Capital Trading Group

Alternative Investments within Managed Futures

Will the Velocity of Money Finally Rise?

Posted by Capital Trading Group on Jul 12, 2018 4:23:57 PM

Last week we saw NFPayrolls rise 213k above the 195k that was widely expected.  May’s payroll report was also revised higher by some 21k to 244k. One weak spot was that the unemployment rate saw a .2% up tick to 4.0% and the average hourly earnings which saw a 0.2% increase with yoy rising only 2.7%, was a percentage point less than expected. Manufacturing and construction continued to lead the charge as yoy figures show them adding 285k and 282k jobs respectively. (WSJ)

The other noteworthy news item last week was the highly anticipated “Fed Minutes.” The Fed continued to convey the “strong economy” theme and that gradual rate hikes are still necessary. Officials were obviously concerned with the economic risks associated with the current administrations trade policies.  Inflation doesn’t seem to be that pressing and that the yield curve will and should be monitored given the historical relationship of increased risks of indicating a recession. Zerohedge posted a chart of the 2s30 which we have here showing a nice 33% reduction in a little over a month from 60bp to 40bp:

We must remember that the Federal Reserve still pays IOER and thus continues to subsidize the banks. We updated our data recently and we found two charts that truly standout to us. The first one here is the fact that excess reserves continue to plummet and if inflation can’t pick up with ER falling, then deflation must be a massive hidden and underlying thorn in the  Fed’s side:

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Topics: US Economy, IOER, Emini S&P, Cryptocurrencies, China, US Futures Markets, global trade war, Tariffs, Shanghai Index

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