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fx:macro Summary Changes 2023_04_08

Created 2 years agoDiff never expires

53 removals

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55 additions

114 lines

"25.03.23

"08.04.23

***** MACRO *****

>>BULL<<

▶︎ Heavy flows into SPY

▶︎ No sign of exuberance so far

▶︎ FX volatility is still pretty low

▶︎ Commercial positioning in VIX is bearish and short-term positioning changes in SPX are bullish

▶︎ Equity volatility is looking calm with VIX and VVIX both low and skew flatter

▶︎ Asian PMIs have improved considerably (Hong Kong, Taiwan), other Emerging Markets too (Brazil, Mexico)

▶︎ MOVE is still high

>>BEAR<<

▶︎ There's a full-blown banking and liquidity crisis going on...

▶︎JPY and CHF are outperforming, risk-on currencies are underperforming

▶︎ Risk-off currencies are outperforming

▶︎ Asian and EM PMIs are weaker again

▶︎ Sector dispersion is huge with Tech being the only sector that actually performs

▶︎ Market breadth isn't looking healthy

▶︎ Re-steepening of the yield curve after a curve inversion... this has stalled, though

▶︎ Treasury futures COT positioning and positioning changes are bullish

▶︎ Industrial metals aren't performing

▶︎ OPEC cut is a sign of weak oil demand, CL term structure and COT positioning changes are bearish too

▶︎ Credit spreads are still relatively wide

▶︎ Huge flows into money market funds

▶︎ Tech is carrying the rally sector-wise, the implosion of Energy happens well after the top of the business cycle and it's not bullish

▶︎ Re-steepening of the yield curve after a curve inversion

▶︎ Credit spreads have widened, and IG spreads have moved for the first time in a while

▶︎ Inflation breakevens, RINF, 5y5y forward inflation are all lower

▶︎ Volatiliy metrics have improved with VVIX dropping below 100 but MOVE still won't come down

>>SUMMARY<<

Credit Suisse has been eaten, now the vultures are circling above Deutsche. As I wrote last week, I have no edge in predicting how it will go, and we're still trading mostly off sentiment. What I see is that stocks are still holding up fairly well despite the chaos... I mean, VIX is not even at 25. Tech is the main driver but other sectors are up as well. What's clearly not good is the implosion of Energy. I don't like the market despite the positives that are there.

The banking crisis seems to be behind us and stocks are still holding up. It's mostly Tech and a few stocks, though, and breadth is already seeing some signs of weakness under the hood. Volatility is still low but aside from that, thing's aren't looking good: currency performance, metals, crude oil...

***** USD *****

>>BULL<<

▶︎ GDPNow remains >3% for Q1

▶︎ CESI continues to go higher

▶︎ COT positioning is still bullish

▶︎ Improving PMI on the heatmap

>>BEAR<<

▶︎ GDPNow for Q1 has halved in the last two weeks (but it's Q2 now...)

▶︎ CESI has dropped

▶︎ USD didn't like weaker growth and jobs data this week

▶︎ Dovish shift in the language of the FOMC statement despite the the FFR path being projected a bit higher and inflation projections higher too

▶︎ 2y and 10y yields are moving lower in tandem, bull steepening

▶︎ 2y and 10y yields are moving lower in tandem

▶︎ We're in the trough of the dollar smile with global PMIs improving and the US not outperforming on the one side and the current banking crisis not (yet?) serious enough to trigger panic flows

▶︎ The repricing of the future Fed hiking path lower has been pretty dramatic

▶︎ Lower real yields and lower breakevens aren't bullish USD

▶︎ Declining consumer inflation expectations

>>SUMMARY<<

The Fed didn't help this week, and the combination of lower real yields and lower inflation breakevens plus a bull steepening in 2s10s all make me change the bias to short. The path of least resistance for the USD should be lower, and I'll be looking for short trades unless we get a serious liquidity crunch and the world scrambles for dollars.

