Australian dollar pounded as Fed panics

So much for Jay Powell’s immaculate disinflation. DXY is up and roaring:

AUD is at the neckline of a head and shoulders top:

Gold knew:

Metals were OK:

Miners too:

But not EM stocks:

Nor junk:

The Treasury curve steepened as the entire price deck threatens to back up anew:

Which smacked stocks upside the head:

US PPI came in hot. Barclays:

The headline PPI rose 0.7% m/m, sa (6.0% y/y) in January, led in part by a surge in energy costs. That said, PPI inflation excluding food and energy also firmed, rising 0.5% m/m (5.4% y/y). US producer prices accelerated across the board in January

Final demand PPI rebounded 0.7% m/m (6.0% y/y) in January, following a revised 0.2% m/m decline (6.5% y/y) in December. This print was firmer than our and consensus forecasts (0.4% m/m). Core PPI, which excludes food and energy, was up 0.5% m/m (5.4% y/y), also stronger than forecasts (Barclays/consensus: 0.4% m/m). Excluding food, energy, and trade margins, final demand PPI was up 0.6% m/m (4.5% y/y), the largest monthly move since March 2022. Estimates after translating to PCE weights were similar, with the overall index rising 0.7% m/m, and the core index (excluding food and energy) up 0.5% m/m.

And the Fed panicked with Mester and Bullard deploying the jawbone for a 50bps hike next meeting.

Markets don’t buy it yet, with only a 13% chance:

But the Fed needs financial conditions to tighten again:

Most notably, it needs the stock market to fall because that is what is driving the re-acceleration in consumption:

The Fed pivoted too early and now it is pivoting again. AUD, EM, Europe, and commodities to the woodshed!