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fx:macro Summary Changes 2023_07_08

Created about a year agoDiff never expires

81 removals

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128 lines

"16.06.23

"08.07.23

***** MACRO *****

>>BULL<<

▶︎ Positive growth and falling inflation: goldilocks for stocks

▶︎ Positive growth and falling inflation in the US: goldilocks for stocks

▶︎ FX volatility is dropping further

▶︎ FX and equity volatility is still low

▶︎ VIX is at a 13 handle...

▶︎ The pain trade is still higher in stocks (says BofA FMS)

▶︎ Credit spreads aren't widening

▶︎ The rally is increasingly broad-based with market breadth improving

▶︎ The rally is increasingly broad-based with market breadth improving and sectors confirming

▶︎ Until one or two weeks ago, it was only Tech driving the rally but this has broadened too

▶︎ The Chinese OECD CLI has turned around and is outperforming

▶︎ TD Ameritrade IMX is moving up and is far from extreme

>>BEAR<<

▶︎ Short-term warning signal from ES/VVIX correlation spiking is still in effect

▶︎ Sentiment is becoming exuberant with AAII Bull-Bear approaching streched highs and CNN F&G in extreme greed mode

▶︎ Latest PMIs and Asia aren't looking good on the Bloomberg heatmap

▶︎ The Bloomberg PMI heatmap isn't looking good, World PMI has worsened

▶︎ The Global CESI is falling

▶︎ Treasury futures COT positioning is mostly bullish

▶︎ Industrial metals and CL aren't performing

▶︎ Sentiment is bullish with AAII Bull-Bear at an 18-month high and CNN F&G in Extreme Greed

▶︎ Recession probability according to the Cleveland Fed model now at 80%

▶︎ All of the G8 2s10s except for JPY are inverted now

>>SUMMARY<<

Stocks are in full reflation-mode, ripping higher with vol dropping. The rally is now lifting more boats than just a few tech names. Industrial metals and energy are less optimistic but have shown a few signs of life last week. The bond market is still calling for a recession with 2s10s flattening globally and nearing levels from before the banking crisis. No re-steepening yet, so the recession isn't going to happen next week. Currencies seem to have changed their mind recently and play risk-on along with stocks. Next week we'll probably see the PBOC cutting the LPRs, plus there was a WSJ report on a big stimulus package coming. This could be a catalyst for more risk-on, especially now that the Fed has paused. Chart-wise, stocks look pretty overextended and the ES/VVIX warning is still in effect.

It's been three weeks since the last bigger picture analysis but macro-wise things haven't changed too much. The US is still going relatively strong, the rally in stocks looks stretched but market internals and sectors have improved to the point where it's impossible to count them as negative. On the not-so-good side, pretty much every data point from China over the last five weeks has disappointed, the China CESI is near a low, the PBOC LPR cuts have underwhelmed, activity currencies are still not performing, and commodities aren't doing anything constructive. Every asset class is still in its own little business cycle.

***** USD *****

>>BULL<<

▶︎ Hawkish dot plot but dovish press conference post FOMC

▶︎ The FOMC Minutes were more hawkish than expected

▶︎ Only two Fed speakers since Powell and they were both hawkish

▶︎ Recent Fed speakers have been broadly more hawish than dovish

▶︎ 10y yields have only gone sideways but bear flattening of the 2s10s

▶︎ Rising real yields with lower (or sideways) breakevens should be bullish

▶︎ COT positioning is still bullish

▶︎ GDPNow is still solidly positive

▶︎ CESI is up - but it's a mean-reverting index

▶︎ OECD CLI is slowly picking up

>>BEAR<<

▶︎ The market reaction to the Fed's hold was clearly negative, Powell even refused to call it a ""skip"" and talked down the dots

▶︎ The market is still pricing in higher for (even) longer but the dollar isn't really following

▶︎ Higher for longer (no cuts this year) is already priced into STIRs, and 2y yields have barely seen any follow-through post FOMC