The dollar is at key support levels vs. several other currencies but I don't see why we should get a sustained move higher unless it's a panic of some sort. This week, more weak data is expected and I doubt that the FOMC Minutes will provide some hawkish impetus.

***** EUR *****

>>BULL<<

▶︎ ECB hawks clearly outnumber the doves at the microphones

▶︎ Inherent strength

▶︎ Core CPI is sticky

▶︎ CESI has flattened out

>>BEAR<<

▶︎ The ECB statement last week has been taken as dovish by the market

▶︎ CESI is going lower

▶︎ German PMI on the heatmap is weaker, Eurozone isn't improving

▶︎ COT positioning is at a bearish extreme

▶︎ European stock markets aren't outperforming anymore

>>SUMMARY<<

The short Dollar bias should make the Euro a long but I don't like the extreme in positioning. Also, last week, the market saw Deutsche as the next possible victim of the banking crisis. If this escalates, it very likely won't be good for the Euro. And we expect German and Eurozone CPIs to come in softer next week (no Core, though).

I still don't like it much because of the positioning issue but the ECB is still comparatively hawkish, the European banks don't have to deal with massive deposit flight, China reopening is still happening and EUR has been trading well, so there are definitely things going for it, and I'll be taking short-term trades from the long side.

***** GBP *****

>>BULL<<

▶︎ CESI is higher

▶︎ Inherent strength

▶︎ Hot CPI print this week

>>BEAR<<

▶︎ The MPC statement could have been worse: Mann didn't vote for 50 bps but at least they left guidance unchanged

▶︎ Nothing hawkish from the BoE, Tenreyro talked about rate cuts again

▶︎ PMIs have worsened

▶︎ The FTSE's outperformance seems to have come to an end

▶︎ COT positioning is now bearish 6B as well

▶︎ PMI is worse

>>SUMMARY<<

The market liked the hot CPI print this week before the BoE rate statement, and it was kind of undecided on the Bank of England itself. The PMIs both disappointed, yet GBP still traded higher vs. EUR with better PMIs. The hopes for a softer-than-projected landing are still keeping it afloat, it's definitely not driven by what the BoE does.

There's not much positive about it from a fundamental perspective except that it has been surprising to the upside again and again.

***** AUD *****

>>BULL<<

▶︎ Risk reversals are bullish

>>BEAR<<

▶︎ Dovish RBA Minutes after their dovish hike

▶︎ RBA pivot with dovish guidance this week, Lowe also dovish

▶︎ Further hikes have been priced out completely now, pricing for a rate cut reached >30% at one point

▶︎ CESI is near lows and not picking up

▶︎ Probably the worst PMIs of the week

▶︎ Bearish seasonality and sentiment

▶︎ CPI and GDP both surprised to the downside

▶︎ CESI is near lows

▶︎ Bearish seasonality

>>SUMMARY<<

Not much to like about it at the moment: weak fundamentals, dovish central bank, overall market sentiment.

Unchanged from two weeks ago: Not much to like about it at the moment: weak fundamentals, dovish central bank, overall market sentiment.

***** NZD *****

>>BULL<<

▶︎ The RBNZ is still going with 50 bps and they actively discussed 75 bps, they now have the highest policy rate among the G8, and they say that policy has to tighten further

▶︎ Another 50 bps hike but guidance has softened

▶︎ 2s10s are bear flattening

▶︎ Risk reversals are bullish

>>BEAR<<

▶︎ Incoming economic data is getting weaker: last week it was a -0.6% GDP print vs. -0.2 expected

▶︎ CESI is trending lower, and the CESI spread AUD-NZD is reversing higher

▶︎ Bullish sentiment

▶︎ It's inherently weak

>>SUMMARY<<

The RBNZ will meet on April 4th, so far there's nothing that would make me change the short bias.

