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A Bank of America poll illustrates global growth pessimism drops to lowest in a year. In addition, investors are positioned well underweight stocks, which is leaving many chasing the market rally. As a result, from that indicator perspective, it is not quite a ‘sell’ signal yet.

The pound is taking a bit of a dip this morning, with the GBPUSD down by 0.6%. Word on the street is that investors are speculating that the Bank of England may hit the pause button on hiking interest rates soon. Why? Well, turns out the prices for January in the Kingdom came in lower than what analysts had anticipated on an annual basis (+10.1% vs 10.3%) and on a monthly basis (-0.6% vs -0.4%).

However, before you start panicking and unloading your pounds, keep in mind that the UK economy is actually doing better than many had predicted. So while the selling pressure might cause a bit of a dip, the downside risk should be limited.

Core CPI came slightly higher than forecast at 5.6% YoY versus 5.5% expected. Nonetheless, month-over-month it met expectations at 0.4%. Energy prices will continue to be a major focus. The war on inflation is certainly not over, and markets still need to digest the significantly higher interest rates than last year. 
Markets may again feel some anxiety as we near another key inflation data, the PCE, on Friday, February 24th. And the most important element in driving stocks remains the Fed and the yield curve. And Treasury yields are significantly higher than last year and are likely to keep a lid on valuation multiples.

It is looking clearer now that the number of bulls is rising and bears are fewer. As we presented at the start of the year, markets were very bearish, but now a mean reversal has taken place, leaving less room for error. Nonetheless, the environment has clearly improved, despite the tight liquidity conditions with higher interest rates.
Source: chart by Willie Delwiche

This morning, the dollar is trading lower against EUR, as Federal Reserve Chair Jerome Powell failed yesterday to toughen his stance on inflation, even with the US witnessing impressive job growth in the previous week. But chances for a dollar appreciation are high. A key resistance to watch for is near the 1.0800 level on EURUSD.