fx:macro Summary Changes

140 lines
-36 Removals
139 lines
+35 Additions
"***** MACRO *****
"***** MACRO *****
>>BULL<<
>>BULL<<
▶︎ The Chinese mini-pivot on Covid with small changes to Covid protocols has made Asian stock markets and Semiconductors rally
▶︎ GDP growth is picking up, inflation is coming down: goldilocks again
▶︎ GDP growth is picking up, inflation is coming down: goldilocks again
▶︎ Asian stock markets holding on to their gains for now
▶︎ Volatility metrics are bullish, no indication of stress whatsoever
▶︎ Volatility metrics are bullish, no indication of stress whatsoever
▶︎ Sector performance has been outright bullish with offensives outperforming defensives
▶︎ ETF flows are bullish
▶︎ Breadth is bullish, the rally in stocks sees enough participation to go on
▶︎ Breadth is bullish
▶︎ TD Ameritrade IMX is near lows
▶︎ TD Ameritrade IMX is near lows
▶︎ Seasonality is very bullish for equities
▶︎ Seasonality is very bullish for equities
▶︎ Copper has seen some upside
▶︎ Stocks are up despite the meltdowns in crypto
▶︎ Stocks are up despite the meltdowns in crypto
>>BEAR<<
>>BEAR<<
▶︎ Correlation between ES and VVIX has hit a critical level
▶︎ Longer-term treasuries have started to perform: bad news for risk assets if this goes on
▶︎ CNN Fear & Greed already at ""Greed""
▶︎ CNN Fear & Greed already at ""Greed""
▶︎ Credit spreads are still at/near/above recent highs
▶︎ Credit spreads are still at/near/above recent highs
▶︎ Six out of eight G8 2s10s yield curves have inverted so far (latest: DE this week)
▶︎ Six out of eight G8 2s10s yield curves have inverted so far
▶︎ The global economy continues to weaken (e.g. PMIs)
▶︎ The global economy continues to weaken (e.g. PMIs)
▶︎ Equities (still) seeing outflows globally
▶︎ Equities (still) seeing outflows globally
▶︎ Energy futures haven't performed this week despite the China news and a buy-everything-rally
▶︎ Sector performance bearish once again despite stocks going nowhere, though this seems to change week-by-week now... not good either way
▶︎ Key commodities (CL, HG) lower despite the pausing dollar and glimmers of hope out of China is a very bad sign for the global economy
▶︎ The stocks that are rallying are the most beaten-down names, so there's probably a lot of short-squeezing and dead-cat-bouncing going on
▶︎ The stocks that are rallying are the most beaten-down names, so there's probably a lot of short-squeezing and dead-cat-bouncing going on
>>SUMMARY<<
>>SUMMARY<<
The market has wanted to rally for weeks now, and it got its catalyst with the CPI print and what it perceives as a Fed pivot. The fundamental picture hasn't improved but sentiment has changed completely with the China headlines and the Fed pivot. There's a real possibility of hawkish Fed commentary to counter that but I doubt that will be enough to change the trajectory. Strategically still short, tactical long bias for risk-assets until the next CPI/PCE prints tell me otherwise. Using higher prices in stocks to increase tail hedges.
I'm still seeing short-term upside in risk assets because of the post-CPI sentiment shift and how stocks have traded since then, and because I believe it needs a hard catalyst like a hot CPI or a box on the ears by Powell to change that. What's worrying is the ES/VVIX correlation signal, so I'm definitely going to be careful. And using the upside to build downside convexity.
