Macro: Geopolitics Raises Risks of Fed Policy Error as Sanctions Fallout Threaten Global Inflation and more

In today’s briefing:

Geopolitics Raises Risks of Fed Policy Error as Sanctions Fallout Threaten Global Inflation
Prices Obliterating Forecasts
Alpha Bites: Performance Summary of Trade Recommendations in FX and Rates – March 2022
CX Daily: Hong Kong Cases Top 55,000, but Lam Rules Out Full Lockdown

Geopolitics Raises Risks of Fed Policy Error as Sanctions Fallout Threaten Global Inflation

Geopolitical events impacting oil prices in the 1970s and 1990 resulted in Fed policy mistakes. Current tensions complicate the path of Fed tightening, raising the risks of a policy error.
Russia’s exclusion from SWIFT makes servicing foreign debt more difficult. Exposure to foreign creditors via US dollar-denominated bank loans and debt securities has fallen sharply since 2014.
Energy markets will spread the fallout of sanctions on Russia, particularly in Europe. Food inflation could become an issue, while emerging markets will also face headwinds from Fed tightening.

Inflation has continuously exceeded expectations as traditional economic models fail to capture the regime shift. Prices are far below equilibrium and rising towards it.
We now incorporate this macro convergence at a micro-level, bridging the gap between approaches. This fix reflects the new distribution, including the higher median impulse.
The pull toward equilibrium cumulatively adds about 1pp to UK inflation over the year ahead, driving us further above the consensus. Second-round effects would extend it.

In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.
Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.
I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.

Hong Kong cases top 55,000, but Lam rules out full lockdown
Wounded Chinese citizen in Ukraine ‘out of danger,’ ministry says
GDP target, budget deficit, housing controls: What to watch for at China’s ‘Two Sessions’

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