One report to discuss today and then the Fed Balance Sheet:
- Housing Starts (HOUST): +291k [+21.7%], a huge move higher. May be seasonal.
- Fed Balance Sheet (WALCL): -26.26B [-0.31%].
The big global-economic news was the BOE raising rates 50 bp (to 5%) on Thursday, when the expected move was +25 bp. (Source – Pfizer/Reuters). “Joseph Little, global chief strategist at HSBC Asset Management, said Britain was in the worst position of major western economies, hit not only by the cost of living crisis but also a shortage of workers and fast-rising wages.” So a worker shortage in the UK is pushing the BOE to raise rates? Wolf always has good charts. Let’s see what he says.
Inflation Shocker in the UK: Core CPI Spikes to 30-Year High, Driven by Spike in Services, even as Motor Fuel Prices Plunge (Source – WolfStreet).
Wolf’s “UK Services CPI” chart shows a straight line up since mid-2021. Did something happen in mid-2021? I’m baffled as to what it might be. Wolf reminds us: “Inflation in services is notoriously hard to stamp out.” It is even harder to stamp out when you have an actual shortage of services workers, as observed by that chief strategist at HSBC. And Japan too – core inflation in Japan is also a straight line up (Source – WolfStreet). Maybe they have a worker shortage too? What is causing this “worker shortage” seen now in two more countries? Climate Change, perhaps? Shoveling snow? Stressful Mondays? Maybe call it: Cause Unknown.
US rates didn’t move much this week; the 1-month is slowly moving down to meet the Fed Funds rate, while the 1-year is inching higher. Is the 1-month trying to tell us there won’t be a rate increase next Fed meeting? CME Fedwatch Tool thinks the Fed will raise – it assigns a 72% chance.
The buck moved higher this week, rising 0.70 [+0.69%] to 102.54, with all of the gains happening on Thursday and Friday. The buck moved back above the 9 and 50 MA lines, but the trends are still mixed. The daily “swing low” candle pattern (not shown) looked as bullish as it comes: 69% chance of marking the low. In a Thursday speech Powell said: “it will be appropriate to raise rates again this year, and perhaps twice,” according to yahoo finance.
by davefairtex 