We've had a 50 bps hike from the RBNZ with a bit of a dovish undertone and the market didn't like it, so no change to the short bias.

***** CAD *****

>>BULL<<

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

▶︎ 25-delta risk reversal is bullish

>>BEAR<<

▶︎ The first central bank to end their hiking cycle and hold rates at current levels, no hawkish tilt in their statement last week

▶︎ Nothing hawkish from the BOC

▶︎ Crude oil has broken out of its range and correlation to CAD is >0.65 again

▶︎ Everything about crude oil looks bearish (COT positioning changes, term structure, OPEC cut)

▶︎ Sentiment is bullish (and extremely bearish in USDCAD)

▶︎ PMI weakening on the heatmap

>>SUMMARY<<

There's no good reason to go long CAD from a fundamental point of view at this point. Shorting it is tough because of the extreme in COT positioning.

Unchanged from two weeks ago: There's no good reason to go long CAD from a fundamental point of view at this point. Shorting it is tough because of the extreme in COT positioning.

***** CHF *****

>>BULL<<

▶︎ The most hawkish one of the recent central bank statements this week, they upgraded their inflation projection and they hiked by 50 bps despite the debacle with Credit Suisse

▶︎ The SNB is still sounding hawkish

▶︎ Yields are outperforming

▶︎ CESI is now bullish

▶︎ It's the currency with by far the worst sentiment; USDCHF and EURCHF two FX pairs with the most bulls

▶︎ It's the currency with by far the worst sentiment; USDCHF and EURCHF are two FX pairs with the most bulls

>>BEAR<<

▶︎ The Credit Suisse drama has clearly had a negative impact

▶︎ CESI has dropped sharply

▶︎ PMI has weakened

▶︎ CPI missed to the downside this week

>>SUMMARY<<

Safe haven and the hawkish SNB are the two major factors; the SNB said that they've sold foreign currencies, and I see no reason why they should stop doing that if CHF gets weaker.

This hasn't changed either during the last two weeks: CPI might have come down but the SNB is still hawkish and they're probably still buying CHF. Plus, it has the benefit of being a risk-off currency.

***** JPY *****

>>BULL<<

▶︎ It's still the prime safe-haven currency

▶︎ The shunto wage negotiations have led to the highest wage increases in 30 years (just below 4%)

▶︎ Tokyo Core CPI still >3%

▶︎ PMI is improving

>>BEAR<<

▶︎ 10y yields have backed off the 0.50% ceiling

▶︎ Tokyo Core CPI expected to come in lower next week

▶︎ Still the most dovish central bank out there

▶︎ Bullish sentiment

>>SUMMARY<<

Unchanged from last week: Safe-haven flows come and go but the wage negotiation outcome has clearly been something the BOJ has wanted to see. Nobody is talking about policy normalization right now, though, but it should be supportive."

No reason to change the bias at this point. Headlines about possible policy normalization are popping up again but implied vol is still low. "

Saved diffs

Original text

Open file

"25.03.23
***** MACRO *****
     >>BULL<<
▶︎ Heavy flows into SPY
▶︎ FX volatility is still pretty low
▶︎ Commercial positioning in VIX is bearish and short-term positioning changes in SPX are bullish
▶︎ Asian PMIs have improved considerably (Hong Kong, Taiwan), other Emerging Markets too (Brazil, Mexico)
     >>BEAR<<
▶︎ There's a full-blown banking and liquidity crisis going on...
▶︎ Risk-off currencies are outperforming
▶︎ Huge flows into money market funds
▶︎ Tech is carrying the rally sector-wise, the implosion of Energy happens well after the top of the business cycle and it's not bullish
▶︎ Re-steepening of the yield curve after a curve inversion
▶︎ Credit spreads have widened, and IG spreads have moved for the first time in a while
▶︎ Inflation breakevens, RINF, 5y5y forward inflation are all lower
▶︎ Volatiliy metrics have improved with VVIX dropping below 100 but MOVE still won't come down
     >>SUMMARY<<
Credit Suisse has been eaten, now the vultures are circling above Deutsche. As I wrote last week, I have no edge in predicting how it will go, and we're still trading mostly off sentiment. What I see is that stocks are still holding up fairly well despite the chaos... I mean, VIX is not even at 25. Tech is the main driver but other sectors are up as well. What's clearly not good is the implosion of Energy. I don't like the market despite the positives that are there.

