Risk assets had a solid week as financial conditions continued to ease following the recent soft jobs data. Stocks shrugged off weaker U-M consumer confidence and inflation expectations data, with consumer confidence falling to 67.4 from 77.2 last month, while 1-year inflation expectations jumped to 3.5% from 3.2%.
Overall, the macroeconomic surprises index has fallen to its lowest level in 1.5 years, with Citi's hard data gauge posting its biggest one-day drop in a year last week. While it's too early to call a "hard landing," U.S. consumers are indeed beginning to enter a softer phase as consumer savings decline, PMI continues to be depressed, high interest rates drag down credit demand, and the job market finally slows .
Market focus will be on the CPI data this Wednesday, which could be a key driver of medium-term price movements. While markets do want lower inflation data to steer the narrative of slowing inflation back in, market-led CPI fixing has been fairly stable recently, with traders expecting CPI growth of around 3.4% year-on-year in May, and possibly slowing further to around 3.1% in December. Easing financial conditions in the short term will offset weak consumer credit demand, while oil price movements could drive inflation trends and expectations towards the end of the year.
Cryptocurrency price trends are disappointing. BTC fell sharply from 63.5k to 60.5k during New York trading last Friday, and ETFs experienced a small outflow of 85 million. The world's major CEX reported that spot trading volume dropped in April to about 5 The first decline in months. With spot prices consolidating for much of the past 1–2 months, price action appears heavy, and existing investors naturally remain biased toward the longs. Additionally, implied volatility has fallen significantly as trend traders sell call options for additional income and longer-term players have returned to exploiting volatility to generate gains during the current period of depressed sentiment.
