Daily Global Macro Update

Despite a seemingly fatigued market with? Trump's tariff threats &? trades, there's no way to come to? hard definitive conclusion. 'Reciprocal' tariffs are buzzing this week that might? leave the likes of Korea, India, and Brazil the most exposed.

Bumpy road is turning into an uphill path as evidence of inflation stalling out - blame eggflation -? Jan? CPI comes in hotter- 12-month pace of core CPI picked up to 3.3% , keeping? 3.2%-3.3% range? -where it has been since June. Fed's last rate cut in December looks questionable-

Expectations for the next? cut were pushed back to Dec- USD OIS curve briefly moving to discount less than a full rate cut over next 11 months -threshold for additional rate hikes is not so high as well -Powell wrapped up his Congressional visit - he is? stuck in limbo with rates -not by choice but by the reality.

Markets were cheered when Trump said rates should be lowered -however reality is that Presidents can? impact Fed policy only? by their appointments.Powell’s term ends May 2026.( if he is replaced as Chair, he would remain on Board till? Jan 31, 2028). Kugler’s term ends Jan 31, 2026. These two will be only opportunities for Trump to appoint new Governors. Long way to go....

At best ,there can be regulatory changes which could lower? yields by encouraging banks to widen swap spreads - obviously fraught with risk runaway inflation fuelled by growth & accelerated consumption.

Euro doing better this week- reassessment? on outperformance of EZ equities? and probable end to Ukraine war – optimism that all the bad news is priced- risk in chasing this move is that there is likely to be a likely Aggressive tariff response from Trump as Germany's trade surplus with U.S. at € 70 bio? in 2024, from €63.3 bio in 2023-? possible 25% tariffs on EU exports to U.S. might push? EUR/USD towards 1.00, if not 0.95.

Labour’s long-awaited industrial strategy will not now be published until June.UK's stagflation backdrop is a drag for GBP - GDP and output data, and next week's employment and CPI to confirm - 1.2450 break to ensure that this move is a bull trap.

PPI 4.2%y/y (exp 4.0% pre 3.8%).Ueda to stay unmoved and currency has to bear the cross - USDJPY moved as expected -above 151.50,? gains have hit 154.67 so far.? Obj 155.64? above 152.77 -

Storm after Calm and Calm after Storm have been the hallmarks of USDINR over? last three decades - so much happening now -? unheard levels of aggression -? sterilization through various means - "stability" in 86.65 - 86.95 range is in order.?