▶︎ The 5y breakeven rate is below the 10y and the 5y-10y spread is falling fast

▶︎ Lower inflation prints this week, falling Consumer Inflation Expectations

▶︎ CSII is lower

▶︎ CSII is lower too

▶︎ Weaker PMI on the heatmap

▶︎ Bearish seasonality

▶︎ 25-delta risk reversal for USDCNY is lower

>>SUMMARY<<

I'm conflicted. The market was clearly disappointed by the FOMC. USD was higher on the statement but down on the press conference, and 2y yields have hardly seen any follow-through. Waller and Barkin have come out hawkish but that didn't help the dollar either. China is going to cut rates, which should be positive crossflow-wise via USDCNY, the ECB hike and the EUR's reaction (and crossflows into Europe on Chinese stimulus) will be negative via EURUSD. From a dollar-smile perspective, I see more negatives than positive. To keep it simple: US real yields rising and breakevens are barely moving, so I'm sticking with the bullish bias for now.

The USD has performed less well than expected. US data has been more positive than negative over the last few weeks, real yield proxies have gone up, USDCNY looks like a one-way street and yield differentials point to a stronger dollar. I keep the bullish bias here but when I see that the Citi Economic Surprise Index is at its high then we're probably not far from peak optimism among economists and forecasters.

***** EUR *****

>>BULL<<

▶︎ Central bank policy divergence in favour of the EUR with at least one more hike very likely

▶︎ Central bank policy divergence in favour of the EUR with at least one more hike in July very likely

▶︎ Bear flattening of the 2s10s goes on

▶︎ BTP-Bund spread isn't widening

>>BEAR<<

▶︎ Dovish sounding sources report after the ECB decision

▶︎ CESI is still down but it has picked up a tiny bit, same for the CESI spread EUR-USD

▶︎ CESI is still down but has paused, same for CESI spread EUR-USD

▶︎ The German PMI on the heatmap is weaker, the Eurozone one remains deeply red

▶︎ The Eurozone PMI on the heatmap is weaker

▶︎ COT positioning has pared back from its extreme but it's still relatively bearish

▶︎ Sentiment in EURGBP and EURCHF is extremely bullish

▶︎ Sentiment in EURGBP and EURCHF is very bullish

▶︎ OECD CLI for Germany has turned lower again

>>SUMMARY<<

Last week, I wrote that I don't believe in sustained strength in the Euro because the fundamentals are too weak, and that's still the case. It does hang on the dollar, though, so if I'm wrong there I'll be wrong here. Also, I do see that the CESI hasn't dropped futher and is near a low, so we could be in for better-than-expected data.

Similar to the USD, EUR has performed better than I had expected. EUR hawks were clearly in control of the narrative over the last few weeks, especially during the Sintra conference. Economic data has come in mostly worse than expected, and I still see some downside but the CESI is already at an extreme low, so my expectation is that realized economic data will start to improve relative to forecasts soon.

***** GBP *****

>>BULL<<

▶︎ A blowout jobs report this week

▶︎ Yields are still outperforming by a wide margin, the bear flattener over the last weeks had a huge rate of change

▶︎ Yields are still outperforming and 2s10s are bear flattening with the highest rate of change

▶︎ It's inherently strong even in the face of weaker data

▶︎ Inherent strength

▶︎ The CLI is rising fast even though it's still below the G7 average

▶︎ CESI is at a high... but it's a mean reverting index

▶︎ Bearish sentiment

▶︎ OECD CLI has slowed but is still trending higher

▶︎ Bullish seasonality

>>BEAR<<

▶︎ COT positioning is bearish

▶︎ The (Manufacturing) PMI on the heatmap is unchanged but compared to the Eurozone, Services have come in worse; new prints this week

▶︎ The (Manufacturing) PMI on the heatmap has worsened

>>SUMMARY<<

As last week, the bullish arguments outweigh the bearish ones, so I'm going to stick with the bullish bias. I don't have a very good read on what the market expects from the BoE aside from what's priced in, so Thursday is going to be a wildcard.

