MARKETS
The US inflation improvement is working magic and reducing fears of most other structural impediments, including micro impulses from earnings as calmer seas ahead have investors sailing to the soft landing camp.
Since we are still in a very uneven trading environment, a good portion of the street is still worried about when the “Legoland Effect” takes charge.
Mind you, investors are still trying to get their heads around what a soft landing looks like
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With even the most ardent dollar bulls long EURUSD on hopes, the ECB hikes jumbo. Still, with the market focusing on growth vs inflation risk, the street is unsure how EU risk markets will eventually react.
GOLD
With the sell-off in TIPS yield slowing and markets increasingly shifting their focus on growth, the asymmetry for gold has overall improved, especially over the medium-term – gold has recently traded in line with the market bias for the Fed to cut rates rather than hold the course as officials suggest.
OIL
Oil markets are pretty quiet; yea, the Asia holiday effect, but some oil traders are fretting about what we think now is a temporary speed bump, the possible post-lunar consumption deflator syndrome. But it’s enough to keep positions lite, possibly until we clear the next expected Covid wave in China. China is a game changer for oil markets, and traders will come to the notion that you only get paid once for this China reopening bounce.
