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Narratives follow prices
Aurelie Barthere
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Key Takeaways
5 min read
  • The scenario of “soft landing” (or its less optimistic UK version of “shallow recession”) that markets have been pricing since October 2022 has now gained a higher probability of occurrence for central bankers and economists
  • As narratives follow prices, investors must stay alert to market developments. The US dollar and rates have retraced higher post-FOMC: last week’s moves could hint at markets slowly moving away from “soft landing” to “higher rates for longer”. This needs to be monitored
  • For a crypto investor, it is important to stick to risk management and price the YTD rally as a likely bear market rally

Macro and market thread

Last week the three major central banks, the European Central Bank (ECB), the US Federal Reserve (Fed), and the Bank of England (BoE) hiked their respective interest rates by 50bps to 3.00%, by 25bps to 4.50-4.75%, and by 50bps to 4.00%. These actions were well telegraphed and markets were rather focused on press conferences, forward guidance (or lack thereof), and the intricacies of rhetoric and tone nuances.

The ECB sounded, as we had expected (see last newsletter) the more hawkish of the three, with President Lagarde guiding for an additional 50bps hike at the March meeting. However, the commonalities between the three were...