Every data point has either seen no reaction or a higher GBP, the terminal rate gets continuously bid higher, and yields are going insane. Everyone (including me) wonders how long this can go on but there's just no catalyst on the horizon that I would judge to stop that for good. That being said, upcoming UK data this week is looking pretty bad but we've seen that before.

***** AUD *****

>>BULL<<

▶︎ Another hot labour market report

▶︎ The RBA paused again, their statement wasn't very hawkish but they left their guidance of maybe more tightening in place and were more upbeat about the economy despite higher rates

▶︎ The RBA is comparatively hawkish with two surprise hikes in a row

▶︎ ASX Rate Indicator shows that market-implied odds for another hike continue to increase

▶︎ AUD traded well despite weak China data this week and last

▶︎ Yields are outperforming

▶︎ COT positioning is bullish

▶︎ Bullish seasonality

▶︎ CESI has picked up

▶︎ OECD CLI looks like it is bottoming

>>BEAR<<

▶︎ CSII is dropping

▶︎ The market was a bit disappointed with the RBA decision this week

▶︎ China isn't performing

▶︎ Weak Chinese data is still weighing on AUD

▶︎ Bullish sentiment

>>SUMMARY<<

We've now seen two weeks with AUD trading will despite data from China being weak. The last days have seen one headline after the other about more Chinese stimulus, plus the hot labour market report, plus the increasing expectations for more hikes from the RBA, plus Iron Ore finding a bit of strength. I'm changing the bias to long.

I changed the bias to bullish three weeks ago because I expected better data from China, incoming Aussie data started to look good and related commodities picking up. Since then we've had: dovish RBA minutes, weaker PMIs, lower CPI, the not-very-hawkish rate statement last week, all of the disappointing China data and commodities still going nowhere. Changing the bias to neutral.

***** NZD *****

>>BULL<<

▶︎ CESI seems to have picked up a bit

▶︎ Bullish seasonality

>>BEAR<<

▶︎ Officially in a recession now with two quarters of negative GDP growth

▶︎ Yields are underperforming, 2s clearly believe that the RBNZ is done with their hiking cycle

▶︎ The only curency with a flattening yield curve over the last week

▶︎ It's inherently weak

▶︎ Sentiment is bullish

▶︎ CSII has dropped too

>>SUMMARY<<

I expect it to underperform AUD because of the central bank divergence and the increasingly weak data. The CESI spread AUD-NZD isn't showing much movement but the contrast between the (retrospective) negative Kiwi GDP print and the hot Aussie labour market is emblematic. But: last time we played China reopening, it took a good while for AUDNZD to get going.

There isn't a lot of new information since three weeks ago. Economic data has improved a bit but nothing to get too excited about. Pricing for a 25 bps hike at the upcoming meeting this week is virtually non-existent, there was barely any commentary from the RBNZ since their last meeting and no major data points. AUDNZD is right in the middle of a wide range, so I have no good idea of where we could or should go from here.

***** CAD *****

>>BULL<<

▶︎ Yields are outperforming, bear flattening of the 2s10s (but much less than in AUD or GBP)

▶︎ Positive seasonality

▶︎ The BOC hiked by 25 bps but made forward guidance more dovish by dropping the bit about being prepared to raise rates further if needed

▶︎ COT positioning is bullish, Dealers are near multi-year long levels

▶︎ Bearish sentiment in USDCAD

>>BEAR<<

▶︎ Data over the last few weeks has mostly disappointed and weakened

▶︎ COT/TFF dealer net positions have nosedived with a high rate of change

▶︎ Crude oil just isn't performing but correlation to CL is currently zero

▶︎ Bearish seasonality

▶︎ Has the worst CLI among the G7

▶︎ CSII has dropped

>>SUMMARY<<

I don't have much to add to what I wrote last week: it's doing it's own thing separate from CL (correlation at -0.29 now), and a stronger dollar should help CAD as well.

