Cost of living Of greater concern for the Fed
‘Commodity markets are filled with consensus trades, and look ready for a sharp correction’, Macro Thoughts, May 18, ‘Extremes’. Global bond yields started to turn lower from May 19.
A widening gap between consumer inflation (demand) and producer inflation (supply) should be of greater concern for the Fed and other central banks…
Although we started to discuss a commodity market correction towards the end of April, the reversal of the Baltic Dry Index from its high around 3250 at the beginning of May gave us a confirmation that a correction was due; the index would fall to 2421. The Index surged 7% to 2,857 on Friday….
US CPI rose 0.6% month on month and 5% year on year, slightly below our expectation, and slightly higher than consensus, whilst the Chinese Producer Price Index increased 9% yoy; both are the fastest the since the recovery from the financial crisis.
Which economy is faring better in its recovery from COVID is captured by the currency moves; the Dollar had the boost from the Biden election, but now the pressure is back on and, at the moment, it is the Yuan that is winning.
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