fx:macro Summary Changes 2022_09_10

Created Diff never expires
30 removals
115 lines
30 additions
116 lines
"***** MACRO *****
"***** MACRO *****
>>BULL<<
>>BULL<<
▶︎ Volatility is still pretty calm, there doesn't seem to be much demand for hedges
▶︎ Emerging markets are performing (Brazil, India)
▶︎ From the volatility side there's nothing to be concerned about
▶︎ COT equity positioning is still bullish
▶︎ COT equity positioning is still bullish
▶︎ G10 CESI is moving up fast
▶︎ AAII Bull-Bear spread is near an extreme low again
▶︎ Gamma Exposure (GEX) is at a level consistent with a bounce in ES
▶︎ G10 CESI is improving
▶︎ GDPNow for Q3 is improving, inflation is coming down... this is goldilocks for stocks
▶︎ GDPNow for Q3 is still positive, inflation is coming down... this is goldilocks for stocks
>>BEAR<<
>>BEAR<<
▶︎ Equities heading lower, credit spreads widening, etc. seems to be the only logical trade
▶︎ Equities heading lower, credit spreads widening, etc. seems to be the only logical trade
▶︎ Sector performance is a bit chaotic, but bearish seems to be more bearish than bullish
▶︎ Sector performance is a bit chaotic, but seems to be more bearish than bullish
▶︎ Breadth no longer a bullish supporting factor
▶︎ Breadth no longer a bullish supporting factor
▶︎ Four out of eight G8 2s10s yield curves have inverted so far
▶︎ Four out of eight G8 2s10s yield curves have inverted so far
▶︎ Commodities losing ground again
▶︎ Flows out of equities and into USD
>>SUMMARY<<
>>SUMMARY<<
Don't see a clear way forward: low volatility, bullish positioning, bullish gamma are points for the bulls, macro is a major point for the bears. Equities aren't going to drop like a stone, most reasonable thing to expect would be a wide range of chop.
Unchanged from last week: don't see a clear way forward: low volatility, bullish positioning, bullish gamma are points for the bulls, macro is a major point for the bears. Equities aren't going to drop like a stone, most reasonable thing to expect would be a wide range of chop.


***** USD *****
***** USD *****
>>BULL<<
>>BULL<<
▶︎ A barrage of Fed speakers before blackout, all of them hawkish
▶︎ PMI-wise it looks a bit like Dollar Smile with the US outperforming
▶︎ PMI-wise it looks a bit like Dollar Smile with the US outperforming
▶︎ Economy is slowing but it doesn't look too dramatic for now: goldilocks PMIs, strong NFPs
▶︎ Economy is slowing but it doesn't look too dramatic for now: goldilocks PMIs, strong NFPs
▶︎ Real yields rising, breakevens falling -> most bullish scenario for USD
▶︎ Real yields rising, breakevens falling -> most bullish scenario for USD
▶︎ Fed speakers are keeping to the hawkish tune for the most part
▶︎ Bearish sentiment
▶︎ PBOC rate cuts support the dollar
>>BEAR<<
>>BEAR<<
▶︎ Hardly any reaction from STIRs to goldilocks data, expectations seem pretty much aligned with what Fed speakers are saying
▶︎ Pushback from BOJ and PBOC could take some steam out of the dollar
▶︎ Huge drop in Inflation Surprise indicators, 5y5y not rising further, forward-looking inflation indicators lower as well
▶︎ Huge drop in Inflation Surprise indicators, 5y5y not rising further, forward-looking inflation indicators lower as well
▶︎ Positioning in the PAIN index and COT is becoming stretched
▶︎ Positioning in the PAIN index and COT is becoming stretched
>>SUMMARY<<
>>SUMMARY<<
Has the Dollar Smile, rising real yields in combination with lower breakevens, and the overall macro backdrop going for it.
It's hard to imagine the USD bull run coming to a hard stop: Dollar Smile, hawkish Fed rhetoric, rising STIR and real yields in combination with lower breakevens, and the overall macro backdrop.


