MBCC TH 9th February'23 - "Is US Fed policy defying the Phillips J-Curve or has something broken? What does this mean for Dollar and risk?"

After the Dovish FOMC, the Dollar fell which as we mentioned in our notes was the counter intuitive move given Powell has not really said anything we do not know, and the Fed really does not know either as they are just assuming that their policy is magically resolving the structural issues in the market, i.e. lower wage growth (no inflation) together with a tight labour market. I mean why fight something that is working right?

Well we discuss that in our note today and what are other 25 different macro factors are telling us as to where Bonds, Rate volatility, $VIX are all leading us to. This plays into how one should be positioned and asset allocation/sector allocation here. As you can see above, the US 10 year Bond yields are moving sharply higher to 3.6% from lows of 3.39% - what is going on in the Bond market?

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