RPIX
Actually its the CPI and not the RPIX that the BOE focuses on but either way there is no inflation in the UK right now. On a y/y basis the CPI has fallen quite dramatically and the outlook for inflation is for continued benign levels as annualizing the 3/mo levels of CPI shows a downward trend.
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Maybe I'm just speaking for myself, but it seems that we're all trying to build models (or gadgets like a 'binkie' holder). The beauty of a good model is that it takes away from subjective decision making (or over-analysis) and if the model produces significant returns with an adequate profit-to-loss ratio then you go ahead and turn it on. Should the FOMC build a model? It could match monetary policy to Capacity Utilization with tweaking available for inflation and other considerations.
The chart below shows that the Fed seems to be constantly behind the up and down swings in Cap. U. The period of 2002 - 2004 was the classic example and looking ahead, when Cap. U. does get back towards 74% will the FOMC have altered rates at all? Or will they be worried about disrupting the economic recovery again?
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The TIC data has fallen from our favorite list of indicators, still it bears watching. Despite the clear downward trend of foreign investments into the US the US markets have more than upheld his year (or since March). Will the later dictate the former? Probably and this downward trend will have bottomed and start to cycle higher in the years to come.
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Speaking of models, here is a very simple model that helps forecast EURUSD and the overall risk-taking environment in the markets. The columns reflect EURUSD and are shaded in Red when you should be Short and shaded in Blue when you should be Long. You can see that we are still in a Long environment at the moment. Is this trend over-extended and are we about to change? We'll post it when it does update.
Please note that gaps reflect Neutral periods as normally it'll go from Long to Neutral to Short as discovery of trends is usually after a trend has begun and/or ends, so it won't hit the tops and bottoms but its performance since 1989 has been very successful.
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