Friday Paper Charts
December 15, 2023
We are only through half of the month, but for many, it feels like the year has already ended. What was surely the most dovish FOMC meeting and press conference for a while was taken as the cycle pivot, which will certainly be used as the measuring stick for their policy stance as we glide into next year. Regardless of yesterday’s stronger-than-expected retail sales and jobless claims, sentiment seems to have shifted forcefully. I opined on my immediate FOMC after-thoughts here.
Against this overall dovish backdrop, the ECB still leaned quite vocally against dovish market pricing. ECB rate cuts haven’t been discussed at all, and the monetary policy stance is still considered to be data-dependent (which it always is). We know the ECB is always late to the game, however, so their relatively hawkish messaging has to be taken with a grain of salt. The market has also priced in 6 ECB rate cuts for next year. Better take note, Christine!
The BoE sounded similarly hawkish, stating that "further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures" and confirming their view that rate cuts are premature at the current juncture. The market had positioned itself for dovish risks around the vote split, given the recent softening in wage and retail sales data. However, the vote split was 6-3, with Mann, Haskel and Greene calling for a rate hike. The MPC acknowledged that "there has been further evidence of some loosening in the labour market" but suggested there are still upside risks to wage growth.
Proper hawkishness came from the Norges bank, which, despite only a few bps being priced, decided to hike rates by 25 bps. Meanwhile, the SNB also chose a more dovish stance, lowering their inflation forecasts and dropping any messaging about further rate hikes.
This leaves us with the following G-10 OIS run from yesterday’s close of business.
On a change basis, the US now even stands out, cutting close to 200 bps over the next two years. I very much doubt they are going to outcut everyone. There are going to be great relative value trades coming up as varying monetary policy cycles throw up opportunities.
With all central bank meetings (aside from BoJ on December 22nd) out of the way, let’s look at where we stand in terms of overall momentum and whether any reversals are flashing up, given the speed of adjustment we have just gone through. The models have given us great entries and signals this year. Long may it last.
We have a new record of 127 charts for you to go through. Take your time. As a reminder, we have Equity Indices, Sectors, Single Stocks, ETFs (new), Rates (Futures), Curves, FX, Commodities and Crypto all in one place.