ECB: Chat-GPT Analysis Of PMI Text Improves GDP Nowcast Performance
Jun-26 10:36
An ECB working paper released this morning suggests GDP nowcast accuracy can be improved by incorporating AI-based insights from qualitative information available in PMI releases. The paper is here.
- “ChatGPT was employed to analyse PMI news releases and generate activity sentiment scores. These scores quantify the sentiment about activity expressed in the narratives and anecdotes of the news release, ranging from strongly expanding activity to significantly contracting activity”
- “The study then integrates these ChatGPT-derived activity scores in traditional GDP nowcasts, i.e., forecasts of real GDP growth in the current quarter, to assess their predictive power. The analysis utilizes two notoriously hard-to-beat benchmarks for GDP nowcasting, setting a high standard for accuracy, namely ECB/Eurosystem Staff projections and the first GDP estimate”.
- “The main compelling result is that the enhancement of the PMI text scores to the two GDP nowcast benchmarks significantly improves the accuracy of GDP nowcasts. Similar in-sample gains are not obtained by adding the composite output PMI diffusion index”
- “The out-of-sample forecast gains of enhancing GDP nowcasts with PMI text scores are on average about 20% apart from the two most recent years, but they are strongly time-dependent, varying by calendar years. The study shows that the qualitative insights from the PMI narratives and anecdotes provide valuable information that complements the numerical data, offering a more comprehensive assessment of real GDP growth”.
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BONDS: EUREX Roll Views
May-27 10:35
EUREX ROLL Views, these won't be quite active until later this Week, but especially next Week, expiry is on the 6th June.
JPM:
- Buxl: Bullish.
- Bund: Bullish.
- Bobl: Bullish.
- Schatz: Neutral.
- OAT: Bullish.
- BTP: Bearish.
- BTS: Bearish.
MS:
- Buxl: Mildly Bullish.
- Bund: Mildly Bearish.
- Bobl: Neutral.
- Schatz: Mildly Bearish.
- OAT: Neutral.
- BTP: Bearish.
US 10YR FUTURE TECHS: (M5) Corrective Bounce
May-27 10:33
- RES 4: 112-20+ High May 1 and a bull trigger
- RES 3: 112-01+ High May 2
- RES 2: 111-22 High May 7
- RES 1: 110-21+ High May 16 and a key near-term resistance
- PRICE: 110-09+ @ 11:21 BST May 27
- SUP 1: 109-13 Low May 22
- SUP 2: 109-08 Low Apr 11 and key support
- SUP 3: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
- SUP 4: 108-21 Low Feb 19
A bear cycle that started early May in Treasury futures remains in play for now, and short-term gains are considered corrective. The recent breach of 110-01+, 76.4% of the Apr 11 - May 1 bull leg, strengthened a bearish theme and has exposed key support at 109-08, the Apr 24 low and a bear trigger. Key near-term resistance has been defined at 110-21+, the May 16 high. A clear break of this level is required to signal a potential reversal.
OUTLOOK: Price Signal Summary - USDJPY Bounce Considered Corrective
May-27 10:26
- In FX, trend conditions EURUSD are bullish and moving average studies remain in a bull mode position, highlighting a dominant uptrend. The Apr 21 - May 12 bear leg appears to have been a correction. Sights are on 1.1453, the 76.4% retracement of the Apr 21 - May 12 bear leg. Key support lies at 1.1143, the 50-day EMA. A clear break of the average would highlight a stronger reversal. Initial support lies at 1.1271, the 20-day EMA.
- The trend needle in GBPUSD continues to point north and the pair traded higher Monday. The bull trigger at 1.3444, the Apr 28 / 29 high, has been cleared. The break confirms a resumption of the uptrend and sights are on 1.3605, a 1.382 projection of the Feb 28 - Apr 3 - 7 price swing. Medium-term trend signals highlight a dominant uptrend - moving average studies remain in a bull-mode position. First support lies at 1.3351, the 20-day EMA.
- USDJPY maintains a softer tone despite today’s bounce from the day low. The recovery - for now - is considered corrective. Support at 142.36, the May 6 low, has been pierced, and a clear break of it would open 139.89, the Apr 22 low and the next key support. Key short-term resistance has been defined at 148.65, the May 12 high. Initial firm resistance to watch is 145.73, the 50-day EMA.
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