DXY was hit last night as EUR popped:
AUD popped:
And that means commodities:
Big miners dead cat bounced:
EM lifted:
Not junk:
Treasuries were bid:
The AI bubble inflated:
The Fed is now feeding the AI frenzy:
Fed talk. Patrick Harker doubled down on his call for a June pause, saying the Fed is close to where it can stop tightening. He suggested that there may not be a need for more hikes. James Bullard wrote that he believes rates are “at the low end of what is arguably sufficiently restrictive.” US labor market strength can’t be making the Fed happy, though.
That is, ADP was strong and ISM weak but the balance is still jobs positive.
We have seen this before in this cycle. The Fed talks pause, stocks inflate, and consumption follows the wealth effect. Inflation warms up again. The Fed reverses course.
It is my view that AI will ultimately be very deflationary but not in a timeframe that will satisfy a central bank.
An AI melt-up chased by the Fed, followed by a global recession, is not good for the AUD.
