Macro Pulse Update 21.07.2023

The Fed is OUT OF CONTROL - hiking rates as inflation cools!

Is China's economy DOOMED?

🧵👇

Macro Pulse Update 21.07.2023, covering the following topics:

1️⃣ Macro events for the week
2️⃣ Bitcoin Buzz Indicator
3️⃣ Market overview
4️⃣ Key Economic Metrics
5️⃣ Views/Expectation

1️⃣ Macro events for the week

2️⃣ Bitcoin Buzz Indicator

3️⃣ Market overview

June CPI print signals the Fed's actions may be starting to work, but more time is needed to determine if inflation is on a sustained downward trajectory. The Fed will likely continue raising rates steadily for now.

• Markets are anticipating a 0.75 percentage point rate hike at the July Fed meeting, with a potential pause in rate hikes at the September meeting if inflation continues to moderate.

• But the Fed will likely want to see several months of declines in inflation before declaring victory. A one month easing may not be enough yet for the Fed to dramatically pivot policy.

• The cooling inflation data provides some hope that the Fed can achieve a soft landing, but risks remain high. Supply chain problems, the war in Ukraine, and COVID lockdowns in China could reignite price pressures.

4️⃣ Key Economic Metrics

Data indicates the Fed's rate hikes are starting to cool US growth as intended, though inflation remains high. China is attempting to stimulate its slowing economy but further robust efforts are likely needed. Stocks continue to see gains as some major companies like Schwab and Microsoft beat earnings or launch new products.

• Retail sales and industrial production 🟢 rose less than expected in June, signaling the Fed interest rate hikes may be slowing US economic growth.

  

• Interest rate 🔴 - Markets see a 99.8% chance of another rate hike this month.

• China unveiled plans 🟢 to boost domestic consumption and consumer spending to counter recent economic weakening exacerbated by COVID-19 lockdowns. But the measures are seen as incremental, with more impactful action needed to stabilize growth.

• Major US stock indices 🟢 rose on Tuesday, with shares of Charles Schwab up 12.57% on strong earnings, and Microsoft up 3.98% after announcing a new AI product using OpenAI technology.

5️⃣ Views/Expectation

More rate hikes. China confident about avoiding deflation and keeping recovery on track.

1. Fed's Waller forecasts 2 more rate hikes this year, but noted further cooling inflation could eliminate the need for a second hike. He cautioned against reading too much into one data point.

2. Fed's Goolsbee called recent inflation data "promising" but said it remains too high.

3. China's central bank expects to avoid deflation this year despite weak consumer prices and exports. They see a rebound coming and China's recovery on track.

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