Data for CAD has come in mostly weaker over the last few weeks and the CAD has reacted to that. And we've seen a pretty fast reduction of the short position in the market in COT/TFF data. It's still not driven by CL or USD (no correlation at the moment). I'm changing the bias to bearish.

***** CHF *****

>>BULL<<

▶︎ The SNB is still sounding hawkish

▶︎ The SNB decision two weeks ago was disappointing but every comment since then was hawkish

▶︎ Bearish sentiment

▶︎ SNB still buying CHF

▶︎ Bullish seasonality

▶︎ Bearish sentiment via EURCHF and USDCHF

▶︎ CESI is off lows

▶︎ CSII has ticked higher

>>BEAR<<

▶︎ Yields are underperforming

▶︎ Yields are underperforming (absolutely no positive correlation to CHF, though)

▶︎ CSII has dropped

▶︎ Bearish seasonality

▶︎ Weaker PMI on the heatmap

▶︎ Bearish 25-delta risk reversal

>>SUMMARY<<

I still don't know what to do with the Swissie at the moment for the same reasons I listed last week. We'll get more information from the SNB on Thursday, expectations are for 25 bps.

I don't really understand the Swissie: CPI has come down (again this week) but they're still sounding hawkish, and it just doesn't feel like it makes sense.

***** JPY *****

>>BULL<<

▶︎ The economy is performing better (but JPY is looking through that)

▶︎ A bit of a hawkish tilt in the latest BOJ Summary of Opinions

▶︎ Bullish seasonality

▶︎ We're back at/near/in BOJ intervention territory

>>BEAR<<

▶︎ There was nothing hawkish about the BOJ decision or Ueda's presser

▶︎ BOJ jawboning re: intervention is still weak

▶︎ COT says it's still not a very crowded trade

▶︎ COT still says it's still not a very crowded trade

▶︎ The 25-delta risk reversal for USDJPY is moving higher fast

▶︎ The disinflationary momentum has slowed, CSII has dropped too

▶︎ Tokyo Core CPI still >3% but latest print disinflationary and a miss

▶︎ Still the most dovish central bank out there

▶︎ Bullish sentiment

▶︎ Inherent weakness

>>SUMMARY<<

And we've had another BOJ meeting where they didn't give any food for the hawks. The jawboning from officials regarding the exchange rate has picked up but it's mild so far. A few Yen crosses are approaching (or have exceeded) multi-year or multi-decade highs but there's nothing to suggest that the train is stopping now. The fundamental way to go is clearly lower but I leave the bias at neutral because of how prone it is to risk-off strength but it's the go-to currency if I'm looking for a short-term short."

Nothing has really changed from three weeks ago. We get tiny signals from the BOJ that they might do something with YCC but we've gotten those again and again over the last months, so that's nothing fundamentally new. What's a bit surprising is that there's comparatively less pushback now than there was last year before the MOF intervened, so we might still see some more downside."

Saved diffs

Original text

Open file

"16.06.23
***** MACRO *****
     >>BULL<<
▶︎ Positive growth and falling inflation: goldilocks for stocks
▶︎ FX volatility is dropping further
▶︎ VIX is at a 13 handle...
▶︎ The pain trade is still higher in stocks (says BofA FMS)
▶︎ Credit spreads aren't widening
▶︎ The rally is increasingly broad-based with market breadth improving
▶︎ Until one or two weeks ago, it was only Tech driving the rally but this has broadened too
▶︎ The Chinese OECD CLI has turned around and is outperforming
▶︎ TD Ameritrade IMX is moving up and is far from extreme
     >>BEAR<<
▶︎ Short-term warning signal from ES/VVIX correlation spiking is still in effect
▶︎ Latest PMIs and Asia aren't looking good on the Bloomberg heatmap
▶︎ The Global CESI is falling
▶︎ Treasury futures COT positioning is mostly bullish
▶︎ Industrial metals and CL aren't performing
▶︎ Sentiment is bullish with AAII Bull-Bear at an 18-month high and CNN F&G in Extreme Greed
▶︎ Recession probability according to the Cleveland Fed model now at 80%
▶︎ All of the G8 2s10s except for JPY are inverted now
     >>SUMMARY<<
Stocks are in full reflation-mode, ripping higher with vol dropping. The rally is now lifting more boats than just a few tech names. Industrial metals and energy are less optimistic but have shown a few signs of life last week. The bond market is still calling for a recession with 2s10s flattening globally and nearing levels from before the banking crisis. No re-steepening yet, so the recession isn't going to happen next week. Currencies seem to have changed their mind recently and play risk-on along with stocks. Next week we'll probably see the PBOC cutting the LPRs, plus there was a WSJ report on a big stimulus package coming. This could be a catalyst for more risk-on, especially now that the Fed has paused. Chart-wise, stocks look pretty overextended and the ES/VVIX warning is still in effect.

