Soft CPI leads to Risk On

GFBP Tracker best day in some time

Alright, we already posted about the softer CPI in our earlier post but one thing we haven’t touched upon is the fact that there is still a 92% chance for a hike at the July meeting in 2 weeks. We cannot fathom why the FOMC would hike given if they do this would put the Fed Funds/ CPI spread at about +250bp which is historically highly restrictive. So the Magnelibra minds are figuring there has to be more to this story. What if the FOMC has to raise rates to keep the dollar from continuing to get smoked on the FX front? Are we truly in a situation where the rest of the global trading partners are willing to allow this to happen? Higher rates should mean more US based investing but what it also means is that foreigners are requiring a higher term premium for risk and if the FOMC lets the foot off the gas then maybe the dollar degradation continues. We have seen a weaker Yuan and Yen, but it seems those trends have stalled for a bit here and now is the weaker dollar the base case moving forward? Time will tell but we cannot fathom any other rational reason as to why the FOMC would hike rates further given the data that they continue to see.

Anyway we posted a few technical charts earlier so let’s just get to the subscriber only trackers where the GFBP Tracker posted its best day in quite some time +2.59% on the day:

The Tracker is getting close to adding to the long US Fixed income and equities positions as well as the FX and silver positions…so we will keep you informed.