***** EUR *****
***** EUR *****
>>BULL<<
>>BULL<<
▶︎ The barrage of hawkish ECB speakers this week was extraordinary and hit home
▶︎ EUR is up one week after Russia capped gas flows for good... it's obvious that a lot of negativity is priced in by now
▶︎ Econ data still surprising to the upside with CESI rising
▶︎ Econ data still surprising to the upside with CESI rising
▶︎ Dealer positioning at a 2-year high
▶︎ Dealer positioning at a 2-year high
▶︎ Risk reversals are bullish
▶︎ Risk reversals are bullish
>>BEAR<<
>>BEAR<<
▶︎ Friday's North Stream 1 headlines out of Russia show how vulnerable EUR(ope) is, and right now it doesn't look like the worst case is already priced in
▶︎ The ECB decision appeared hawkish but they opted to increase liquidity by suspending the two-tier system for reserves, so dovish under the surface
▶︎ European stock markets are the worst performers
▶︎ European stock markets are the worst performers
▶︎ Increasing fragmentation with peripheral spreads widening
▶︎ Increasing fragmentation with peripheral spreads widening
▶︎ Italian elections on September 25th coming closer, significant risk of a right-wing and Euro-sceptic future PM
▶︎ Italian elections on September 25th coming closer, significant risk of a right-wing and Euro-sceptic future PM
▶︎ Negative German trade balance in decades... this does not bode well for the EUR and for the global economy; it's been a few weeks but it remains important
▶︎ Negative German trade balance in decades... this does not bode well for the EUR and for the global economy; it's been a few weeks but it remains important
>>SUMMARY<<
>>SUMMARY<<
Market seems determined to buy into the ECB meeting. Headline risk after Friday makes every trade that's not short-term a tough spot to be in for next week.
It's still a short but the fact that Russia cutting gas flows to Europe entirely just one week ago is being completely looked through by now makes me believe that the bearish energy story for the EUR has come to an end. Lots of other problems remain, though.


***** GBP *****
***** GBP *****
>>BULL<<
>>BULL<<
▶︎ New PM could be bullish for the currency: more fiscal spending, higher yields, tighter monetary policy; investments into energy (fracking) will be perceived as bullish, some backpedaling on Brexit escalations, etc.
▶︎ CESI is rising, economy is performing better than expected
▶︎ CESI is rising, economy is performing better than expected
▶︎ Risk reversals are pricing it higher
▶︎ Risk reversals are pricing it higher
▶︎ Yields are strong... market not following, though, for obvious reasons
▶︎ Yields are strong... market not following, though, for obvious reasons
>>BEAR<<
>>BEAR<<
▶︎ The Inflation Surprise Index is staggering: in ordinary circumstances it would be bullish, but it just contributes to the mess the UK is in
▶︎ The Inflation Surprise Index is staggering: in ordinary circumstances it would be bullish, but it just contributes to the mess the UK is in
▶︎ Inherent weakness
▶︎ PMIs are weak across all markets, but GBP seems to be the worst
▶︎ PMIs are weak across all markets, but GBP seems to be the worst
▶︎ Cost-of-living squeeze in full effect with increase of Ofgem price caps this week
▶︎ Cost-of-living squeeze in full effect... could be mitigated by fiscal policy, though
▶︎ Bearish seasonality
▶︎ Bearish seasonality
▶︎ Huge geopolitical and energy risks to inflation and growth, risks re: Northern Ireland Protocol
▶︎ Huge geopolitical and energy risks to inflation and growth, risks re: Northern Ireland Protocol
>>SUMMARY<<
>>SUMMARY<<
What North Stream 1 is for EUR, Liz Truss is for GBP. Can't make a good guess as to what happens next week. Overall bearish bias, though.
Medium and long-term bearish bias remain, but there could be some short-term upside for a few weeks given the change in government, also some positive econ data next week.


***** AUD *****
***** AUD *****
>>BULL<<
>>BULL<<
▶︎ Risk reversals are diverging to the upside
▶︎ Risk reversals are diverging to the upside
▶︎ Relative PMI outperformer
▶︎ Relative PMI outperformer
▶︎ Flows into AUD
▶︎ Sentiment is bearish especially vs. NZD
>>BEAR<<
>>BEAR<<
▶︎ Inflation is surprising to the downside
▶︎ The rate hike this week was dovish: softer commitment to fight inflation, monetary policy already seems to be normalized
▶︎ Dovish speech by Lowe
▶︎ Econ data and inflation are surprising to the downside
▶︎ 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
>>SUMMARY<<
>>SUMMARY<<
Bullish vs. weaker currencies, the options market is saying AUD should trade higher, and I'm listening. RBA on Tuesday.
Still playing it from the long side. The more-dovish-than-hawkish tone from the RBA and Lowe was surprising.