***** USD *****
     >>BULL<<
▶︎ Hawkish dot plot but dovish press conference post FOMC
▶︎ Only two Fed speakers since Powell and they were both hawkish
▶︎ 10y yields have only gone sideways but bear flattening of the 2s10s
▶︎ Rising real yields with lower (or sideways) breakevens should be bullish
▶︎ COT positioning is still bullish
▶︎ GDPNow is still solidly positive
     >>BEAR<<
▶︎ The market reaction to the Fed's hold was clearly negative, Powell even refused to call it a ""skip"" and talked down the dots
▶︎ Higher for longer (no cuts this year) is already priced into STIRs, and 2y yields have barely seen any follow-through post FOMC
▶︎ The 5y breakeven rate is below the 10y and the 5y-10y spread is falling fast
▶︎ Lower inflation prints this week, falling Consumer Inflation Expectations
▶︎ CSII is lower too
▶︎ Weaker PMI on the heatmap
     >>SUMMARY<<
I'm conflicted. The market was clearly disappointed by the FOMC. USD was higher on the statement but down on the press conference, and 2y yields have hardly seen any follow-through. Waller and Barkin have come out hawkish but that didn't help the dollar either. China is going to cut rates, which should be positive crossflow-wise via USDCNY, the ECB hike and the EUR's reaction (and crossflows into Europe on Chinese stimulus) will be negative via EURUSD. From a dollar-smile perspective, I see more negatives than positive. To keep it simple: US real yields rising and breakevens are barely moving, so I'm sticking with the bullish bias for now.

***** EUR *****
     >>BULL<<
▶︎ Central bank policy divergence in favour of the EUR with at least one more hike very likely
▶︎ Bear flattening of the 2s10s goes on
▶︎ BTP-Bund spread isn't widening
     >>BEAR<<
▶︎ Dovish sounding sources report after the ECB decision
▶︎ CESI is still down but has paused, same for CESI spread EUR-USD 
▶︎ The Eurozone PMI on the heatmap is weaker
▶︎ COT positioning has pared back from its extreme but it's still relatively bearish
▶︎ Sentiment in EURGBP and EURCHF is extremely bullish
     >>SUMMARY<<
Last week, I wrote that I don't believe in sustained strength in the Euro because the fundamentals are too weak, and that's still the case. It does hang on the dollar, though, so if I'm wrong there I'll be wrong here. Also, I do see that the CESI hasn't dropped futher and is near a low, so we could be in for better-than-expected data.

***** GBP *****
     >>BULL<<
▶︎ A blowout jobs report this week
▶︎ Yields are still outperforming and 2s10s are bear flattening with the highest rate of change
▶︎ Inherent strength
▶︎ The CLI is rising fast even though it's still below the G7 average
▶︎ CESI is at a high... but it's a mean reverting index
▶︎ Bearish sentiment
     >>BEAR<<
▶︎ COT positioning is bearish
▶︎ The (Manufacturing) PMI on the heatmap is unchanged but compared to the Eurozone, Services have come in worse; new prints this week 
     >>SUMMARY<<
As last week, the bullish arguments outweigh the bearish ones, so I'm going to stick with the bullish bias. I don't have a very good read on what the market expects from the BoE aside from what's priced in, so Thursday is going to be a wildcard.

