Global Macro Update
Trump 2.0 has been more disruptive & Chaotic - his first few weeks in power have been a whirlwind of activity -Markets? track his every word and all other conventional factors are ignored -as and when , markets loose fascination with these headlines,? barrage would stop.
His policy steps starting off small - but could cause? unintended consequences -too early but this is something to keep an eye on for the exogenous shocks to the economy.
1. Value of US mfg output ($2.85tr in 2023) is less than? value of goods imported into US ($3.1tr in 2023), implying that? mfg output would need to double in size to remove the need for imports- obviously not possible? within the next decade, let alone the next few months. So this Tariff rhetoric set to stay as the underlying factor for long.
2. Govt layoffs and early retirement efforts under Musk - Will these workers find other jobs or drop out of the labor force??
3. Migrant deportations - Many of them work and anecdotal evidence suggests that the threat of deportation is keeping some undocumented workers at home.
On data front, not an encouraging read - NY Fed? mfg improved to 5.7. Orders & shipments rose- employment fell. Prices rose at fastest pace in 2 years. FOMC minutes today to be a non event .
In Foreign policy space ,Russia currently controls large swathes of mineral-rich Eastern Ukraine and they may be willing to offer US an exclusive critical minerals deal? Ukraine, meanwhile, angling for its own minerals deal with Europe for continued support - started working out regulatory & legal steps to integrate Ukraine into EU’s resource strategy.
Europe still hopes to see if this? loveless marriage can be salvaged - accelerating focus on national security, at the expense of economic efficiency is a? key negative for currency -ZEW at 24.2 in Feb - Support 1.0420 -downside risk for? 1.0380 -usual two big figure back & forth trading 1.0300- 1.0500 developing.
Chinese New home prices recorded? 20th straight m/m % drop and second hand home prices hit 21 straight declines -property sector in slump despite govt intervention.
UK Jobs data solid, but outlook definitely shaky ahead of rise in employer’s National Insurance in Apr - Strong 6% wage growth - so no rate cuts - CPI? today expected at 2.8% y/y vs. 2.5% in Dec, core at 3.7% y/y vs. 3.2% in Dec. Would still expect 1.2600 region to hold for 1.2430 .
Takata :Japan's real rates remain deeply negative -are still accommodative. Bounce off 151.30 is encouraging? - Ability to rise past 152.70 should be seen supportive for gains towards 155.00?
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