***** NZD *****
***** NZD *****
>>BULL<<
>>BULL<<
▶︎ Risk reversals are diverging to the upside
▶︎ Risk reversals are diverging to the upside
>>BEAR<<
>>BEAR<<
▶︎ Bullish sentiment on NZD vs. bearish sentiment on AUD
▶︎ Bullish sentiment on NZD vs. bearish sentiment on AUD
▶︎ Very weak data and weak CESI
▶︎ Very weak data and weak CESI
▶︎ Divergence between increasing Aussie trade balance and stagnant/falling Kiwi TB
▶︎ Divergence between increasing Aussie trade balance and stagnant/falling Kiwi TB
>>SUMMARY<<
>>SUMMARY<<
I still don't see why it should outperform AUD, so I remain bearish (in relation to AUD).
I still don't see why it should outperform AUD, so I remain bearish (in relation to AUD).


***** CAD *****
***** CAD *****
>>BULL<<
>>BULL<<
▶︎ Proximity to the strong US dollar
▶︎ Proximity to the strong US dollar
▶︎ Housing market remains strong, getting attention from the BOC
▶︎ Housing market remains strong
▶︎ Sentiment is very bearish
▶︎ Sentiment is very bearish
>>BEAR<<
>>BEAR<<
▶︎ The BOC didn't provide any hawkish impulse this week
▶︎ CSII lower
▶︎ CSII lower
▶︎ Fundamentals still relatively strong on an absolute level, but it's weakening with CESI moving down for months now and PMIs deteriorating
▶︎ Fundamentals still relatively strong on an absolute level, but it's weakening with CESI moving down for months now and PMIs deteriorating
▶︎ Yields have softened, inverted 2s10s
▶︎ Yields have softened, inverted 2s10s
>>SUMMARY<<
>>SUMMARY<<
Unchanged: despite the volatility in energy, it has been a quiet outperformer for months now.
Unchanged: despite the volatility in energy, it has been a quiet outperformer for months now.


***** CHF *****
***** CHF *****
>>BULL<<
>>BULL<<
▶︎ A bit of a hawkish impulse from Jordan and Maechler this week
▶︎ Between-meeting action on rates by the SNB is a wildcard
▶︎ Between-meeting action on rates by the SNB is a wildcard
▶︎ Very bearish sentiment, especially in EURCHF
▶︎ Very bearish sentiment, especially in EURCHF
>>BEAR<<
>>BEAR<<
▶︎ Vulnerable to hawkish ECB
▶︎ Has lost quite a lot of its strength
▶︎ Inflation not surprising to the upside anymore
▶︎ Inflation not surprising to the upside anymore
▶︎ Yields are underperforming
▶︎ Yields are underperforming
>>SUMMARY<<
>>SUMMARY<<
Changing it to neutral. The EUR is dictating the music for now until there's a new impulse from the SNB.
We'll see how the SNB meeting on 22-Sep plays out. Could see some more buying action into that after this week's comments.


***** JPY *****
***** JPY *****
>>BULL<<
>>BULL<<
▶︎ It's not much, but it's something: FinMin talked remotely about possible FX intervention on Friday
▶︎ Rhethoric from BPJ and FinMin is getting a bit more aggressive
▶︎ Some expectations that YCC might be tweaked at next meeting
>>BEAR<<
>>BEAR<<
▶︎ Risk reversals have reversed against the JPY sharply, limiting the upside
▶︎ Yield differentials widening vs. everyone else and US yields seem unstoppable for now
▶︎ Yield differentials widening vs. everyone else and US yields seem unstoppable for now
>>SUMMARY<<
>>SUMMARY<<
Changing to bearish: JPY Is just to weak to maintain a slightly bullish bias."
The only thing that's bullish now is the ominous threat threat of an intervention. Even if it comes it doesn't have to turn the tide, but it could create a lot of volatility."