***** AUD *****
     >>BULL<<
▶︎ Another hot labour market report
▶︎ The RBA is comparatively hawkish with two surprise hikes in a row
▶︎ ASX Rate Indicator shows that market-implied odds for another hike continue to increase
▶︎ AUD traded well despite weak China data this week and last
▶︎ Yields are outperforming
▶︎ COT positioning is bullish
▶︎ Bullish seasonality
     >>BEAR<<
▶︎ CSII is dropping
▶︎ China isn't performing
     >>SUMMARY<<
We've now seen two weeks with AUD trading will despite data from China being weak. The last days have seen one headline after the other about more Chinese stimulus, plus the hot labour market report, plus the increasing expectations for more hikes from the RBA, plus Iron Ore finding a bit of strength. I'm changing the bias to long.

***** NZD *****
     >>BULL<<
▶︎ CESI seems to have picked up a bit
     >>BEAR<<
▶︎ Officially in a recession now with two quarters of negative GDP growth
▶︎ Yields are underperforming, 2s clearly believe that the RBNZ is done with their hiking cycle
▶︎ It's inherently weak
▶︎ Sentiment is bullish
▶︎ CSII has dropped too
     >>SUMMARY<<
I expect it to underperform AUD because of the central bank divergence and the increasingly weak data. The CESI spread AUD-NZD isn't showing much movement but the contrast between the (retrospective) negative Kiwi GDP print and the hot Aussie labour market is emblematic.  But: last time we played China reopening, it took a good while for AUDNZD to get going.

***** CAD *****
     >>BULL<<
▶︎ Yields are outperforming, bear flattening of the 2s10s (but much less than in AUD or GBP)
▶︎ The BOC hiked by 25 bps but made forward guidance more dovish by dropping the bit about being prepared to raise rates further if needed
▶︎ COT positioning is bullish, Dealers are near multi-year long levels
▶︎ Bearish sentiment in USDCAD
     >>BEAR<<
▶︎ Crude oil just isn't performing but correlation to CL is currently zero
▶︎ Bearish seasonality
▶︎ Has the worst CLI among the G7
     >>SUMMARY<<
I don't have much to add to what I wrote last week: it's doing it's own thing separate from CL (correlation at -0.29 now), and a stronger dollar should help CAD as well.

***** CHF *****
     >>BULL<<
▶︎ The SNB is still sounding hawkish
▶︎ Bearish sentiment
▶︎ Bullish seasonality
     >>BEAR<<
▶︎ Yields are underperforming
▶︎ CSII has dropped
▶︎ Weaker PMI on the heatmap
     >>SUMMARY<<
I still don't know what to do with the Swissie at the moment for the same reasons I listed last week. We'll get more information from the SNB on Thursday, expectations are for 25 bps.

***** JPY *****
     >>BULL<<
▶︎ The economy is performing better (but JPY is looking through that)
▶︎ Bullish seasonality
     >>BEAR<<
▶︎ There was nothing hawkish about the BOJ decision or Ueda's presser
▶︎ BOJ jawboning re: intervention is still weak
▶︎ COT says it's still not a very crowded trade
▶︎ The 25-delta risk reversal for USDJPY is moving higher fast
▶︎ Tokyo Core CPI still >3% but latest print disinflationary and a miss
▶︎ Still the most dovish central bank out there
▶︎ Bullish sentiment
▶︎ Inherent weakness
     >>SUMMARY<<
And we've had another BOJ meeting where they didn't give any food for the hawks. The jawboning from officials regarding the exchange rate has picked up but it's mild so far. A few Yen crosses are approaching (or have exceeded) multi-year or multi-decade highs but there's nothing to suggest that the train is stopping now. The fundamental way to go is clearly lower but I leave the bias at neutral because of how prone it is to risk-off strength but it's the go-to currency if I'm looking for a short-term short."

