The Great U.S. China Inflation War!!

OK, you've caught me. It's not a war, but disagreement just doesn't have the same ring to it.

I'm trying to drum up some excitement because someone hit the market off switch (again)

Yields and FX are not moving much.

U.S. futures up by 0.2%.

Asian equities 👇

Keeping it simple, China's Banking and Insurance watchdog (CBIRC) say that global inflation is NOT temporary.

For China, it is the cost-push inflation which affects the operation of the middle and downstream enterprises. The banks need to make some forward-looking forecasts to control the risks.

They expect monthly PPI to hit 10% in June...

The recent crackdown on 'speculation' and release of state metal reserves is expected to help cap prices going forward

TSMC are planning some price increases too 👇

 ðŸ‡¹ðŸ‡¼ TSMC plans to raise price for some 8-inch and 12-inch wafers by 10% to 20% next year due to strong demand, Taipei-based Economic Daily News reports, citing unidentified people in integrated circuit design industry.

*Link: https://t.co/9rKKen2jMv— Christophe Barraud🛢 (@C_Barraud) June 24, 2021 

It's likely that we will see more of these price increase headlines throughout the rest of the year.

Whilst the structural pressures that have kept a lid on inflation continue to be present, the increase in commodity prices, disruption in supply chains and excessive shipping costs have been persistent.

They will eventually ease and drag prices back down with them, but until then, companies will pass those costs on as much as possible.

 This is how the rising freight rate markets ease and then the eventual collapse happens. Seen this cycle a few times in the last 30 years in this industry: Box ship order book grows fatter, with Evergreen and SITC needing more capacity https://t.co/VSamYgI3YX— Uresh Perera (UP) (@UreshP) June 22, 2021 

Fed's Bostic commented yesterday that the period of high inflation will be 'longer than the Fed previously anticipated'. 

The Fed expected higher inflation to last 2-3 months, now they're looking at 6-9 months.

Wonder if that was a factor in the messaging from the latest meeting?

A message to reassure markets that they won't let inflation run too far before acting.

Bostic also said the tapering decision could be in 3 or 4 months, and confirmed that he is one of the 2022 dots, and sees two hikes in 2023.

Although, earlier in the day he said that the Fed should avoid 'prematurely' declaring a victory in the jobs battle...

It's a pretty inconsistent position on the face of it.

Reading between the lines, it sounds like higher inflation proving stickier has them spooked, but they haven't lost sight of the main goal to really push for full employment.

BOE meeting (ING): In reality, we don’t think the Bank will say anything particularly new on the timing of rate hikes at this next meeting.

Indeed it has recently shied away from saying anything particularly concrete on the timing of a first move.

UK policymakers have taken a leaf out of the Fed’s book by signalling it wants ‘significant’ progress on spare capacity before thinking about hiking.

As long as hospitalisations and deaths stay low, case number headlines like these 👇 will be inconsequential.

Headline of the week!

 UK anti-money laundering expert convicted of laundering cash https://t.co/G9isBDxldN— Financial Times (@FT) June 23, 2021 

Looking ahead:

German Ifo & BOE meeting the highlights this morning.

US Initial/Continued Jobless Claims & Durable Goods this afternoon.

Fed speakers: Williams, Barkin, Bostic, Bullard, Harker, Kaplan

ECB Speakers: Schnabel, Panetta

EUR/USD 1.1900 (700M), 1.1910 (524M), 1.1920-30 (2.0BLN), 1.1950 (512M), 1.1975 (640M), 1.2000 (826M), 1.2020 (300M), 1.2045-50 (570M), 1.2100 (450M)

USD/JPY 109.95-00 (2.2BLN), 110.25-30 (740M), 110.60 (600M), 110.75 (1.153BLN), 111.00 (535M), 111.30 (1.12BLN), 111.75 (1.2BLN), 112.00 (400M)

GBP/USD 1.3895-00 (800M), 1.4000 (687M)

EUR/JPY 132.00 (556M)

USD/CAD 1.2350 (400M)

AUD/USD 0.7500 (840M)

AUD/JPY 82.45 (1.1BLN), 84.75 (1.1BLN)

Source: DTCC