***** USD *****
***** USD *****
>>BULL<<
>>BULL<<
▶︎ It's hard to imagine the run-up in stocks and the fall in yields won't provoke hawkish Fed commentary
▶︎ Fedspeak has felt a touch more hawkish with Bullard and Waller but they're the outliers for now
▶︎ GDP growth in Q4 picking up (GDPNow)
▶︎ GDP growth in Q4 picking up and so far shows no sign of coming down (GDPNow)
▶︎ Flows into USD continue
▶︎ Flows into USD continue
▶︎ CESI is rising, labour market remains strong... for now it's a soft landing
▶︎ The labour market remains strong... for now it's a soft landing
▶︎ Slowing global growth (PMIs getting worse globally, Fidelity Business Cycles)
▶︎ Slowing global growth (PMIs getting worse globally, Fidelity Business Cycles)
>>BEAR<<
>>BEAR<<
▶︎ Inflation breakevens coming down
▶︎ The cooler-than-expected CPI print has cemented the market's expectation of a Fed pivot
▶︎ The cooler-than-expected CPI print has cemented the market's expectation of a Fed pivot
▶︎ Fed speakers continue to talk about slowing hikes, 25 bps in December have already been mentioned (albeit just once); this isn't priced in yet
▶︎ STIRs pricing significant rate cuts already for 2023/24
▶︎ The options market is pricing USD lower vs. most other G8s (25-delta risk reversals)
▶︎ Three CBs intervening (or rumoured to intervene) on behalf of their currencies: Japan, China, India
▶︎ Three CBs intervening (or rumoured to intervene) on behalf of their currencies: Japan, China, India
▶︎ Housing is seeing one bad print after the other
▶︎ Housing is seeing one bad print after the other
▶︎ Real yields haven't moved higher for a while
▶︎ Real yields haven't moved higher for a while
>>SUMMARY<<
>>SUMMARY<<
It's basically the opposite of the Macro view above: China headlines, perceived Fed pivot, buy-everything sentiment, the stretched USD long positioning all see USD downside. It's going to be interesting to see Fed speakers' reactions but for now they've been decidely not hawkish, and I doubt the usual talking points will be able to turn the tide now. The short-term bias is clearly lower but on a longer-term timeframe I don't see the dollar having put in its high.
As last week it all hangs on the Macro view above. The market has been trading a Fed pivot, the Fed's reaction to that has been far less hawkish than I would have expected, breakevens coming down and no hard data points on the calendar next week, so a lower dollar is the reasonable thing to expect although my conviction isn't high.
***** EUR *****
***** EUR *****
>>BULL<<
>>BULL<<
▶︎ The ECB is starting to look relatively hawkish compared to the Fed, BoE, BOC, RBA, BOJ
▶︎ The ECB is starting to look relatively hawkish compared to the Fed, BoE, BOC, RBA, BOJ
▶︎ Hawkish comments from policymakers continue (on rates and QT)
▶︎ Hawkish comments from policymakers continue (on rates and QT)
▶︎ Yields are performing, especially the short end (central bank)
▶︎ Yields are performing, especially the short end (central bank)
▶︎ European stock markets are outperforming
▶︎ European stock markets are outperforming
▶︎ Significant flows into EUR
▶︎ Significant flows into EUR
▶︎ CESI still going higher
▶︎ CESI still going higher
▶︎ There hasn't been any nuclear rhetoric from Russia for a while, and it feels as if a positive catalyst from the conflict is a bit more possible than it was in the past
▶︎ There hasn't been any nuclear rhetoric from Russia for a while, and it feels as if a positive catalyst from the conflict is a bit more possible than it was in the past
>>BEAR<<
>>BEAR<<
▶︎ European PMIs have weakened further
▶︎ European PMIs have weakened further
▶︎ No discussion on QT at the ECB meeting last week and probably not at the next one
▶︎ Bloomberg sources saying 50 bps is the likely step in December
▶︎ COT positioning is bearish
▶︎ COT positioning is bearish
>>SUMMARY<<
>>SUMMARY<<
Similar to last week: the EUR has several points going for it besides a weaker USD (and its strength even during the dollar bull run has been noteworthy): the ECB looks credibly hawkish, the energy situation has calmed for now, the Russia/Ukraine war isn't delivering any fresh catalysts to the downside, stock markets are up, yields are performing.
Similar to last week: the EUR has several points going for it besides a weaker USD (and its strength even during the dollar bull run has been noteworthy): the ECB looks credibly hawkish, the energy situation has calmed for now, the Russia/Ukraine war isn't delivering any fresh catalysts to the downside, stock markets are up, yields are performing.
