The Current Scenario.
Analysis of the current scenario with forward data expectations.
I intended to post it earlier, but it took me more than expected.
Enjoy the read, folks.
United States:
The United States economy continues to demonstrate resilience; robust consumer spending fuels economic growth, employment numbers remain strong, and economic growth continues to surprise economists as the country’s Gross Domestic Product (GDP) is revised higher. The nations’ employment and Gross Domestic Product (GDP) growth rates remain within the range of FOMC officials’ projections.
Figure 1. United States’ Consumer Spending Statistics.
Figure 2. United States’ Nonfarm Payroll Employment Remains Strong.
Figure 3. United States’ Month-Over-Month Employment Growth Remains Concentrated In Private Sector & Services Sector.
Figure 4. FOMC Officials’ Projections Over The United States’ Unemployment Rate.
Figure 5. FOMC Officials’ Projections Over The United States’ Real Gross Domestic Product (GDP) Growth.
Figure 6. United States’ Gross Domestic Product (GDP) Was Revised Higher & Remains Higher Than FOMC Officials’ Projections.
As previously explained, given the non-existent need for rate cuts due to the strong job market, monetary policy should remain hawkish until inflation reaches the Federal Reserve’s dual mandate’s price stability goal. FOMC officials emphasized that more statistical data releases are required before declaring victory over price stability; in the meantime, they indicated that monetary policy should not rush into cutting rates.
Figure 7. FOMC Officials’ Rate Projections.
Figure 8. Market-Priced Rate Stance.
Figure 9. FOMC Officials’ Rate Projections. [ Fourth Quarter 2024 (Q4 2024) ]
Markets have priced two twenty five basis point cuts for June and September FOMC rate decisions, a twenty five basis point hike for the November FOMC rate decision, and a fifty basis point cut for the end-of-the year FOMC rate decision in December. Macroeconomic models’ rate forecasts and economists’ non-speculative consensus forecasts over rates indicate that rates have peaked.
Figure 10. Markets Consensus Forecasts & Non-Speculative Consensus Forecasts Over Rates.
Figure 11. Summary Of Federal Funds Rates Based On Seven Simple Monetary Policy Rules.
Figure 12. Federal Funds Rates Based on Forecasts from the Survey of Professional Forecasters and Seven Simple Policy Rules.
Table 2a provides the results from seven simple monetary policy rules conditional on forecasts from the Survey of Professional Forecasters. The Survey of Professional Forecasters provides forecasts for Personal Consumption Expenditures (PCE) inflation, core Personal Consumption Expenditures (PCE) inflation, and the unemployment rate. Because they do not estimate the output gap, construct a proxy for the output gap using Okun’s coefficient and the unemployment gap. The forecast horizon is shorter than that of other forecasts included here, extending 4 quarters into the future, which limits results coming from the rules.
Table 2b provides the formulae used to calculate each policy rule based on forecasts from the Survey of Professional Forecasters.
Figure 13. Federal Funds Rates Based on Forecasts from the Congressional Budget Office and Seven Simple Policy Rules.
Table 3a provides the results from seven simple monetary policy rules conditional on forecasts from the Congressional Budget Office (CBO). The Congressional Budget Office (CBO) provides forecasts for Personal Consumption Expenditures (PCE) inflation, core Personal Consumption Expenditures (PCE) inflation, the unemployment rate, and the output gap.
Table 3b provides the formulae used to calculate each policy rule based on forecasts from the Congressional Budget Office (CBO).
Figure 14. Federal Funds Rates Based on Forecasts from the FRBC Staff Small BVAR Model and Seven Simple Policy Rules.
Table 4a provides the results from seven simple monetary policy rules conditional on forecasts from a small statistical Bayesian Vector Autoregression model consulted by staff at the Federal Reserve Bank of Cleveland (FRBC BVAR). Because the Cleveland Fed staff consult a variety of forecasting models, the FRBC BVAR model forecast does not necessarily represent the official forecast of Cleveland Fed staff or the president of the Cleveland Fed. The Bayesian Vector Autoregression model consulted by staff at the Federal Reserve Bank of Cleveland (FRBC BVAR) provides forecasts for Personal Consumption Expenditures (PCE) inflation, core Personal Consumption Expenditures (PCE) inflation, and the unemployment rate. Because it does not provide an estimate of the output gap, construct a proxy for the output gap using Okun’s coefficient and the unemployment gap.
