📰 Macro-News round-up

📊 Markets seem to be trying to remain stable in anticipation of the two most important events this week. On the one hand, today’s US inflation rate release, more necessary than ever to understand the situation, as Fed officials are giving contradictory messages, as we have reminded in previous reports with explicit quotes. Is it possible that the Fed rate cut will be reversed? Today we will have a clue in this regard.

💼 As a second important event, we have the interest rate decision by the European Central Bank tomorrow, the second largest central bank in the world. The market is discounting that there will be a rate cut in June, so no surprises are expected for this meeting. It is even expected that if rates are not cut in June, they will definitely be cut in July. As we have shared in these reports, while we doubt the Fed’s rate cut, in the case of the European Central Bank, not only do we not doubt it, but we believe that a rate cut is vital for the survival of the euro zone economy.

💱 As a reminder, let us not forget that industrial activity in the euro zone has been depressing for months. Particularly worrying is the case of Germany, whose manufacturing PMI is close to 40, an extremely low ratio that indicates a strong economic contraction. On the other hand, its inflation rate is at 2.2%, practically in line with the ECB’s targets, thus leaving the green light for a rate cut.

📈 Markets: The mini SP500 is slightly above 5250 points, after recovering from another mild fall yesterday. Nasdaq 100 recovers to 18,200 points. In Europe, the Dax 40 makes clear lower highs, but is currently holding above 18,200 points. The Dollar index DXY remains near 104 points, after pulling back after its flash bullish rally on Friday on good US employment data. EURUSD, holding at 1.0860, but as mentioned, all fundamental data points to an irremediable bearish relationship.

💰 Commodities & Geopolitics: beware, there is a doomsday scenario that could be looming on the horizon. Recently, we have seen crude oil prices rise, reaching almost 92$ a barrel on Friday. Possibly triggered by increased tensions between Israel and Iran. The British newspaper The Sun published an article this week suggesting that Israel could prepare a pre-emptive strike against Iranian nuclear facilities, an event that would set off alarm bells in the markets. In fact, gold is still at record highs, above $2,350 per ounce. But not only that, we have taken a look at the CRB commodity index, which measures a very wide range of commodities from energy, grain, livestock, to precious metals and industrials. Bad surprise, because its levels exceed the zones we saw in 2022 May, reaching 344 points. Two months later, the US recorded the highest inflation in decades. Let us hope that this time it will be different. If a second inflationary wave occurs, it will ruin plans to cut rates, which in Europe’s case are vital for survival.