Output Gap

Turkey At Risk Of Hyperinflation As CPI Soars To 14-Year High

The problem for Turkey's central bank is that markets are demanding further significant tightening in policy to contain inflation and stem the decline in Lira - something which the dictatorial presence of President Erdogan might make "problematic."

"When To Worry?": How Long After The Curve Inverts Does The Recession Begin

Sometimes inversion provides a timely signal for the economic cycle a la 2000, where Professor Curve predicted almost the ding-dong high in the SPX. However the 2006 episode of inversion dished up 7 months of pain for equity bears, with 18% further upside for the SPX. Same for 1989 where equities continued to rally 22% into the 1990 recession...

Loonie Plunges After Bank Of Canada Keeps Rates Unchanged

After two rate hikes earlier in the year, once in July and an unexpected rate hike in September, the Bank of Canada decided to tread lightly, and kept its overnight rate at 1%, as everyone expected stating that "the current stance of monetary policy is appropriate" and changes its hiking tune, warning that "less monetary policy stimulus will likely be required over time."

Bond Yields Break Out Around The World As Japan's Record Stock Rally Ends

S&P futures are fractionally in the red while traders await President Trump’s pick for Fed chair and more clues on the fate of tax reform; Asian stocks slide, European shares are little changed ahead of tomorrow's ECB tapering announcement as US 10Y yields finally break out of their multi-month range below 2.40%.

What Selloff: Futures Rebound, Nikkei Extends Record Winning Streak

European shares are modestly lower as investors monitor fluid events in Spain and as focus turns to Thursday’s ECB meeting; US equity futures have rebounded from yesterday's sharp but shallow selloff and are in the green amid rising odds of U.S. tax reform and the imminent unveiling of the next Fed chair while Asian shares rise and Japan extends its winning streak to a record 16 days.

How BofA Learned To "Stop Fighting Central Banks" And Love Shorting The Euro

In a new report that may come as music to the ears of Mario Draghi, who has been valiantly hoping to show the European economy recovering while keeping the EURUSD below the "red line" of 1.20, BofA FX strategist Athanasios Vamvakidis is out with a new note today urging currency traders to "stop fighting the central banks", in other words stop selling the USD and buying the EUR, and recommends shorting the EURUSD to 1.15 with a 1.21 stop loss. 

Goldman Is Troubled By The Fed's Growing Warnings About High Asset Prices

"At this point, the FOMC does not need additional reasons for gradual further tightening, which a traditional reaction function based on the dual mandate suggests is already warranted. But Fed officials do appear more concerned about financial stability risks, and this could strengthen the case somewhat for tightening in the future."

IMF Rings The Alarm On Canada's Economy

"On the downside, risks stem from several potential factors—including the risk of a sharp correction in the housing market, high uncertainty surrounding U.S. policies, or a further decline in oil prices—that can be mutually reinforcing"