The May 23 Federal Open Market Committee outing was widely received as dovish, with the Federal Reserve signalling that it remains prepared to permit an overshoot of inflation beyond the central bank's 2% target.
The Fed's statement also indicated the potential for a shift in forward guidance, perhaps pointing to a willingness to reconsider the now priced-in hawkish 2018 trajectory.
"We are seeing relief in emerging markets today, both on the Fed and on Turkey's rate hike," reports Saxo Bank head of forex strategy John Hardy in the wake of the Turkish central bank's move to rein in its rapidly depreciating currency.
"US 10-year yields are lower and the curve is steeper," reports Saxo equities head Peter Garnry, pointing to bullish sentiment in stocks surrounding the potential re-emergence of the 'Goldilocks trade' seen in 2017.
Meanwhile, in single shares, Garnry states that Saxo's model remains negative Deutsche Bank despite the bank's move to sharply scale back its US and global equities presence – Deutsche is laying off 25% of its global equities division – in a cost-cutting effort.
Deutsche shares fell 2% on the news.
Finally, Saxo head of commodity strategy Ole Hansen reports that yesterday's surprise surge in US inventories appears to have capped the crude oil rally while gold, he notes, is "consolidating but in need of a spark".
"We see support at $1,286/oz and resistance at $1,299/oz and $1,304/oz, with the latter being key for hedge funds looking to re-establish XAUUSD positions," Hansen says.
US 10-year yields (via Bloomberg):
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.