📈 Macro-News round-up

💰 On Saturday, Joe Biden approved a new public spending package that amounts to 1.2 trillion dollars, excluding the funds they want to send to Ukraine. This new package guarantees that government services will continue to operate. The Senate voted in favour of it, with a Democratic majority and 74 votes in favour and 24 against. It is worth noting that the US public debt amounts to more than 127% of GDP, and its deficit is close to 6% of GDP. 💼💵

📊 In the meantime, we are still waiting this week for the revised US GDP, jobless claims, the Fed’s PCE inflation rate, and Powell’s speech. Everything seems to be going according to plan, and the Fed insists that there will be a rate cut; however, Botic’s words yesterday continue to sow doubts in the investing public. Bolstic said that he expects only one rate cut this year, and that cutting rates too soon could be more disruptive to the economy. Similarly, Goolsbee said that we need to make more progress in reducing inflation, and in his case, he expects three rate cuts by 2024. 📈🏦

📉 This is evidence that there is no unanimity among Fed members on their view of the US economy and the urgency of the need to cut rates. Indeed, the market reflects this. The US 2-year bond is still holding at 4.60% and in fact, 4.50% is probably a support zone. Discounting, that the rate cut will need to be fully bought by the investing public. The dollar DXY is discounting something similar, with its index rising above 104 points since the last few days. Both behaviors in these two markets would not be possible if there was a clear unanimity that a rate cut is going to happen, the market is discounting another scenario. More and more voices are saying that there might not even be a rate cut by the Fed this year. 📉💵💭

🗣️ As we have discussed in previous reports, the Fed knows that the bulk of inflation lies in the labor-intensive service sector. This means that only by reducing the cost of labor, inflation will be safely controlled. For this to happen, the unemployment rate must rise, and perhaps they are looking for two ways to contain the cost of labor: One, by increasing labor supply through mass immigration, the other, by increasing productivity through AI. ⚖️📈🤖

📉📈🇺🇸🇬🇧 Meanwhile, Wall Street closed yesterday slightly negative. SP500 fell by 0.31%, Nasdaq 100 fell by 0.34%. The UK’s FTSE 100, lagging somewhat behind the rest of the top western indices, appears to be approaching the 8000 point ceiling. 

📈🌍 As a reminder and recap, note that inflation in the US and Europe seems to have been zig-zagging in recent months. The 3% figure seems to be something of an average, especially in the case of the US, creating what has been called sticky inflation. On the other hand, last week and the beginning of this week have left us with two important countries picking up in inflation, but for the moment they are in Asia, Japan and Singapore. 

💥 Commodities: in this scenario, it is worth noting the following. While the dollar seems to be strong, its substitute, gold, remains particularly bullish. The reason may be that it is not responding to the Fed’s signals, but rather to the geopolitical situation. Israel continues to shock the world with images of attacks on the Gaza population, to the point that its own ally, the US, is beginning to openly criticize it. This means that the chances of this conflict getting out of control are greater today. This could be fuelling the bullish number which is currently approaching all-time highs, now trading at $2190 per ounce. 📈💰🌍🇺🇸🇮🇱

🛢️ On the other hand, OPEC+ said yesterday that it plans no changes to its policy next week, leaving an oil market which remains relatively strong compared to the last 2 months. For many, the bullish factor is also geopolitical in origin. The reason could be the attacks on Ukraine, Russian oil refineries, this is another war that does not seem to be cooling down either and could escalate, making gold more relevant. 🌍💥