Table 4b provides the formulae used to calculate each policy rule based on forecasts from the Bayesian Vector Autoregression model consulted by staff at the Federal Reserve Bank of Cleveland (FRBC BVAR).
The current disinflation, which is a temporary deflationary cycle rather than a complete deflation, may be why FOMC officials are hesitant to change the monetary policy to a more dovish stance. They continue to be hawkish in their majority and are waiting for more statistical data releases before making monetary policy decisions, but markets keep front-running the rate cuts, given the momentary progress over price stability.
Figure 15. FOMC Officials’ Projections Over Personal Consumption Expenditures (PCE) Inflation.
Figure 16. Alternative Personal Consumption Expenditures (PCE) Inflation Statistics.
The United States’ TSY market ( TLT 0.00%↑ ) remains hawkishly skewed, and government bond yields ( TTT 0.00%↑ ) have been advancing in lockstep with the dollar’s ( UUP 0.00%↑ ) performance; the correlation has been increasing since late April and nearly the beginning of May 2022, markets continue to defend the dollar ( UUP 0.00%↑ ) while the United States government spends billions and issues that debt to the government bond market; however, the government shutdown risk remains contained given the “Further Consolidated Appropriations Act, 2024,” bill ( §2882 ), which extended the government’s functioning until September 30th of this year.
Figure 17. Government Bond Yields ( TTT 0.00%↑ ) To United States’ Dollar ( UUP 0.00%↑ ) Performance Correlation Is Getting Closer To 1:1 Correlation.
Figure 18. Government Shutdown Averted Once Again.
Figure 19. United States’ Government Debt Issuance. ( Data As Of The Last Government Bulletin )
The government deficit remains a factor of concern, although the soft-landing path remains the most likely scenario, which is in line with the previously shown expectations over soft-lading. The previously mentioned improvements over price stability and a strong job market keep forward expectations optimistic; markets reflect the strength in statistics, optimism, and the reduction of risks by government measures.
Figure 20. Soft-Landing Expectations.
Figure 21. The S&P500 Is Currently On A Winning Streak Not Seen Since The Last Taper Tantrum.
Figure 22. Deutsche Bank CROCI US Plus Index Total Return.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/29/2024 market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F42996a6f-16af-419a-8d10-51c1d65225f0_3480x1620.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/29/2024 market close. |")
As seen before, rising oil prices will likely generate inflation as energy sector commodities drive the rest of the goods’ and sevices’ prices as cost increases are always passed onto the consumer. Over energy sector, I believe Saudi Aramco is undervalued compared to its major global peers ( MUSA 0.00%↑ & MPC 0.00%↑ ).
Figure 23. I Believe Saudi Aramco Is Undervalued Compared To Its Major Global Peers [ Murphy USA Inc ( MUSA 0.00%↑ ) & Marathon Petroleum Corp ( MPC 0.00%↑ ) ].
Given the liquid fuels consumption and production statistics, energy sector has upside until the second quarter of 2025, continuing improvements in technology increase energy consumption keeping energy sector a bull niche; the previously shown brent short volatility index is a good hedge over it, but going long Saudi Aramco stock given the spread between its global peers ( $MUSA & $MPC ) isn’t a bad hedge.
Figure 24. World Liquid Fuels Consumption Is Expected To Exceed World Liquid Fuels Production Until The Second Quarter Of 2025.
Figure 25. United States Oil and Natural Gas Production.
Figure 26. United States’ Oil and Shale Gas Regions.
Figure 27. Brent Short Volatility III Sub Index 3.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fb6653e55-436d-412c-a7ec-5ad8a5d361a4_3416x1615.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |")
I remind you folks once again that the current geopolitical scenario’s supply chain disruptions have a long-term inflationary effect that has not yet materialized; the disrupted number of vessels has decreased, although the use of the Suez Canal remains nearly the same with freight rates remaining elevated, keeping long-term inflation expectations elevated.
Figure 28. Vessels Continue To Not Pass Through The Suez Canal.
Figure 29. Vessels Continue To Not Pass Through Bab El-Mandeb Strait.
Figure 30. Vessels Keep Re-Routing Through Cape Of Good Hope.
Figure 31. I Remind You Folks Once Again, That The Supply Chain Disruptions' Effect In Shipping Costs Have A Long Term Impact In Inflation Statistics.
This year, Americans’ major priority over government policy is to strengthen the economy and minimize the government budget deficit. Priorities differ by age, race, and political affiliation, as can be seen in the following figures.
