading down towards FED target, little doubt about that, though core inflation remains stubbornly elevated (shelter infl key...) and still way above FED target >>> Lower CPI good news for economy maybe & equity... in as much as it causes the Fed to cut rates faster (in the market's mind..eventually..) but if rates stay higher for longer..., it means more implicit tightening, so not great clearly..
China's exports fall most in three years as global economy falters, exports fell by 12.4% vs an expectation of -9.5% and imports -6.8% vs -4% expected. Exports fell the most in 3 years, Chinese demographics weak, a lot of attention put to JPN style 1990's situation going forward..full on deflationary scenario (....AND inflationary where ever reshoring is taking place - MEX, US, Vietnam and so on...) >>> Michael Pettis' Thread below is all is there is to know together, WELL worth reading, IMHO he and couple of others have a very good handle on what is going there..
BoC hiked 25bps to 5%, a 25year highs
ECB's Visco : we are not very far from the peak in interest rates (that's what the market is pricing in really)
Global GDP and consumer credit slowing, US 'traffic hitting the skids and rebook sales now negative / Thread below
IEA Trims 2023 Oil Demand Forecast on economic headwinds - Global Oil demand set to rise By 2.2Mln BPD In 2023 tor reach record 102.1Mln BPD
DeSantis would never be Trump’s VP
India is considering banning exports of most rice varieties, a move that may send already lofty global prices of the food staple higher
A scorching heatwave gripping southern Europe is expected to tip temperatures well into the 40C range this week and next
The drop in inflation in June paves the way for the US economy to avoid a recession, former PIMCO chief economist says

Markets :

USDollar softer on CPI, next more lower, $ breaking bid support levels vs CHF, EURO, GBP, XAU, AUD etcc...(...it was not rallying when rates when up last few weeks..), Gold, WTI crude, commods all on cue higher after softer CPI, FED Sep expectation remain the same, more skipping till then >>> BIG moves, $ on the cups of a major break down
UST2y yields drops sharply, over 40bps in few days-steeper curve
Equity markets love a weaker USDollar, softer rates and vols.. while 4450+, SPX500 could be melting up towards 4600-4700 top of channel/range, earnings season starting shortly, commodity stocks and few other sectors joining in of late (weak $, higher crude etc and some thoughts China will throw the kitchen sink at the economy... well they already have!)
Crude ticking up in price terms AND The US Strategic Petroleum Reserve is now at its lowest level since August 1983. Over the past 2 years we've seen a drawdown of 275 million barrels (44% decline)
GOLD trading higher again, a reminder that betting against Gold is effectively betting that the debt problem is going to go away miraculously...it won't (whether you want to bet 'on' and how is another question..)