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08Jun Macro Video: Fed prepares market for Tapering but risks being too far behind the curve to stop inflation running hot.

08Jun Macro Video: Fed prepares market for Tapering but risks being too far behind the curve to stop inflation running hot.

*The Fed is preparing the market for the slow road to tapering in face of increasing criticism for over stimulating.
*Yellen’s comments over higher rates / inflation being good for the US economy highlight the “transactional” nature of US policy makers fitting the roles they have been assigned.
*The lack of volatility highlights the complacency in markets over Fed control; the risk remains the Fed is too far behind the curve and risks being forced to hike too quickly.
*Weakness in Bitcoin could support Gold which retains its position as THE “risk off” inflation hedge.

07June Chart Video: NFP downside miss highlights pricing power of labour growing – the OPPOSITE of a disinflationary signal.

07June Chart Video: NFP downside miss highlights pricing power of labour growing – the OPPOSITE of a disinflationary signal.

*The lower than expected rise in NFP highlights the pricing power of labour that will ensure inflation rises are not “transitory”.
*The rally in bonds is a reflection of the Fed’s success in yield curve control through a policy of colossal over stimulation.
*USDCNH continues to stabilise – we believe this is desired by PBOC in the near term.
*US CPI and ECB meeting Thursday key events this week.

04Jun Macro Video: Position reduction in Data and CB meetings as volatility set to remain; we remain focused on USDCNH.

04Jun Macro Video: Position reduction in Data and CB meetings as volatility set to remain; we remain focused on USDCNH.

*Position reduction ahead of key data and central bank meetings sets up a “cleaner market” to engage with.
*With Global Central banks looking to taper, the pressure on the Fed is growing too from past FOMC members as well as hawkish comments from Kaplan.
*USDCNH has found near term support on China intervention; USDCAD calls added to the RadarScreen to provide near term gamma.
*Weakness in Tech stocks (and Tesla!) highlights the difficulty for US broad indices to rally give tech’s large overall weighting.

03June Chart Video: USDCNH weakness has been a key driver of equity and commodity inflation, but is this sustainable?

03June Chart Video: USDCNH weakness has been a key driver of equity and commodity inflation, but is this sustainable?

*With tight ranges in major markets and meme stocks in play, investors are waiting for data to spark volatility
*The weakness in USDCNH over the past year has correlated strongly with inflation in both asset and commodity prices
*China historically has been concerned with inflation – we increasingly believe they will resist an ever weaker USDCNH
*This has significant implications for markets fuelled on weaker financial conditions driven by USD weakness.

02June Chart Video: Lack of growth stock momentum highlights waning upside impetus for US indices

02June Chart Video: Lack of growth stock momentum highlights waning upside impetus for US indices

*The lack of upside momentum in growth stocks highlights the lack of leadership to drive broad US indices to new highs
*Whilst the market waits for the key US employment data, past FOMC members continue to question the Fed’s cautious approach.
*USDCAD correlates strongly with USDCNH but technical pattern echoes late 2020 when downside momentum was lost.
*RadarScreen books profit in SP500 and GBPUSD call spreads – these trades allows more “dry powder” to react to coming volatility.

01Jun Macro Video: Impending data, events and central bank meetings highlight June as a key month in the next stage of “Covid” recovery.

01Jun Macro Video: Impending data, events and central bank meetings highlight June as a key month in the next stage of “Covid” recovery.

*June 2021 brings raft of data, events and central bank meetings as the next phase of the Covid “recovery” focused on place of accommodation withdrawal.
*Fed tone change and the explosion in global house prices acts directly to widen inequality gaps whilst Fed’s control of the USD cash market becomes increasingly tenuous.
*We see June bringing more realised volatility no matter what the data shows – the narrative is changing to the negative effects of over-stimulation.
*China intervention continues as they act to stem pace of CNY appreciation.

28May Macro Video: Central Banker Taper-talk signals June volatility to come as May “pause” ends

28May Macro Video: Central Banker Taper-talk signals June volatility to come as May “pause” ends

*May pause comes to an end as Central bankers – including the Fed – switch to tapering talk.
*Expectations for US data in June may be too low as risk skewed firmly to upside – this bring risks of higher volatility
*Fixed income price action suggests yields are basing – USDJPY upside added again to the RadarScreen
*USDCNH assumes critical importance as China rotates to offsetting commodity inflation to growth support.

27May Chart Video: Explosion in US Reverse Repo highlights QE ineffectiveness and creates need to Fed to pivot quickly

27May Chart Video: Explosion in US Reverse Repo highlights QE ineffectiveness and creates need to Fed to pivot quickly

*Geo-political cooperation continues to weaken with cancelled trade deals with the EU whilst Biden strikes a far more hawkish tone with China over both trade and origin of Covid19
*Meanwhile the rapid expansion of use in the Fed reverse repo facility signals they are simply printing far too many USD that are swamping the cash system with a lack of available collateral.
*This is creating a significant near term issues and we argue is driving the change in tone from Fed speakers in the past days.
*This sets up the data flow in early June and Central Bank meetings as sources of a significant vol pickup – we are questioning the USD short trades on the RadarScreen

26May Chart Video: Asset correlations increase in the “everything” rally but this portends volatility to come

26May Chart Video: Asset correlations increase in the “everything” rally but this portends volatility to come

*The May pause of Stocks / Bonds / Commodities higher; Dollar lower is creating ever looser financial conditions and reflexively fuelling the “everything” rally
*As correlations increase, we are increasingly emboldened with our view of more volatility in June as Fed speakers indicate conversations could be happening over tapering
*The sheer scale of US asset purchases continues to create far too much USD liquidity – the marginal effects of QE are diminishing.
*We hold our short USD, long SP500 plays on the RadarScreen – but recognise these will be reassessed as we run into June.

25May Macro Video: Lower dollar keeps volatility low and risk grinds higher…but this appears …”transitory”!

25May Macro Video: Lower dollar keeps volatility low and risk grinds higher…but this appears …”transitory”!

*May “pause” in volatility in force as USD grinds weaker loosening financial conditions and equities break out topside
*We view this is as transitory (no pun intended!) as June promises to bring significant headline and data volatility.
*China is increasingly intervening in housing / crypto / speculation /commodities as 100year anniversary of CCP approaches.
*We see the China stance on many issues as increasingly hawkish in H2 2021, another reason for our sense of a higher vol world approaching as Fed policy is challenged too.

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