Figure 32.
Figure 33.
Figure 34.
Figure 35.
Figure 36.
Figure 37.
Figure 38.
Approximately one in every four Americans has negative views of both ballot candidates for the upcoming elections. As per prior statistics, Americans’ views differ based on age. race, and political affiliation, as can be seen in the next figures.
Figure 39.
Figure 40.
Figure 41.
Figure 42.
Figure 43.
Figure 44.
These statistics indicate that the upcoming elections may be tied'; polls statistics are somewhat neutral, implying a nearly 50%/50% election scenario. Speculators’ positioning for the forthcoming elections are leaning Republican; however, Democrats’ odds, specifically Biden’s odds, have been rising since early this month.
Figure 45. 2024 Election’s Consensus.
Figure 46. Betting Odds: 2024 U.S. President. ( Upcoming Elections Odds )
What does this mean for markets, you may ask? Reelection usually results in markets rising, and when the opposite is elected, markets usually rally as well; seasonality favors the continuation of markets during the current election year.
Figure 48. S&P500 Performance During & After Election Years.
Figure 49. S&P500 Seasonality.
When it comes to geopolitics, the Taiwan war risk remains present, reminding you folks again of the fact that when it starts, recession will be the consequence.
Figure 50. The Two Scenarios Over The Taiwan War.
To conclude, the forward inflation and employment statistical data reports will likely skew the monetary policy stance; FOMC officials’ speeches should also indicate the forward monetary policy that awaits data, as monetary policy is data-dependent.
Figure 51. This & Next Week’s Data Release Expectations.
If inflation data releases are more elevated than expectations, yields ( TTT 0.00%↑ ) and the dollar ( UUP 0.00%↑ ) should rise, and markets ( DIA 0.00%↑SPY 0.00%↑QQQ 0.00%↑IWM 0.00%↑TLT 0.00%↑ ) should lower. If inflation data releases show deflation, yields ( TTT 0.00%↑ ) and the dollar ( UUP 0.00%↑ ) should lower, and markets ( DIA 0.00%↑SPY 0.00%↑QQQ 0.00%↑IWM 0.00%↑TLT 0.00%↑ ) should rise. If job market data releases are lower than expectations, yields ( TTT 0.00%↑ ) and the dollar (UUP 0.00%↑) should lower, and markets ( DIA 0.00%↑SPY 0.00%↑QQQ 0.00%↑IWM 0.00%↑TLT 0.00%↑ ) should rise; if job market data releases are higher than expectations, yields ( TTT 0.00%↑ ) and the dollar ( UUP 0.00%↑ ) should rise, and markets ( DIA 0.00%↑SPY 0.00%↑QQQ 0.00%↑IWM 0.00%↑TLT 0.00%↑ ) should lower.
Europe:
The Euro-Zone economy continues to perform within the range of expectations, business sentiment has risen in recent months given strong growth and strong employment, with the unemployment rate at historical lows. The European Central Bank's measures have and are ensuring price stability in the Euro-Zone; although inflation has not yet reached the European Central Bank's price stability goal, inflation expectations are elevated in the long run given the warfare that generates supply-side inflation in the long run.
Figure 52. Euro-Zone Employment Remains Strong With The Unemployment Rate Remaining At Historical Lows.
Figure 53. Euro-Zone Inflation Has Not Yet Reached The European Central Bank's Price Stability Goal.
The European Central Bank's Governing Council members remain somewhat hawkish but overall neutral; Ms. Lagarde keeps a hawkish-nimble stance; the market-priced rate path in the €STR, which is the European version of the United States' SOFR and the United Kingdom's SONIA, is somewhat dovish but more hawkish than previous months; although the long-run rate remains near 2.5%, which is quite dovish.
Figure 54. European Central Bank’s Governing Council Doves & Hawks.
Figure 55. European Central Bank’s Governing Council Hawk & Dove Members.
Figure 56. The Rate Path Kept Shifting Dovish At The Beginning Of The Month, Although More Hawkish Than Previous Months.
Figure 57. Market Expectations Over The European Central Bank’s Monetary Policy Rate Have Shifted Hawkish At The End Of The Month.
Markets continue to be optimistic over the European Central Bank's monetary policy measures, and strong growth and employment keep expectations over the soft-landing outcome elevated, which is reflected in markets' performance.
