Euro / U.S. DollarShort
Unanchored
For the first time since the release of Space Invaders on Atari 2600, inflation control is a higher US policy priority than jobs or growth.
The front end cratered today as Biden and Manchin made it clear that inflation is now US policy priority #1, CPI was hot as ever, and the bond auction tailed badly. Market reactions were somewhat consistent but the exception was gold. Generally, when the front end sells off a lot, signaling faster rate hikes from the Fed, gold falls. But today, it did not, even as the USD mooned.
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Headlines today:
*PRESIDENT BIDEN SAYS REVERSING INFLATION IS A TOP PRIORITY
Senator Joe Manchin [Twitter]
"By all accounts, the threat posed by record inflation to the American people is not “transitory” and is instead getting worse. From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day."
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A magical and toxic combination of disorderly post-COVID reboot, mass resignations, fiscal flooding, relentlessly turbo aggressive monetary policy, and emerging inflationary psychology have changed the economic imperatives. To me this means:
• Bostic’s odds should be trading higher than 7%.
• A tariff reduction deal has to be in the US administration’s thought process. This headline hit yesterday and it definitely makes you go hmmm… VIRTUAL SUMMIT BETWEEN U.S. PRESIDENT JOE BIDEN AND CHINESE PRESIDENT XI JINPING IS TENTATIVELY SCHEDULED FOR MONDAY EVENING – POLITICO.
• Fed might taper much faster than planned.
• CPI matters more than SPX.
A tighter, faster Fed is not bullish gold and to me it stands out and looks wrong. Same thing for crypto, which initially rallied in tandem with gold but now has reversed bigly.
Inflation is good for gold when the Fed is loose and not reacting... but I think with the political winds having turned 180 degrees, the Fed will turn soon too.
The front end cratered today as Biden and Manchin made it clear that inflation is now US policy priority #1, CPI was hot as ever, and the bond auction tailed badly. Market reactions were somewhat consistent but the exception was gold. Generally, when the front end sells off a lot, signaling faster rate hikes from the Fed, gold falls. But today, it did not, even as the USD mooned.
************
Headlines today:
*PRESIDENT BIDEN SAYS REVERSING INFLATION IS A TOP PRIORITY
Senator Joe Manchin [Twitter]
"By all accounts, the threat posed by record inflation to the American people is not “transitory” and is instead getting worse. From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day."
************
A magical and toxic combination of disorderly post-COVID reboot, mass resignations, fiscal flooding, relentlessly turbo aggressive monetary policy, and emerging inflationary psychology have changed the economic imperatives. To me this means:
• Bostic’s odds should be trading higher than 7%.
• A tariff reduction deal has to be in the US administration’s thought process. This headline hit yesterday and it definitely makes you go hmmm… VIRTUAL SUMMIT BETWEEN U.S. PRESIDENT JOE BIDEN AND CHINESE PRESIDENT XI JINPING IS TENTATIVELY SCHEDULED FOR MONDAY EVENING – POLITICO.
• Fed might taper much faster than planned.
• CPI matters more than SPX.
A tighter, faster Fed is not bullish gold and to me it stands out and looks wrong. Same thing for crypto, which initially rallied in tandem with gold but now has reversed bigly.
Inflation is good for gold when the Fed is loose and not reacting... but I think with the political winds having turned 180 degrees, the Fed will turn soon too.
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