The Federal Reserve will announce their interest rate decision next Wednesday, February 1st 2023. The markets and analysts are expecting a 25 basis points (bps) rate hike, after some dovishness shown by FED officials. There seems to be a willingness to wait and see the delayed effects of monetary policy. Here, I'll challenge the status quo and briefly go through two factors that might bring a surprise next Wednesday. This is just an exercise, and does not constitute investment advice. The two factors are: The financial conditions have been easing over the past three months The broad US dollar index has been decreasing since October 2022   Factor 1: Financial Conditions The Chicago Fed’s National Financial Conditions Index (NFCI) provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems. Because U.S. economic and financial conditions tend to be highly correlated, the FED also pr...

News Highlights   On the 5th of December 2022, the EU started enforcing an embargo on Russian crude oil exports. The sanctions were supposed to curtail revenues and at the same time dissuade European shippers from moving fossil fuels to the rest of the world. One month later, an Investigate Europe and Reporters United investigation finds the move is having limited impact: Moscow still profits highly from exports and European firms still facilitate much of the trade. (Source: Investigate Europe )   German Chancellor Olaf Scholz announced on Wednesday that they would be providing Ukraine with Leopard 2 tanks. The German government’s statement said that: “The training of the Ukrainian crews is to begin quickly in Germany. In addition to training, the package will also include logistics, ammunition and maintenance of the systems.” The tanks could be operational in Ukraine in about three months. The announcement was matched by the United States. On Wednesday, President Joe Bide...

Summary: This week, the rich, powerful and visionary met in Davos, Switzerland (World Economic Forum). Nothing very useful came out of there, including the interviews that passed on the mainstream media. There is a general optimism of the politicians and stock markets. But both technical indicators and fundamentals point downwards. It's too soon for optimism regarding the monetary policy and economic performance. Retail sales in the US declined 1.1% month-over-month in December 2022, following an upwardly revised 1% drop in November and worse than forecasts of a 0.8% fall. Producer prices for final demand in the US dropped 0.5 percent from a month earlier in December 2022, following a revised 0.2 percent gain in November and compared with market expectations of a 0.1 percent fall. It was the largest monthly decline since April 2020, adding to signs that inflationary pressure in the world's largest economy is cooling. On an unadjusted yearly basis, the PPI increased 6.2 percent ...

Summary: The week was marked by the release of the Consumer Price Inflation data in the US. The stock markets remain on a slightly positive note, while investors await the results of this earnings season and the FED decision and speech early next month. The annual inflation rate in the US slowed for a sixth straight month to 6.5% in December of 2022, the lowest since October of 2021, in line with market forecasts. Inflation seems to have peaked at 9.1% in June of 2022 but it still remains more than three times above the Fed's 2% target. Energy cost increased 7.3%, well below 13.1% in November, as gasoline cost dropped 1.5%, following a 10.1% surge in November. Also, fuel oil cost slowed (41.5% vs 65.7%) while electricity prices rose slightly faster (14.3% vs 13.7%). A slowdown was also seen in food prices (10.4% vs 10.6%) while cost of used cars and trucks continued to decline (-8.8% vs -3.3%). On the other hand, the cost of shelter increased faster (7.5% vs 7.1%). Compared to the ...

Summary: Happy new year and welcome to the first trading week. A worldwide recession is being forecasted by almost everybody. Some still believe in a soft landing. But nobody really knows. So we'll stay in tune with the news and make our best investments and bets, carefully. December FED minutes were released, and the aggressive stance continues. Fed policymakers continued to anticipate that ongoing increases in the federal funds rate would be appropriate and that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%. Also, several participants noted that historical experience cautioned against prematurely loosening monetary policy, given the persistent and unacceptably high level of inflation. At the same time, no participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023. The Federal Reserve raised the fed funds rate by 50bps to 4....