Figure 58. DB Eurozone Gross Equity Futures Index.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7edc9670-f420-4e82-ba1e-4108f01a2f0b_3406x1626.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |")
Figure 59. Croci World EUR Master TR Index.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/29/2024 market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F84508894-ec8b-4539-ada1-495dc0a687ed_3440x1612.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/29/2024 market close. |")
European markets continue their lead, as macroeconomic data supports the rally; the Euro's performance over major G20 countries' currencies remains strong, although EM currency indexed strategies performance is worth mentioning.
Figure 60. Changes In The Exchange Rate Of The Euro vis-à-vis Selected Currencies.
Figure 70. Ascent Broad In EUR.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F93f3cf75-3e70-4d4a-86cb-d1fdc6a6d615_3398x1606.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |")
When it comes to politics, the previously mentioned European governments' measures enabled Europe to completely phase out Russian natural gas with Norwegian natural gas; warm weather and record Norwegian natural gas production kept European natural gas prices low. With decreasing European energy prices, consumers' purchasing power increases, as does industrial activity. Major European energy companies' profits remain elevated.
Figure 71. Europe’s Heating Usage Has Been Lower Than Normal This Winter, Given The Warm Weather.
European governments should increase defense spending as a percentage of Gross Domestic Product (GDP) to address geopolitical risks. Some European countries have already begun to ramp up efforts, which demonstrates their commitment to safeguarding freedom.
Figure 72. North Atlantic Treaty Organization (NATO) Defense Expenditures As A Share Of Gross Domestic Product (GDP).
The developments in Ukraine remain concentrated in the same regions, Russia continues to fail to properly deploy its army in Ukraine given the fact that the Russians can’t compensate volunteer and irregular forces deployed in Ukraine, Russia’s Putin seems to have lost control over its deployments in Ukraine to the point that the Russian government has passed a new legislation that simplifies it. It may be a good moment for the North Atlantic Treaty Organization ( NATO ) to deploy troops in Ukraine, which wasn’t ruled out, it’d prove that the North Atlantic Treaty Organization ( NATO ) supports Ukraine with more than just good wishes and supplies.
Figure 73. Russo-Ukrainian War Situation Map.
To conclude, the upcoming job market and inflation statistical data releases should skew the forward monetary policy stance; the next European Central Bank rate decision is expected to be a hawkish hold; markets should be attentive to the press conference following the rate decision, as monetary policy remains neutral-hawkish; and statistical data reports prior to the rate decision will most likely shift the stance.
Figure 74. This & Next Week’s Data Expectations.
If inflation data releases are more elevated than expectations, yields and the euro should rise, and markets should lower. If inflation data releases show deflation, yields and the euro should lower, and markets should rise. If job market data releases are higher than expectations, yields and the euro should rise, and markets should lower; if job market data releases are lower than expectations, yields and the euro should lower, and markets should rise.
United Kingdom:
The United Kingdom's economy is currently in a technical recession, according to the last Gross Domestic Product Data ( GDP ) release. The United Kingdom's employment statistical data reports suggest that the country needs government action towards enhancing economic growth and job growth; if not, it could end in a long-term recession that nobody really wants to see. Statistics keep failing to deliver Prime Minister Rishi Sunak's pledge to grow the United Kingdom's economy; which is why alternatives are surging in poll statistics.
Figure 75. Prime Minister Rishi Sunak's Pledge To Grow The Economy Fails To Deliver As The United Kingdom’s Gross Domestic Product ( GDP ) Is Revised Lower.
( Data As Of March 28th 2024 Statistical Data Release )
Figure 76. The United Kingdom's Unemployment Rate Has Upticked.
Figure 77. An Alternative To Labour & Conservative Has Been Surging.
Figure 78. Britons Are Unsure About Labour & Conservative Leaders.
The only factor that keeps optimism over the United Kingdom's economy is the fact that price stability achievement is close but not quite there yet. The Bank of England's Monetary Policy Committee's projections are realistic, not too optimistic nor too pessimistic. In my opinion, the Bank of England may be the first central bank to cut rates in order to prevent a long-term recession in the United Kingdom. It's quite notable that the Monetary Policy Committee members have shifted more dovish over the past few weeks, although markets remain positioned hawkishly as inflation has not yet reached the Bank of England's price stability goal.
Figure 79. Bank of England Monetary Policy Committee’s Hawks & Doves.
Figure 80. Market Expectations Over The Bank of England’s Monetary Policy Rate.
