In today’s briefing:
- Global Liquidity Has Bottomed …
- UK: Resilient GDP Raises Work for BoE
- US Inflation Watch – a Consensus Print, but Decently Dovish Beneath the Surface
- Putting (some) chips back on the table
Global Liquidity Has Bottomed …
- Global Liquidity Index (GLI) moves higher to 17.5 (normal range 0-100). Most national liquidity indexes bottomed around October 2022
- Global Liquidity will reverse its recent fall and rebound to US$174 trillion. Rising Central Bank Liquidity is a common theme. Financial dominance driving a return to Central Bank QE.
- More liquidity is consistent with future stabilisation and moderate gains in World asset markets. Rebound investment phase. Emerging Markets and Cyclicals favoured. Gold, commodities and crypto also could be winners
UK: Resilient GDP Raises Work for BoE
- UK GDP was surprisingly resilient in Nov-22 as it grew by 0.1% m-o-m, about 0.3pp above forecasts. The World Cup helped, but services trends are broadly less bleak.
- Further downward revisions from the national accounts don’t negate existing evidence of excess demand. Delaying GDP falls means inflationary pressures persist for longer.
- The BoE will need to squeeze demand more if inflation doesn’t achieve that itself amid second-round effects. More rate hikes and a recession are still coming in 2023.
US Inflation Watch – a Consensus Print, but Decently Dovish Beneath the Surface
- Inflation printed right on consensus despite another jump in shelter costs.
- Several goods categories cooled quicker than anticipated by many. .
- This is net/net a dovish report after all. USD remains a sell.
Putting (some) chips back on the table
- After a blow out year in 2022, the CTA macro funds are being careful how they place their chips for 2023 and while some are trying to push equities and bonds lower, continuing last year’s winning trades, more focus is currently on their more traditional ‘noise markets’ of FX and Commodities, where if anything most of the trades being put on are now the opposite of last year!
- However, this is evidently harder work than last year, when it was ‘easy’ to create forced buyers and distressed sellers.
- Thus, after being long energy in 2022, with early commentary emphasis on a big slowdown in GDP, the traders tried to flip and push Oil lower from the top of its trading band (around $85 on Brent).
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