Stagflation, hyperinflation, soft landing, hard landing, deflation, disinflation ..... and some more I can't remember.
We've heard them all since COVID.
It's time to look at some big picture macro and geopolitical situations that are in flux.
The chart above is the US Govt 10 year bond yield monthly, since 1971 in fact. The down trending channel in green marked an extraordinary secular decline in yields as the world experienced lower growth and lower inflation environments. It starts in 1985, 14 years ago the USD came off the Gold Standard. In 1985 the USD was so strong that all the big world central banks - FED, BoE. Bundesbank and Bank of France all agreed to sell the USD in the world's biggest concerted foreign exchange intervention. The pact was signed at the Plaza Hotel in New York.
DXY futures below (they're interpreted as the Mark, Franc etc don't exist anymore).
The low of the US 10 Year yield and the upswing in the USD is at the COVID point in time, and since both have risen significantly. Higher rates --> higher currency makes sense in FX101.
More importantly with the market lurching from one perceived economic outcome to another, the best we can say is that for now there is nothing to guide us where long rates should go. Maybe lower as the FED digests this months CPI and PPI - see below, or higher as the avalanche of USD debt refunding means investors need more yield to compensate for more supply, a record high budget debt, and a country fighting financial war on two fronts.
Xi Jinping came to San Fransisco and met with politicians and business leaders - Musk, Fink, Cook etc. You wouldn't have thought this would be possible at all 3 months ago, but such is the dramatic disintegration of the Chinese economy.
I wonder what Putin thinks of it?
An unprecedented $8.2T of US government debt will be maturing in the next 12 months, or 1/3 of the total Treasuries outstanding.
That is 3.5x more than what was net issued so far this year.
Keep in mind that the fiscal deficit next year would also require at least another $2T in addition to the $8.2T that needs to be re-issued.
This week's economic outcome is soft landing.
CPI was less than forecast and so was PPI.
Take a look a Truflation, a modern real-time assessment of inflation (prices-paid)
US Govt data is lagging and open to Government changing methodologies or outright cheating.
A six month lag between Govt CPI and real-time CPI seems plausible, and if so, looks like the official rate could head 1% higher.
Now UK prices paid is undoubtedly falling off a cliff
In Japan, what looked like progress for once - higher GDP and inflation, seems to be reversing
And imports down 12.5% YoY supports a population unwilling to spend
More pain in Europe where recession is hitting but inflation is still high.
Stronger employment numbers and high wage growth numbers tell us that the RBA has been way too accommodative and that they'll want to hike again, it could even be as FED cuts. RBA is under of lot of political pressure not to hike as the Labour Govt can't seem to get anything right.