Labyrinth Capital

🔔Key Events This Week. ☄️Most volatile day: Wednesday: Central bank heads speak Thursday: US NFP From 2pm to 3pm on Wednesday, central bank chairs will speak at the ECB forum on central banking. Expecting volatility from Warsh in particular as he doubles down on his new proposed Fed framework on forward guidance, inflation expectations, reducing the balance sheet and more. No trade zone during this period recommended. Thursday we see updates to US labor market figures. Expecting consensus. Q3 2026 Report to be released soon. labyrinthcapital.co.uk

⚠️🇮🇷BREAKING: The US has issued Iran a general oil-related license allowing the production, delivery, and sale of Iranian-origin oil, petrochemical, and petroleum products through August 21st. Iranian oil is officially returning to global markets for the first time since 2018. labyrinthcapital.co.uk

🔔Key Events This Week. ☄️Most volatile day: Thursday PCE Price Index This is the Fed's preferred measure of inflation. Expectation is for Core PCE to rise to 0.3%. After Warsh's FOMC last week, particularly the focus of diminishing the use of forward guidance, we will see how much more volatile the markets can be on news drops. Expect this will take some time to settle in. labyrinthcapital.co.uk

This is to be funded entirely by the private sector.

⚠️🇮🇷US, partners to develop $300b Iran reconstruction plan - MOU labyrinthcapital.co.uk

⚠️🇮🇷BREAKING: The US and Iran have signed the “Memorandum of Understanding” to end the Iran War electronically and it is now in effect, per Axios. labyrinthcapital.co.uk

You essentially currently have Fed futures pricing in forward guidance which is tool the Fed have used post 2008 to "control market sentiment" after rates hit the ZLB. Under this new proposal by Warsh, Fed futures will go back to 70s esque format which means futures becomes more sensitive to direct economic data drops. For example, a hot data print in CPI would trigger a far sharper repricing of rate hike expectations. This change from Warsh is arguably more dramatic than people think.

The Fed are clearly reverting to a 70s esque regime. Encourage everyone to study this period with Volcker and how the Fed acted when it cane to rate hikes and volatility in markets.

Fed's Chair Warsh: For me, submitting a dot is not helpful in the conduct of policy.

When asked about a potential hike: "That sounds like you're prompting for forward guidance, we don't do that anymore. We will meet again in 6 weeks" labyrinthcapital.co.uk

Fed's Chair Warsh: In the statement, also absent is forward guidance, which is not well-suited to the current policy state.

Fed's Chair Warsh: Today's policy statement was shorter and simpler. The statement dispenses with older language.

🔴 Fed's Chair Warsh: I expect to propose changes, including to the summary of projections

Fed's Chair Warsh: Communications, balance sheet, data sources, productivity and jobs, and the Fed's inflation frameworks will be studied.

Fed's Chair Warsh: Inflation is well ahead of the 2% goal.

Fed's Chair Warsh did not submit a dot on the SEP dot plot.

❗ Fed: 9 of 18 FOMC participants pencil in a 2026 rate hike.

Fed: Economic activity expanding at a solid pace despite elevated uncertainty that owes in part to the Middle East conflict.

Fed: Inflation remains elevated relative to 2% goal in part reflecting supply shocks that have caused price increases in certain sectors, including energy.