US Fed Hike: This Chart Should Make Investors Nervous

by Steen Jakobsen from Saxobank:

CESIUSD is the Citi Economic Surprise Index which measures data surprises relative to market expectations.

Vice-Chairman Dudley yesterday:

Data releases that are close to our expectations have little additional impact on the forecast, while data releases that deviate significantly from our expectations can lead to more significant revisions of the forecast,” Dudley said Thursday in remarks prepared for a media briefing in New York. “It is, therefore, important for market participants and households to be able to follow the data along with the FOMC and to understand how we are likely to interpret and react to incoming data.”

Source: Bloomberg

Ok so actually CESIUSD Index is perfect measurement of Fed from here out…. The problem?

CESIUSD – the Surprise Index is almost perfectly mean-reverting around ZERO. This is an issue because right now… it’s at a low.. meaning even without doing great the US economy have very chance of improving relative to expectations! I.e.: Not to true picture of overall economy but vis-à-vis present situation…..


Bloomberg have similar index…..  ECSURPUS – not very different…


The “positive” being Atlanta Fed GDPnow forecast which have increased..but often comes down hard as quarter grows old…(Look at March drop for Q1)


Finally, Fed NY nowcast is less “impressive so far..”



I still think Fed is about to do a “massive mistake” taking mean-reverting improving data as a precursor for NET CHANGE in overall momentum – while what is “really happening” is that the US economy is improving from recession bound growth (and productivity) to less than escape velocity…..

I firmly believe Fed’s hawkish tilt will be almost as short as the July/August 2015 announced hike in September 2015…….

Fading the FED is still overall the game, but as above indicates there is risk that FED will be desperate to continue “normalization”…..making June a likely date for July hike….




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