Currency Wars : Chasing Bad News

It’s been nothing but bad news on the US economic front with data mostly disappointing for the past 3 months.

Chart of the US Economic Surprise Index vs S&P 500 vs 10Y UST yields

Chart of the US Economic Surprise Index vs S&P 500 vs 10Y UST yields


Economic numbers have not been this bad since early 2009 and there is little more we can ask for in the S&P 500, if you ask me, that we are at such lofty highs.

Economic Surprise Sectors

Economic Surprise Sectors


The DXY Index has not seen such dramatic up moves since the period of aggressive Fed hikes of the 90’s and we have the markets pricing in hike in 3Q this year to 0.5%.

The American economy lives or dies by what happens to consumer spending

And it is the battle of the retail sales !

* HK Retail sales plunge in biggest drop since 2003 Sars epidemic

* Europe retail sales – the only bright spot !
EU RETAIL SALES* US Retail sales ex autos and gas worst since January 2014

* March China retail sales further decelerated to 10.2% YoY (HTI: 10.8% YoY, c.f. 10.9% YoY), the slowest since Feb 2006, from 10.7% YoY in Jan-Feb. Sales of 50 major department stores in March declined to 0.6% YoY from 1.8% YoY in Jan-Feb, reflecting continuous weak consumption.

And China pulls a fast one ahead of the FOMC on the 31st of March by cutting their RRR today from 19.5% to 18.5% that can be viewed as stimulative on first sight, until market contemplate that it must be an act of desperation that reflects how poor the outlook must appear to the authorities.

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