April Fool’s Day Comes Early

Judging from the market’s reaction yesterday, the Fed should raise rates more often.

Obviously, it wasn’t the market’s reaction. It was algos responding to the “bullish” signals thrown at them, all at the same time, and all before Powell had moved past his opening remarks to say anything of substance that wasn’t already known.

It’s a common ploy in the lead up to major economic news, options expiration (tomorrow) and, especially, FOMC decisions. The purpose is to convey the notion that whatever is being announced is actually bullish.

Remember, the Fed is simply catching up with what the bond market has already done. And, they won’t actually start shrinking the balance sheet for another two months. In the meantime, they will go on propping up stocks as best they can. They’re obviously better at that than they are at forecasting inflation or ensuring price stability.

USDJPY had already broken out and was thus already cheerleading the rebound before it even started. The BoJ prefers to take no chances.

NKD came within 220 of its pre-COVID highs on Mar 10 – much too close for comfort.continued for members


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