***** USD *****
     >>BULL<<
▶︎ GDPNow remains >3% for Q1
▶︎ CESI continues to go higher
▶︎ COT positioning is still bullish
▶︎ Improving PMI on the heatmap
     >>BEAR<<
▶︎ Dovish shift in the language of the FOMC statement despite the the FFR path being projected a bit higher and inflation projections higher too
▶︎ 2y and 10y yields are moving lower in tandem, bull steepening
▶︎ We're in the trough of the dollar smile with global PMIs improving and the US not outperforming on the one side and the current banking crisis not (yet?) serious enough to trigger panic flows
▶︎ The repricing of the future Fed hiking path lower has been pretty dramatic
▶︎ Lower real yields and lower breakevens aren't bullish USD
▶︎ Declining consumer inflation expectations
     >>SUMMARY<<
The Fed didn't help this week, and the combination of lower real yields and lower inflation breakevens plus a bull steepening in 2s10s all make me change the bias to short. The path of least resistance for the USD should be lower, and I'll be looking for short trades unless we get a serious liquidity crunch and the world scrambles for dollars.

***** EUR *****
     >>BULL<<
▶︎ ECB hawks clearly outnumber the doves at the microphones
▶︎ Core CPI is sticky
     >>BEAR<<
▶︎ The ECB statement last week has been taken as dovish by the market
▶︎ CESI is going lower
▶︎ German PMI on the heatmap is weaker, Eurozone isn't improving
▶︎ COT positioning is at a bearish extreme
▶︎ European stock markets aren't outperforming anymore
     >>SUMMARY<<
The short Dollar bias should make the Euro a long but I don't like the extreme in positioning. Also, last week, the market saw Deutsche as the next possible victim of the banking crisis. If this escalates, it very likely won't be good for the Euro. And we expect German and Eurozone CPIs to come in softer next week (no Core, though).

***** GBP *****
     >>BULL<<
▶︎ CESI is higher
▶︎ Hot CPI print this week
     >>BEAR<<
▶︎ The MPC statement could have been worse: Mann didn't vote for 50 bps but at least they left guidance unchanged
▶︎ PMIs have worsened
▶︎ The FTSE's outperformance seems to have come to an end
     >>SUMMARY<<
The market liked the hot CPI print this week before the BoE rate statement, and it was kind of undecided on the Bank of England itself. The PMIs both disappointed, yet GBP still traded higher vs. EUR with better PMIs. The hopes for a softer-than-projected landing are still keeping it afloat, it's definitely not driven by what the BoE does.

***** AUD *****
     >>BULL<<
▶︎ Risk reversals are bullish
     >>BEAR<<
▶︎ Dovish RBA Minutes after their dovish hike
▶︎ Further hikes have been priced out completely now, pricing for a rate cut reached >30% at one point
▶︎ Probably the worst PMIs of the week
▶︎ CPI and GDP both surprised to the downside
▶︎ CESI is near lows
▶︎ Bearish seasonality
     >>SUMMARY<<
Not much to like about it at the moment: weak fundamentals, dovish central bank, overall market sentiment.

***** NZD *****
     >>BULL<<
▶︎ The RBNZ is still going with 50 bps and they actively discussed 75 bps, they now have the highest policy rate among the G8, and they say that policy has to tighten further
▶︎ Risk reversals are bullish
     >>BEAR<<
▶︎ Incoming economic data is getting weaker: last week it was a -0.6% GDP print vs. -0.2 expected
▶︎ CESI is trending lower, and the CESI spread AUD-NZD is reversing higher
▶︎ Bullish sentiment
     >>SUMMARY<<
The RBNZ will meet on April 4th, so far there's nothing that would make me change the short bias.

