US: Out of line with fundamental developments - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that it appears that there are a number of market gyrations that have little relation to economic fundamentals and there is still more reason for bond yields to be rising rather than falling.

Key Quotes

“The US reported stronger wage growth last week, small business confidence surged in December, JOLTS job openings were strong, and mortgage applications for purchase were solid, despite higher rates.”

“Inflation and sentiment survey data in the Eurozone have picked up this year.  UK manufacturing production continued the recent trend of stronger than expected outcomes.”

“Chinese PPI inflation and non-food CPI inflation indicators were strong, suggesting China, via its rapid rebound in commodity prices in the last year, may be contributing to global inflation trends.”

“Market-based measures of inflation expectations have been rising globally, consistent with stronger global growth indicators and stronger commodity prices in recent months.”

“These factors are likely to reassert upward pressure on global bond yields, and rising relative real interest rates in the USA, where rate hikes are more likely to be implemented, supporting the USD.”

“Before the end of the week, it will be interesting to see if USA PPI, retail sales and University of Michigan Consumer Sentiment Survey (including inflation expectations) reassert the rising trend in USA yields and the USD.”