Changed text

Open file

"08.07.23
***** MACRO *****
     >>BULL<<
▶︎ Positive growth and falling inflation in the US: goldilocks for stocks
▶︎ FX and equity volatility is still low
▶︎ The pain trade is still higher in stocks (says BofA FMS)
▶︎ Credit spreads aren't widening
▶︎ The rally is increasingly broad-based with market breadth improving and sectors confirming
▶︎ The Chinese OECD CLI has turned around and is outperforming
▶︎ TD Ameritrade IMX is moving up and is far from extreme
     >>BEAR<<
▶︎ Sentiment is becoming exuberant with AAII Bull-Bear approaching streched highs and CNN F&G in extreme greed mode
▶︎ The Bloomberg PMI heatmap isn't looking good, World PMI has worsened
▶︎ Treasury futures COT positioning is mostly bullish
▶︎ Industrial metals and CL aren't performing
▶︎ Recession probability according to the Cleveland Fed model now at 80%
▶︎ All of the G8 2s10s except for JPY are inverted now
     >>SUMMARY<<
It's been three weeks since the last bigger picture analysis but macro-wise things haven't changed too much. The US is still going relatively strong, the rally in stocks looks stretched but market internals and sectors have improved to the point where it's impossible to count them as negative. On the not-so-good side, pretty much every data point from China over the last five weeks has disappointed, the China CESI is near a low, the PBOC LPR cuts have underwhelmed, activity currencies are still not performing, and commodities aren't doing anything constructive. Every asset class is still in its own little business cycle.

***** USD *****
     >>BULL<<
▶︎ The FOMC Minutes were more hawkish than expected
▶︎ Recent Fed speakers have been broadly more hawish than dovish
▶︎ Rising real yields with lower (or sideways) breakevens should be bullish
▶︎ GDPNow is still solidly positive
▶︎ CESI is up - but it's a mean-reverting index
▶︎ OECD CLI is slowly picking up
     >>BEAR<<
▶︎ The market is still pricing in higher for (even) longer but the dollar isn't really following
▶︎ The 5y breakeven rate is below the 10y and the 5y-10y spread is falling fast
▶︎ CSII is lower
▶︎ Weaker PMI on the heatmap
▶︎ Bearish seasonality
▶︎ 25-delta risk reversal for USDCNY is lower
     >>SUMMARY<<
The USD has performed less well than expected. US data has been more positive than negative over the last few weeks, real yield proxies have gone up, USDCNY looks like a one-way street and yield differentials point to a stronger dollar. I keep the bullish bias here but when I see that the Citi Economic Surprise Index is at its high then we're probably not far from peak optimism among economists and forecasters.

***** EUR *****
     >>BULL<<
▶︎ Central bank policy divergence in favour of the EUR with at least one more hike in July very likely
     >>BEAR<<
▶︎ CESI is still down but it has picked up a tiny bit, same for the CESI spread EUR-USD
▶︎ The German PMI on the heatmap is weaker, the Eurozone one remains deeply red
▶︎ COT positioning has pared back from its extreme but it's still relatively bearish
▶︎ Sentiment in EURGBP and EURCHF is very bullish
▶︎ OECD CLI for Germany has turned lower again
     >>SUMMARY<<
Similar to the USD, EUR has performed better than I had expected. EUR hawks were clearly in control of the narrative over the last few weeks, especially during the Sintra conference. Economic data has come in mostly worse than expected, and I still see some downside but the CESI is already at an extreme low, so my expectation is that realized economic data will start to improve relative to forecasts soon.

***** GBP *****
     >>BULL<<
▶︎ Yields are still outperforming by a wide margin, the bear flattener over the last weeks had a huge rate of change
▶︎ It's inherently strong even in the face of weaker data
▶︎ CESI is at a high... but it's a mean reverting index
▶︎ Bearish sentiment
▶︎ OECD CLI has slowed but is still trending higher
▶︎ Bullish seasonality
     >>BEAR<<
▶︎ COT positioning is bearish
▶︎ The (Manufacturing) PMI on the heatmap has worsened
     >>SUMMARY<<
Every data point has either seen no reaction or a higher GBP, the terminal rate gets continuously bid higher, and yields are going insane. Everyone (including me) wonders how long this can go on but there's just no catalyst on the horizon that I would judge to stop that for good. That being said, upcoming UK data this week is looking pretty bad but we've seen that before.

