Nothing much going on in Asia with markets closed for the Dragon Boat Festival in China, Hong Kong, Taiwan & for the Queens Birthday in Sydney.

Calendar is very sparse today too so should be a quiet one...

FOMC is bound to be the main event this week, although they must be running out of creative ways to say BRRRRR by now... 🙄

This meeting will also include an updated set of economic projections, plus the infamous dot plot, but neither of these are likely to tell the market anything new.

Things are getting better, projections could be upgraded slightly and a couple more will probably move onto the 2023 hike list.

Very meh.

All that really matters is if they are talking about talking about tapering.

Fed Communication Process Template 👇

Talk about talking about tapering -—> Talk about tapering -—> Talk some more about tapering -—> Taper-—> Never hike rates again because the world is levered to the nuts and deflation is NOT transitory.

OK, maybe not the last bit.

Although... Does BlackRock (and others) paying top dollar for homes not seem strange to anyone? 👇

What could their motivations possibly be?

hEdGiNg AgAiNsT hYpErInFlAtIoN was my favourite bad Twitter take.

Clearly bollocks. If they thought inflation and much higher rates were coming, they'd be sitting this out, waiting to buy bonds with actual yields and snapping up houses at cents on the dollar (again) in the ensuing mass default.

Maybe they've realised low rates are here to stay and are literally running out of assets to buy...?

Tangent over!

Back to the Fed.

Substantial further progress hasn't been made so there won't be any policy change...

This was the previous dot plot from March 👇

7 members forecast hikes by the end of 2023 vs 11 who didn't.

That ratio might flip so that the median member sees rate hikes by the end of 2023 (10+ members).

After the last meeting rates markets a 'priced' a 100% chance of a rate hike in 2022.

Markets now see a lower chance of a hike in 2022 than they did in April.

On the face of it this meeting should be as uneventful as a weekend in lockdown.

Its how markets respond that matters.

The USD move on Friday was interesting.

Just some position squaring around option expiries or a shift in USD sentiment?

Scotia Bank

GS-FX COT "Asset managers turned to net buyers of $'s, after eight consecutive weeks of net selling $. Net sold JPY, AUD, CAD, & GBP, & net bought EUR
Levered funds continued to net sell $, against net buys of JPY, BRL, GBP, & CAD. They net sold EUR, AUD, CHF, NZD, MXN & RUB"


The easy way to think about the dollar post-FOMC:

  • No/little mention of taper, still a long way from our goals etc. = Sell USD
  • Meaningful mention of taper = Buy USD

Easy isn't always right... Even if there's no strong mention of taper, the market might decide that everything except the taper box is ticked, and start positioning towards that outcome regardless...

G7 agreed some stuff over the weekend.

Screenshot of the joint statement 👇


Xinhua - "Build Back Better World" or "Empty Promises"? #G7

And a thread on the state of the coverage.

Front page of the FT 👇

'Everything will be so different when Trump leaves'

The only thing that's changed is the language.

This actually applies more broadly.

Biden policies are essentially the same as Trump policies.

The delivery style has changed but policies, actions and goals haven't really shifted (beyond words)

And yet...


Business interests & economics will always guide politics, not the other way around.

Take Germany's attitude to Russia over NordStream 2 & China over the human rights abuses as the perfect examples.

Business Comes First

Onto the rest of the week & UK jobs data (April) on Tuesday is expected to show a fall in unemployment to 4.7% and an increase in average earnings, although the figures are still somewhat distorted by the furlough scheme.

Final inflation data from Europe is unlikely to have any impact. ECB are dovish, and flash readings were already published.

U.S. Retail Sales: Expectations are for another disappointing print around -0.4%. The highest expectation is for a gain of 0.2%.

BofA forecast is lower than consensus based on card data:

Wednesday is the big one.

China's data dump will be published at 8AM BST rather than in the mid-Asian session.

  • Industrial Production is expected to remain buoyant at 8.9% YoY
  • Retail Sales are expected at 14% YoY

The last print (17.7%) was a lot softer than expected (24.9%).

Domestic demand is a big concern for the CCP as they shift away from the export-led growth model and try to deleverage.

Another decent miss could spark concerns over a slow recovery in China with the effects of the deleveraging & negative credit impulse starting to show.  

UK & Canadian CPI releases are unlikely to have much impact.

Biden & Putin will have a chat in Geneva to chastise each other for recent actions, air grievances, and decide if they want a constructive or conflictive relationship going forward.

A joint statement would be seen as a positive, separate statements a continuation of the status quo.

Then it's the FOMC...

followed by Brazils central bank who will keep hiking at Thursdays meeting, taking the Selic rate to 4.25% from 3.5% currently, and reinforce the commitment to continue tightening.


In the early hours, the latest employment data from Oz.

Labour market strength and upward wage pressures are key for RBA policymakers. Then...

More central bank meetings

SNB: Keep rates unchanged at -0.75%, repeat mantra that the Franc is highly valued, will intervene as necessary etc.

Norges Bank: No rate hike yet, but coming soon according to Nordea...

We believe that the new rate path will show a first rate hike in September 2021 with a very high probability and also a fairly high probability for a second hike in December 2021.
Our view is that Norges Bank in the end will hike rates both in September and December as long as there are no big setbacks with the vaccination roll-out nor viral mutations that delay the reopening significantly.
Expect NOK will strengthen moderately when more hawkish message is delivered

CBRT: Nobody knows. Probably on hold for a while longer (Hiking rates gets central bankers fired, cutting rates too early gets markets panicking).

An early rate cut would not be welcome news. Erdogan recently agreed to increase swap lines with China which will help boost foreign reserves.

TRY has rallied against USD over the past week or so.


BOJ meeting will be as uneventful for markets as usual, even if they extend the pandemic relief program by six-months...

UK Retail Sales are expected to moderate after last months 9.2% print.

Quad-witching Expiries 👇