What Omicron? : Macro Charts You Must Know #22
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Markets aren’t so afraid of Omicron after all, with most of them recovering their initial new-variant losses. Fed hawkishness has driven up yields, although macro concerns still linger as the USD remains broadly firm and the US yield curve is still in its down (flattening) trend.
- Macro markets are painting a disjointed picture at the moment – neither one of strong global growth nor one of systemic weakness
- The USD has lost some of its gains, but remains broadly stronger
- Points to tightening Dollar liquidity across the globe, and is often an indicator of deteriorating global financial and economic conditions – watch CNY closely
- Interest rates have surged higher over the first week of 2022
- The US yield curve has steepened in response, although still in a flattening trend
- Oddly, US breakevens have not moved higher with rates, instead moving in the opposite direction
- European yield curves also steepened as rates on the continent mirrored the surge in the US
- Commodities are back to trading according to idiosyncratic factors after the initial Omicron shock
- Oil has rallied sharply and is back around $80 a barrel
- Base metal prices aren’t reflecting growing demand. Copper remains in its wide range and Iron Ore is still in its down trend, although Aluminium is rallying strongly again
- Gold still isn’t doing much, especially considering how inflation is running at elevated levels all around the world
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