Welcome back to On the Daily, FXDD’s daily research blog. Recently we took a brief break to reorganize some of our internal models and methods to enhance our research process. In addition to updating our models, we are updating our content delivery services. In the coming weeks, On the Daily will be migrating to Substack. You can find the link by clicking here.

In the meantime, here are our latest updates:

  1. Global Economic Momentum remains roughly unchanged. A slew of data over the last 48 hours contributed to a drop in economic surprises in the US. Initial and continuing claims were higher than expected, and Chicago PMI’s weaker than expected. In Japan, financial data was broadly weaker than expected, but not enough to move economic momentum meaningfully lower. In the UK, mortgage approvals came higher than expected, but home prices were more vulnerable. Finally, in China, we saw a bounce in PMI’s, which allowed global economic momentum to remain flat.
  2. Global Central Bankers will be speaking today at the ECB’s Forum on Central Banking. Thus far, ECB’s Lagarde has spoken, mainly stressing the unusual nature of inflation today and its likelihood to be transitory. However, she also addressed the risks to this view. We think that after a brief period of EU inflation-outperformance, we are likely to see the inflation trend back down, i.e., we are roughly on the same side as the ECB on this subject.
  3. Finally, markets over the last month remain in a risk-off pricing mode, with the dollar rallying over the week and month. However, we see a broad-based risk-off in markets, a dynamic which we think is potentially unsustainable due to the poor returns offered on dollar-cash assets. Therefore, we believe there will be a rotation into risk once again, given the supportive economic backdrop.

Stay tuned for updates on our Substack launch! In the meantime, here are our data monitors. Let us start with our tracking of global economic momentum:

To add to this picture, here are our global economic cycle, forecast models. A level of 50 implies growth at the local mean, above 50 indicates accelerating economic growth, and below 50% indicates slowing growth:

Additionally, we offer a sliver of our tracking of high-frequency global growth indicators:

Next, we offer our Market Environment Monitor, which aggregates the growth and inflation signals from major global investment markets to tell us what the current market environment is, i.e., expansion, inflation, deflation, or stagflation:

Finally, we show our proxy for capital flows using our Currency Bloc Monitor, which aggregates exchange rate moves across 20+ currency pairs into significant regions or Blocs. We offer the evolution of these Currency Blocs over time:

Until tomorrow!