This is a tough moment for markets

powell headache

The FX charts aren't lying right now.

Nearly every 'risk sensitive' trade is at an inflection point and in danger of piercing important support levels. There's no doubt that delta is a primary culprit but that's combining with an unusual set of economic elements that have everyone off balance.

For starters, yesterday's UK jobs data showed record job openings. US JOLTS data is showing the same thing.

Meanwhile, US UMich consumer sentiment fell below the pandemic low and yesterday's retail sales were weak.

In amongst that is an unprecedented debate about whether or not inflation is transitory. You can see the market shifting towards 'team transitory' but the Fed seems to be shifting towards 'team inflation' and that heightens the risk of a policy mistake that hurts everyone.

Today's RBNZ decision is a microcosm of the problem. You have a central bank that sees inflation and has indicated it will hike to tackle it. Just as it gets ready to act though, delta throws a curveball and now the market has no idea what's coming.

Along with all this, you have to ask yourself what's priced in? The market has seen delta and did a remarkable job of pricing in (and looking past) covid originally. But does that hold with the fiscal response now largely in the rearview and job benefits programs set to imminently expire?

Markets are used to dealing with uncertainty but a global pandemic and a strange recovery are adding a wrinkle that makes it tough to sustain any kind of conviction.