Pro Perspectives 5/28/24





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May 28, 2024

We get inflation data this week (in Australia, Europe, Japan and the U.S.).
And then over the next three weeks, major central bank meetings are on the calendar.  Remember, the easing cycle has already started in Switzerland and Sweden.  And the European Central Bank is expected to follow next week.  And there's about a coin flips chance of a cut coming from the Bank of Canda next Wednesday.  
As for the Fed, the market is now pricing in a little less than one cut by year end.  Again, this is the pendulum swinging from one extreme (as many as seven cuts projected earlier this year), to (now) less than one.
As we've discussed, the Fed tends to be more comfortable adjusting policy reactively, rather than proactively.
What could put the Fed in the position of reactive easing?  Losing control of the bond market.
And we have a potential catalyst.
Closing arguments started today in the Trump case in New York.  If the political opponent to the President of the United States of America is jailed, that might be the final straw for the bond market and the dollar.
We could see capital flight from the historic global safe havens (U.S. Treasuries and the dollar).