***** AUD *****
     >>BULL<<
▶︎ The RBA paused again, their statement wasn't very hawkish but they left their guidance of maybe more tightening in place and were more upbeat about the economy despite higher rates
▶︎ Bullish seasonality
▶︎ CESI has picked up
▶︎ OECD CLI looks like it is bottoming
     >>BEAR<<
▶︎ The market was a bit disappointed with the RBA decision this week
▶︎ Weak Chinese data is still weighing on AUD
▶︎ Bullish sentiment
     >>SUMMARY<<
I changed the bias to bullish three weeks ago because I expected better data from China, incoming Aussie data started to look good and related commodities picking up. Since then we've had: dovish RBA minutes, weaker PMIs, lower CPI, the not-very-hawkish rate statement last week, all of the disappointing China data and commodities still going nowhere. Changing the bias to neutral.

***** NZD *****
     >>BULL<<
▶︎ CESI seems to have picked up a bit
▶︎ Bullish seasonality
     >>BEAR<<
▶︎ Officially in a recession now with two quarters of negative GDP growth
▶︎ The only curency with a flattening yield curve over the last week
▶︎ It's inherently weak
▶︎ Sentiment is bullish
▶︎ CSII has dropped too
     >>SUMMARY<<
There isn't a lot of new information since three weeks ago. Economic data has improved a bit but nothing to get too excited about. Pricing for a 25 bps hike at the upcoming meeting this week is virtually non-existent, there was barely any commentary from the RBNZ since their last meeting and no major data points. AUDNZD is right in the middle of a wide range, so I have no good idea of where we could or should go from here.

***** CAD *****
     >>BULL<<
▶︎ Positive seasonality
     >>BEAR<<
▶︎ Data over the last few weeks has mostly disappointed and weakened
▶︎ COT/TFF dealer net positions have nosedived with a high rate of change
▶︎ Crude oil just isn't performing but correlation to CL is currently zero
▶︎ Has the worst CLI among the G7
▶︎ CSII has dropped
     >>SUMMARY<<
Data for CAD has come in mostly weaker over the last few weeks and the CAD has reacted to that. And we've seen a pretty fast reduction of the short position in the market in COT/TFF data. It's still not driven by CL or USD (no correlation at the moment). I'm changing the bias to bearish.

***** CHF *****
     >>BULL<<
▶︎ The SNB decision two weeks ago was disappointing but every comment since then was hawkish
▶︎ SNB still buying CHF
▶︎ Bearish sentiment via EURCHF and USDCHF
▶︎ CESI is off lows
▶︎ CSII has ticked higher
     >>BEAR<<
▶︎ Yields are underperforming (absolutely no positive correlation to CHF, though)
▶︎ Bearish seasonality
▶︎ Bearish 25-delta risk reversal
     >>SUMMARY<<
I don't really understand the Swissie: CPI has come down (again this week) but they're still sounding hawkish, and it just doesn't feel like it makes sense.

***** JPY *****
     >>BULL<<
▶︎ A bit of a hawkish tilt in the latest BOJ Summary of Opinions
▶︎ We're back at/near/in BOJ intervention territory
     >>BEAR<<
▶︎ BOJ jawboning re: intervention is still weak
▶︎ COT still says it's still not a very crowded trade
▶︎ The disinflationary momentum has slowed, CSII has dropped too
▶︎ Still the most dovish central bank out there
▶︎ Inherent weakness
     >>SUMMARY<<
Nothing has really changed from three weeks ago. We get tiny signals from the BOJ that they might do something with YCC but we've gotten those again and again over the last months, so that's nothing fundamentally new. What's a bit surprising is that there's comparatively less pushback now than there was last year before the MOF intervened, so we might still see some more downside."