DXY faded Friday night:
AUD lifted mechanically:
As bears pile out:
North Asia gave little help:
But commodities are cooked as oil, gold and dirt all fell:
Miners bounced:
EM reversed with China:
Junk pumped:
As yields fell:
Stocks held on:
US inflation is once again fading. Morgan Stanley:
First, the acceleration in 1Q was narrow and does not seem to suggest a persistent upswing in inflation.
Reacceleration was largely concentrated in two components (core goods and financial services) that are likely to decelerate ahead (Exhibit1).
Second, we expect faster deceleration in rent inflation in 2H24.
Third, we think residual seasonality played a role in the recent acceleration.
Our analysis suggests that seasonal factors are now worse at capturing seasonality.
We expect core PCE will end the year at 2.7% (Q4/Q4), still well above the Fed’s target for annual rates. A recurring question we’re asked is Why would the Fed cut rates when core PCE inflation remains so high?
Under this scenario, with such rapid disinflation and increasing unemployment rates, we think the Fed will start cutting in September.
I agree with that. The question for AUD is how fast will Australia follow?
I still see further disinflation in Australia, too, as power subsidies rain down across the land.
Like the energy price surge before it, these subsidies should start to spread through the production chain via reduced inflationary pressure.
Whether rent disinflation takes hold as well will depend upon how fast Albo cuts immigration, notably student visas. There are some encouraging signs.
I still see AUD stuck in the 0.64-0.68 range.
