Daily Alert – Wednesday 15th February 2023: US equities unmoved by inflation miss

Mark NugentDaily Alert, Feb 2023

Daily Alert – Wednesday 15th February 2023: US equities unmoved by inflation miss

Good afternoon.

Yesterday’s US inflation on a year-on-year basis came in at 6.4 percent. The expectation was 6.2 percent and the prior number was 6.5 percent. What does this mean? Well, clearly inflation continues to fall but at a rate lower than the estimates.

The US 2-year and 10-year bond yield rose, as you would expect, on the reasonable more-rate-hikes-for-longer belief currently held by the bond market. You would also expect the USD to rise but it didn’t. Further, it would be reasonable to expect equities to drop but they did not. They were flat on the day. So, what’s the summary? Maybe it’s best to say that the bond traders saw their more-rate-hikes-for-longer narrative reinforced and the equity traders are still telling themselves a story of falling inflation and a pivoting Fed. It’s all very strange really.

I placed two trades last night. Both trades are the same idea – a weak GBP. I shorted GBPUSD and went long on EURGBP. Both trades were entered via pending orders to require the price to reverse before being triggered. Both are in-the-money as I write. These trades were riskier than normal for reasons I explain in the video.

I’ll be back tomorrow.

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