***** CAD *****
     >>BULL<<
▶︎ COT positioning is bullish, Dealers are at multi-year long levels
▶︎ 25-delta risk reversal is bullish
     >>BEAR<<
▶︎ The first central bank to end their hiking cycle and hold rates at current levels, no hawkish tilt in their statement last week
▶︎ Crude oil has broken out of its range and correlation to CAD is >0.65 again
▶︎ Sentiment is bullish (and extremely bearish in USDCAD)
     >>SUMMARY<<
There's no good reason to go long CAD from a fundamental point of view at this point. Shorting it is tough because of the extreme in COT positioning.

***** CHF *****
     >>BULL<<
▶︎ The most hawkish one of the recent central bank statements this week, they upgraded their inflation projection and they hiked by 50 bps despite the debacle with Credit Suisse
▶︎ Yields are outperforming
▶︎ CESI is now bullish
▶︎ It's the currency with by far the worst sentiment; USDCHF and EURCHF are two FX pairs with the most bulls
     >>BEAR<<
▶︎ The Credit Suisse drama has clearly had a negative impact
▶︎ PMI has weakened
     >>SUMMARY<<
Safe haven and the hawkish SNB are the two major factors; the SNB said that they've sold foreign currencies, and I see no reason why they should stop doing that if CHF gets weaker.

***** JPY *****
     >>BULL<<
▶︎ It's still the prime safe-haven currency
▶︎ The shunto wage negotiations have led to the highest wage increases in 30 years (just below 4%)
     >>BEAR<<
▶︎ 10y yields have backed off the 0.50% ceiling
▶︎ Tokyo Core CPI expected to come in lower next week
▶︎ Still the most dovish central bank out there
     >>SUMMARY<<
Unchanged from last week: Safe-haven flows come and go but the wage negotiation outcome has clearly been something the BOJ has wanted to see. Nobody is talking about policy normalization right now, though, but it should be supportive."

Changed text

Open file

"08.04.23
***** MACRO *****
     >>BULL<<
▶︎ No sign of exuberance so far
▶︎ FX volatility is still pretty low
▶︎ Equity volatility is looking calm with VIX and VVIX both low and skew flatter
▶︎ MOVE is still high

>>BEAR<<
▶︎JPY and CHF are outperforming, risk-on currencies are underperforming
▶︎ Asian and EM PMIs are weaker again
▶︎ Sector dispersion is huge with Tech being the only sector that actually performs
▶︎ Market breadth isn't looking healthy
▶︎ Re-steepening of the yield curve after a curve inversion... this has stalled, though
▶︎ Treasury futures COT positioning and positioning changes are bullish
▶︎ Industrial metals aren't performing
▶︎ OPEC cut is a sign of weak oil demand, CL term structure and COT positioning changes are bearish too
▶︎ Credit spreads are still relatively wide
▶︎ Huge flows into money market funds
     >>SUMMARY<<
The banking crisis seems to be behind us and stocks are still holding up. It's mostly Tech and a few stocks, though, and breadth is already seeing some signs of weakness under the hood. Volatility is still low but aside from that, thing's aren't looking good: currency performance, metals, crude oil...

***** USD *****
     >>BULL<<
▶︎ COT positioning is still bullish
▶︎ Improving PMI on the heatmap

>>BEAR<<
▶︎ GDPNow for Q1 has halved in the last two weeks (but it's Q2 now...)
▶︎ CESI has dropped
▶︎ USD didn't like weaker growth and jobs data this week
▶︎ Dovish shift in the language of the FOMC statement despite the the FFR path being projected a bit higher and inflation projections higher too
▶︎ 2y and 10y yields are moving lower in tandem
▶︎ Lower real yields and lower breakevens aren't bullish USD
▶︎ Declining consumer inflation expectations
     >>SUMMARY<<
The dollar is at key support levels vs. several other currencies but I don't see why we should get a sustained move higher unless it's a panic of some sort. This week, more weak data is expected and I doubt that the FOMC Minutes will provide some hawkish impetus.

