With the December jobs report in the rear-view mirror, the focus for the upcoming week’s data turns to inflation and growth. Tuesday’s December CPI report will capture most of the limelight. Our expectations are for these data to come in on the stronger side, unwinding some of the distortions induced by the government shutdown. We expect a strong no at .45% MoM for core CPI against current consensus of .3% MoM. In other US macro data, we have retail sales, existing home sales, PPI & industrial production. In US dated treasuries supply, we have $58 BN sale of 3 yr USTs on Monday, $39 BN sale of 10 yr USTs on Monday again & $22 BN sale of 30 yr USTs on Wednesday. We also have a likely decision on 14th Jan from Supreme Court on the validity of Trump's reciprocal tariffs. The week ahead has a multitude of Fed speakers across the spectrum which should give markets some light on their policy outlook. Our own thought process is that employment looks not breaking down, unemployment rate is stabilising & inflation looks set to be higher in the next few months due to positive residual seasonality. Thus, unless labor markets deteriorate sharply, uncertainty around the inflation outlook will likely keep policymakers vigilant on inflation risks. We continue to believe the Fed will likely keep policy rates on hold until a new Fed chair is sworn in. We continue to expect 2 cuts of 25 bps each in June & Sep after a new Fed Chair arrives by May. We have been bullish on long end UST yields since 9th Nov when we had recommended shorting 10yr UST at then yield of 4.09. Currently it is at 4.16 and we have an eventual target of 4.30. We have been bullish on DXY for some time (since 98.4 levels) and now it’s playing out. We expect DXY to test 100.50 from the current 99.13 levels as US exceptionalism narrative returns with tax cuts, stable employment and AI led productivity growth. On US equities we have been optimistic since 8th Nov when we released following report: https://macro-spectrum.com/trade-recommendation/buy-sp-500 At the time of the release of the above trade reco, S&P was at 6729 and currently it is at 6966. Our eventual target is 7015. In RoW data, we have Euro area sentix & Eurozone industrial production this week. We also have Chinese trade data as well as aggregate financing data this week.
