Home PM Correction, Rate Increase Ahead, No Reform w/o Crash & Burn

PM Correction, Rate Increase Ahead, No Reform w/o Crash & Burn

The User's Profile davefairtex May 28, 2023
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  • Consumer Sentiment: 59.2, expected 58.0, previous 57.7; contractionary.
  • Q1 GDP (2nd estimate): +0.3% q/q (+1.3% annualized), up from +0.275% (1st estimate); contractionary.
  • Durable Goods, New Orders (DGORDER): +1.1% m/m, expected -1.1% m/m, prior +3.2%; expansionary.
  • Fed Balance Sheet (WALCL) -20B w/w; deflationary.

This week both the 1 and 10-year rates moved higher, while the 1-month and 3-month rates mostly held steady.  The 1-month yield saw a shocking rally mid-week, but descended back down to mostly unchanged by Friday.  You can’t see the fuss on my rates chart, since it is a “weekly” line chart, which eliminates all the intra-week volatility.  Chances of a Fed rate increase are much higher this week: the CME Fedwatch Tool assigns a 64% chance of a 25 bp rate increase at the June 14th meeting.  Short-term rates appear to confirm this prediction.

The buck rose 1.06 [+1.03%] to 104.14 – the gains came on Tuesday-Thursday.  The dollar is now in a relatively strong uptrend.  For those concerned about de-dollarization, RMB/USD (Fred: DEXCHUS) rose 0.83% this week.  Once again, RMB is going in the wrong direction if a near-term “End of the Dollar” plague is striking.  A possibility: the dollar is rallying because US rates are also rising – and it doesn’t look as though the Fed will “pivot” any time soon.  Are you enjoying your 5.6% 1-month Treasury yield?  I know I am – I’m going to enjoy the party while it lasts.  How long will it last?  A month?  Six months?   No idea.  Does it keep up with inflation?  Of course not!

Gold fell 27.60 [-1.39%] to 1954.00, due probably to the dollar rally.  Most of the damage happened Wednesday/Thursday.  This week I’m providing the Open Interest, which saw a fairly dramatic decline this week.  Those banksters are cashing in on the gold correction, it seems.  If we use OI as an indicator, a “low” might occur after another 30k of OI is cashed in.  Maybe that’s roughly gold=1925?  Give or take?   Also notice the last correction (in February) was 3 weeks long.  Maybe this one will be also?  Just guesses.  OI remains low by 2021/2022 standards.

Silver fell 0.70 [-2.91%] to 23.36, dropping for most of the week but bouncing back on Friday. 

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