***** EUR *****
     >>BULL<<
▶︎ Inherent strength
▶︎ Core CPI is sticky
▶︎ CESI has flattened out
     >>BEAR<<
▶︎ German PMI on the heatmap is weaker, Eurozone isn't improving
▶︎ COT positioning is at a bearish extreme
     >>SUMMARY<<
I still don't like it much because of the positioning issue but the ECB is still comparatively hawkish, the European banks don't have to deal with massive deposit flight, China reopening is still happening and EUR has been trading well, so there are definitely things going for it, and I'll be taking short-term trades from the long side.

***** GBP *****
     >>BULL<<
▶︎ Inherent strength
     >>BEAR<<
▶︎ Nothing hawkish from the BoE, Tenreyro talked about rate cuts again
▶︎ PMIs have worsened
▶︎ COT positioning is now bearish 6B as well
▶︎ PMI is worse
     >>SUMMARY<<
There's not much positive about it from a fundamental perspective except that it has been surprising to the upside again and again.

***** AUD *****
     >>BULL<<
▶︎ Risk reversals are bullish
     >>BEAR<<
▶︎ RBA pivot with dovish guidance this week, Lowe also dovish
▶︎ CESI is near lows and not picking up
▶︎ Bearish seasonality and sentiment
     >>SUMMARY<<
Unchanged from two weeks ago: Not much to like about it at the moment: weak fundamentals, dovish central bank, overall market sentiment.

***** NZD *****
     >>BULL<<
▶︎ Another 50 bps hike but guidance has softened
▶︎ 2s10s are bear flattening
▶︎ Risk reversals are bullish
     >>BEAR<<
▶︎ Bullish sentiment
▶︎ It's inherently weak
     >>SUMMARY<<
We've had a 50 bps hike from the RBNZ with a bit of a dovish undertone and the market didn't like it, so no change to the short bias.

***** CAD *****
     >>BULL<<
▶︎ COT positioning is bullish, Dealers are at multi-year long levels
▶︎ 25-delta risk reversal is bullish
     >>BEAR<<
▶︎ Nothing hawkish from the BOC
▶︎ Everything about crude oil looks bearish (COT positioning changes, term structure, OPEC cut)
▶︎ PMI weakening on the heatmap
     >>SUMMARY<<
Unchanged from two weeks ago: There's no good reason to go long CAD from a fundamental point of view at this point. Shorting it is tough because of the extreme in COT positioning.

***** CHF *****
     >>BULL<<
▶︎ The SNB is still sounding hawkish
▶︎ Yields are outperforming
▶︎ It's the currency with by far the worst sentiment; USDCHF and EURCHF two FX pairs with the most bulls
     >>BEAR<<
▶︎ CESI has dropped sharply
▶︎ CPI missed to the downside this week
     >>SUMMARY<<
This hasn't changed either during the last two weeks: CPI might have come down but the SNB is still hawkish and they're probably still buying CHF. Plus, it has the benefit of being a risk-off currency.

***** JPY *****
     >>BULL<<
▶︎ It's still the prime safe-haven currency
▶︎ The shunto wage negotiations have led to the highest wage increases in 30 years (just below 4%)
▶︎ Tokyo Core CPI still >3%
▶︎ PMI is improving
     >>BEAR<<
▶︎ Still the most dovish central bank out there
▶︎ Bullish sentiment
     >>SUMMARY<<
No reason to change the bias at this point. Headlines about possible policy normalization are popping up again but implied vol is still low. "