***** GBP *****
***** GBP *****
>>BULL<<
>>BULL<<
▶︎ Drop in Inflation Surprise Index (CSII) but inflation surprised to the upside again this week... the market liked it
▶︎ Flows into sterling
▶︎ CESI picking up, data surprising to the upside
▶︎ Gilt sales have started without much fanfare
▶︎ Gilt sales have started without much fanfare
▶︎ Drop in Inflation Surprise Index (CSII) is a small but positive sign
▶︎ No reaction to worse-than-expected GDP print
▶︎ CESI ticking up
>>BEAR<<
>>BEAR<<
▶︎ Very dovish central bank despite some hawkish comments this week
▶︎ Very dovish central bank despite a few hawkish comments this week and last
▶︎ Depressing economic outlook
▶︎ Depressing economic outlook
▶︎ Worst OECD CLI among G8
▶︎ Worst OECD CLI among G8
▶︎ PMIs have weakened
▶︎ PMIs have weakened
▶︎ Bearish seasonality
▶︎ Bearish seasonality
▶︎ Flows out of GBP
▶︎ Flows out of GBP
>>SUMMARY<<
>>SUMMARY<<
Still bearish. At least the government now look a bit more like they knows what they're doing but I can't see much upside here.
I see the upside surprises in econ data, I see the positive reaction on the government's budget, I see that it's stronger than I anticipated... but with the outlook being as bad as it is, I can't bring myself to put in anything else but bias to the short side.
***** AUD *****
***** AUD *****
>>BULL<<
>>BULL<<
▶︎ China reopening news/rumours/headlines will benefit the AUD (that being said: AUD performance has been a bit muted on the news so far)
▶︎ One of the few PMI outperformers
▶︎ One of the few PMI outperformers
▶︎ Bullish 25-delta risk reversal
▶︎ Relative outperformer in the OECD CLI
▶︎ Relative outperformer in the OECD CLI
>>BEAR<<
>>BEAR<<
▶︎ Regardless whether the Chinese re-opening comes true or not: AUD performance has been disappointing on these news
▶︎ Probably the most dovish central bank beside the BOJ now
▶︎ Probably the most dovish central bank beside the BOJ now
▶︎ CESI is near lows
▶︎ PMIs in Asia deteriorating further, China is a drag on AUD
▶︎ PMIs in Asia deteriorating further, China is a drag on AUD
▶︎ Seasonality is bearish
▶︎ Seasonality is bearish
▶︎ Has seen outflows over the last weeks
▶︎ Has seen outflows over the last weeks
>>SUMMARY<<
>>SUMMARY<<
Fundamentally nothing to be excited about but it's the prime risk-on currency and proxy of a China reopening, so it's a tactical long.
It hasn't reacted to the Chinese reopening news much, commodities aren't performing, the RBA is dovish... switching back to neutral, trading it from the long and short side depending on risk on/risk off.
***** NZD *****
***** NZD *****
>>BULL<<
>>BULL<<
▶︎ Inherent strength
▶︎ Inherent strength
▶︎ Outperformance in yields
▶︎ Incoming data has improved
▶︎ CESI has picked up notably
▶︎ The highest Services PMI among the G8
▶︎ Inflation surprising to the upside again (CSII)
▶︎ Inflation surprising to the upside again (CSII... but PPI disappointed this week)
▶︎ Risk reversal seeing some upside
▶︎ COT positioning is bullish
>>BEAR<<
>>BEAR<<
▶︎ Bullish sentiment
▶︎ Bullish sentiment
▶︎ Divergence between increasing Aussie trade balance and stagnant/falling Kiwi trade balance
▶︎ Divergence between increasing Aussie trade balance and stagnant/falling Kiwi trade balance
>>SUMMARY<<
>>SUMMARY<<
Similar to AUD but with a more hawkish central bank and an economy that seems to perform better. Not sure about its outperformance of AUD anymore: yes, there's a divergence between the central banks but that's been there for a while now and I can imagine reflation/China having more impact on AUD.
The outperformance vs. AUD continues, it seems to benefit from the Chinese headlines way more than AUD. Add the comparatively hawkish RBNZ and it's a long bias.
