Outlook: The PPI data yesterday was a snare and a delusion. Markets took the drop in PPI as affirmation of peak inflation having been reached and an overall slowdown now in the works. This is a false conclusion. PPI does not measure the same stuff as CPI and the two should not be seen as in harness together. As the BLS itself describes, PPI does not include many inputs included in CPI, like imports, taxes and ret (which is 24% of CPI). 

But some market players take the attitude “don’t bother me with the facts.” Since Fed speakers are out in droves announcing they expect lesser hikes (if for longer) in a general slowdown of hiking, the peak inflation story rules and colors all the other data. Today’s that’s retail sales, expected up 1% after a flat reading in Sept. Trading Economics has 0.9%.

Today we also get an update in the Atlanta Fed GDPNow, which was a roaring 4% for Q4 on Nov 9. So far, the gloomy talk of a terrible recession about to crash into the US economy is all in vain. Maybe we ain’t seen nothing yet but maybe there’s nothing much coming.

The dollar recovery is still in the cards but likely postponed to far off in the future, Nobody can name an ending point, yet. It may take a Surprise from left field that restores fear and safe-haven seeking.

Tidbit: ECB VP deGuindos issued a warning that made the FT front page, saying “A toxic combination of recession, soaring inflation, rising funding costs and lower liquidity is threatening to trigger financial market turmoil in the euro area.”  De Guindos “called for banks to take more provisions for bad loans, urged global regulators to make investment funds hold more liquid assets and said the central bank should be prudent in starting to shrink its €5tn bond stockpile next year.”

These warnings come from the twice-yearly financial stability review that in the end, worries about bad outcome risks occurring all at the same time and reinforcing one another. This acknowledgement is going to cause real worries when the ECB contemplates TE in December. Hmm.

Tidbit: The WSJ reports “Dwindling stockpiles of diesel have driven prices to a record premium over gasoline and crude oil, showing how war, weather and other disruptions to globalized energy markets are still producing price shocks and potential shortages.”

Gasoline is up 14% but diesel is up about 50%. “Wholesale diesel, delivered into New York harbor, traded at a record premium to crude oil in October, according to the Energy Information Administration, which also reported the country had only 25 days of diesel in reserve, the lowest since 2008.”

The underlying cause of shortages starts with the Ukraine war but also severe weather last year and the surge in trucking demand due to the pandemic. On top of that is exports to Europe, depriving the US market. Here’s  the scary stuff: “High prices are hitting businesses from mining and manufacturing companies to distributors and retailers, who are paying record sums to transport goods. Bath & Body Works Inc. Kroger supermarkets, Hormel Foods Corp. and Kellogg Co. have all cited diesel costs as a headwind in recent months. Those costs, passed on to consumers, could feed inflation, after signs of easing price increases recently sparked the biggest stock rally since 2020.”

Politics: Disgraced former president Trump, so amoral and self-absorbed he doesn’t recognize the disgrace, announced he is running for president in 2024. His application to the Election Commission is the earliest ever. One motive is the false hope that the Dept of Justice will apply the same no-indictment rule it applies to sitting presidents. Experts say no, becoming a candidate should not stay the DoJ’s hand. Now that its self-imposed rule of no legal actions near elections (the silent period) is over, the clock is ticking on the Trump indictments. We may have a long time to wait.


This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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This morning FX briefing is an information service, not a trading system. All trade recommendations are included in the afternoon report.

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