Markets seem to not care about macroeconomic data, and markets keep focusing on the forecasts that indicate growth. The United Kingdom’s markets remain choppy, unlike other countries’ markets, but there is value in them.
Figure 81. DB UK Gross Equity Futures Index.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fca4c985c-c9fe-485d-9762-1c93dd866f34_3536x1622.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |")
My long-run expectations are optimistic, but short-term expectations for the United Kingdom remain the same unless Prime Minister Rishi Sunak’s pledge materializes. I’m confident that Prime Minister Rishi Sunak won’t let the United Kingdom experience a long-term recession. To conclude, the next Gross Domestic Product (GDP) data release will likely skew the forward monetary policy stance more than inflation statistics as the United Kingdom remains in a technical recession.
Figure 82. This & Next Week’s Data Expectations.
If the Gross Domestic Product ( GDP ) data releases are more elevated than expectations, yields and the British pound should rise, and markets should lower. If Gross Domestic Product ( GDP ) data releases are lower than expectations, yields and the British pound should lower, and markets should rise.
Asia:
China:
The People’s Republic of China’s government’s growth ambitions keep the Chinese economy afloat by devaluing the Chinese currency, although the People's Bank of China's governor 潘功胜 recently indicated that China is open to strengthening the currency with Asean members. Which wouldn’t be a bad idea as the Chinese Renminbi spot to the People's Bank of China Yuan fixing difference widens.
Figure 83. The People’s Bank of China Continues To Support The Chinese Currency Through Fixing.
Figure 84. The Cost Of Hedging Against A Yuan Drop Has Pushed Higher.
The People's Republic of China’s government spending growth is at the highest level since 2019, that spending will likely generate reflation, and so long-term and short-term inflation expectations are elevated for China.
Figure 85. People’s Republic of China’s Government Spending Growth Is At The Highest Level Since 2019.
Figure 86. Upcoming Data Release Expectations.
China’s industrial activity has picked up in recent months, indicating a normalization of the economy, non-speculative Chinese markets remain stable.
Figure 87. DB China H-Shares Income Index.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F378bf18c-1040-4a40-92e2-966d4268af57_3486x1622.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 market close. |")
When it comes to geopolitics, expectations remain the same, Taiwan is China, and People’s Republic of China’s 习近平 assured that Taiwan will be unified:
China will likely keep reacting to any separatist provocation. To conclude, I want to congratulate 陶 玲 on her new position as People’s Bank of China deputy governor, the People’s Bank of China hasn’t had a woman as deputy governor since 2015. She’s well known among Risk Managers given her regulatory work that reduced risks in Chinese markets in 2018.
Japan:
The Japanese economy avoided recession, the government’s measures keep ensuring that the Japanese economy doesn’t enter into a recession, at the cost of currency devaluation, the Japanese Yen clearly needs an intervention. Kanda should take measures as currency devalution weakens the Japanese economy.
Figure 88. The Japanese Yen Weakens Beyond The Previous Intervention Level.
The Bank of Japan’s monetary policy stance remains in a hawkish path, although Japanese markets are pressurized by the Japanse currency devaluation.
Figure 89. Deutsche Bank Japan Gross Equity Futures Index.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 Tokyo market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F1a8cf09f-fcd4-49a4-a0ab-7715e39da101_3502x1632.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 Tokyo market close. |")
Figure 90. Deutsche Bank Japan Gross Equity Futures CTA Index.
[ Left Y-axis: Index data. (🟦) | Right Y-axis: Volatility of the index. (🟥) ]
![[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 Tokyo market close. |](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F4d25a5e0-1cdf-4161-b841-2b0457df18b9_3418x1630.png "[ Left X-axis: Index data. (🟦) | Right X-axis: Volatility of the index. (🟥) ] | Data as of 03/28/2024 Tokyo market close. |")
Another rate hike is expected for the next Bank of Japan rate decision, although recent comments hinted dovish, but positioning is towards a rate hike. Inflation in Japan remains in the range on the Bank of Japan’s goal, Japan’s Prime Minister Fumio’s recent comments suggested that the Japanese government seeks to stabilize inflation as reflationary measures have made Tokyo inflation rise more than the Bank of Japan’s goal.
Figure 91. Upcoming Data Release Expectations.
Forward consumer confidence statistics should be skewed by government measures towards protecting the Japanese Yen, as the currency devaluation decreases consumers’ and producers’ purchasing power and consequently the Japanese economy weakens, thus it affects consumers’ confidence.
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