***** CAD *****
***** CAD *****
>>BULL<<
>>BULL<<
▶︎ CESI has picked up from lows
▶︎ CESI has picked up from lows
▶︎ Small improvement in PMIs
▶︎ Small improvement in PMIs
▶︎ COT positioning is near a bullish extreme
▶︎ COT positioning is near a bullish extreme
▶︎ Housing market remains strong
▶︎ Housing market remains strong
▶︎ Bearish sentiment
▶︎ Bearish sentiment
>>BEAR<<
>>BEAR<<
▶︎ Flows out of CAD
▶︎ Flows out of CAD
▶︎ CSII lower
▶︎ CSII lower
▶︎ Yields have softened, inverted 2s10s
▶︎ Yields have softened, inverted 2s10s
>>SUMMARY<<
>>SUMMARY<<
Apparently its drivers are the USD and crude oil at the moment (and not SPX). Crude not rallying despite the buy-everything trade and the case for a weaker USD make me change the bias to bearish. But it feels like I don't really understand CAD at the moment.
It continues to underperform despite more-hawkish-than-dovish rhetoric from the BOC, and with crude selling off I don't see a lot of upside. But again: I feel that I don't understand it very well at the moment.
***** CHF *****
***** CHF *****
>>BULL<<
>>BULL<<
▶︎ 2s are up while they are down for everyone else
▶︎ PMI still holding up (one of the few that's still green on the map)
▶︎ PMI still holding up (one of the few that's still green on the map)
▶︎ PAIN shows shorts haven't been covered yet
▶︎ PAIN shows shorts haven't been covered yet
▶︎ The most bearish sentiment, especially USDCHF and EURCHF
▶︎ Extremely bearish sentiment, especially USDCHF and EURCHF
▶︎ Hawkish comments again this week
▶︎ Hawkish comments again this week
>>BEAR<<
>>BEAR<<
▶︎ CSII has tanked
▶︎ CSII has tanked
▶︎ CESI has taken quite a nosedive and no sign of picking up
▶︎ CESI has taken quite a nosedive and no sign of picking up
▶︎ Inflation not surprising to the upside anymore
▶︎ Inflation not surprising to the upside anymore
▶︎ Yields are underperforming
▶︎ Yields are underperforming
>>SUMMARY<<
>>SUMMARY<<
Last week: I'm still a bit surprised by how weak it is. This week: hawkish commentary and a short-squeeze. I leave the bias at neutral because I don't know how much further this move has to go: the short-squeeze could last a while with a weaker USD but my conviction is too low to change back to bullish (again).
Two weeks ago: I'm still a bit surprised by how weak it is. One week ago: hawkish commentary and a short-squeeze. This week: downside despite hawkish SNB commentary. Looking at it honestly, I have to admit I don't understand it from a fundamental side at the moment, so I can only trade it on higher timeframes and as a risk-on/risk-off proxy on short timeframes.
***** JPY *****
***** JPY *****
>>BULL<<
>>BULL<<
▶︎ Inflation surprises have picked up, the tone of the talk from policymakers has also shifted subtly (see the Summary of Opinions this week)
▶︎ Inflation surprises have picked up, the tone of the talk from policymakers has also shifted subtly (see the Summary of Opinions last week, Kuroda this week)
▶︎ Treasury yields have tanked
▶︎ Treasury yields have tanked
▶︎ Relative outperformer in the OECD CLI
▶︎ Relative outperformer in the OECD CLI
▶︎ Positioning is still very bullish (I don't really know why I hadn't included that over the last weeks, just look at COT)
▶︎ Positioning is still very bullish (I don't really know why I hadn't included that over the last weeks, just look at COT)
▶︎ One possible contender for the Kuroda succession (Nakaso) is at least a bit hawkish... nothing relevant for now but keeping it in mind
>>BEAR<<
>>BEAR<<
▶︎ The divergence between the BOJ and every other central bank isn't getting any smaller
▶︎ The divergence between the BOJ and every other central bank isn't getting any smaller
>>SUMMARY<<
>>SUMMARY<<
While the perceived Fed pivot will still lead to widening yield differentials, the rate of change will slow down, and apparently this (paired with lower treasury yields) was enough to trigger a short-squeeze in the USDJPY. Add the interventions and the (subtle) shift in BOJ comments and their Summary of Opinions, and it's not a short anymore."
While the perceived Fed pivot will still lead to widening yield differentials, the rate of change will slow down, and apparently this (paired with lower treasury yields) was enough to trigger a short-squeeze in the USDJPY. Add the interventions and the (subtle) shift in BOJ comments and their Summary of Opinions, and it's not a short anymore."
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