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fx:macro Summary changes 2023_05_06

Created 2 years agoDiff never expires

38 removals

109 lines

51 additions

121 lines

"29.04.23

"06.05.23

***** MACRO *****

>>BULL<<

▶︎ FX volatility is still pretty low and falling

▶︎ The VIX term structure is steep and well above cash VIX, the VIX-VVIX divergence has closed

▶︎ The VIX term structure is steep and well above cash VIX

▶︎ COT data for the ES is very bullish

▶︎ No sign of credit spreads widening again

>>BEAR<<

▶︎ Risk-on currencies aren't performing

▶︎ Risk-on currencies aren't performing sustainably

▶︎ Most Asian and EM PMIs are weaker again

▶︎ Most Asian and EM PMIs are weaker

▶︎ Market breadth isn't looking healthy

▶︎ Treasury futures COT positioning is mostly bullish

▶︎ VIX/VVIX correlation signal has triggered and is still in effect

▶︎ Industrial metals aren't performing

▶︎ CL has closed the OPEC gap on the chart: the cut is bearish

>>SUMMARY<<

Zooming out a bit on most macro charts I look at, nothing seems to have changed for months: stocks, commodities, bonds, DXY etc. all going nowhere. The banking crisis (or better: mini-crisis?) saw a bit of a resurrection this week but the market doesn't seem to care much. Tech earnings surprised but the OPEC cut tells the story about global growth/demand, and metals confirm it. Equity sectors look better than I thought last week, and stocks are trading way stronger than they ""should"". Honestly, I'm confused but I suppose I'm not the only one.

Things are as unclear as they were last week (and the weeks before). The debt ceiling is coming up and regional banks are still not out of the woods but stocks are higher rather than lower with pretty bad breadth. The global economy still isn't doing well, all four Chinese PMIs this week disappointed and commodities aren't seeing any upside. To me, it's still a market where I just don't want to take risk.

***** USD *****

>>BULL<<

▶︎ The labour market just isn't cracking

▶︎ COT positioning is still bullish

▶︎ Positive seasonality

▶︎ Q1 GDP was bullish under the hood, GDPNow for Q2 starts at 1.7%

▶︎ GDPNow for Q2 has started strong

>>BEAR<<

▶︎ Dovish FOMC statement, the door is open to a pause

▶︎ Powell tried to sound hawkish but the hawks aren't going for it with Bullard very tame on Friday

▶︎ CESI has dropped, CSII is lower too

>>SUMMARY<<

It's a bit weird to see that USD sentiment is neutral while every other G8 currency is either bullish or bearish. I still don't see a good reason why USD should trade higher when we're in the trough of the dollar smile. The Fed is expected to hike by 25 bps and then hold, maybe they put in some hawkish undertones but I doubt USD strength will last long in that scenario.

The forward pricing of short-term rates is at odds with the higher-for-longer message the Fed has sent, and positioning is clearly in favour of the dollar. We'll get CPI and PPI data this week with a slight inflationary bias (Core CPI lower, though). There's a risk we might see USD strength here. I'm still looking towards a short because of the trough in the dollar smile but my conviction has dropped markedly. I'm changing the bias to neutral.

***** EUR *****

>>BULL<<

▶︎ Hawks in the GC are still pushing for higher rates

▶︎ All in all, the ECB statement was a mixed bag but Lagarde tried to sound hawkish and no one argued for unchanged rates

▶︎ PMI commentary was very positive

▶︎ Inherent strength

▶︎ Sentiment is bearish

>>BEAR<<

▶︎ CESI is heading lower

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

▶︎ German and Eurozone PMIs on the heatmap are weaker

▶︎ COT positioning is at a bearish extreme and Large Trader net positions aren't confirming the strength

▶︎ COT positioning is at a bearish extreme and Large Trader net positions aren't confirming the strength in EUR

▶︎ Bearish seasonality

>>SUMMARY<<

The ECB has sounded more hawkish than the Fed for a while now, and we'll see if we get some forward guidance this week or at least some sources after the rate statement for a bit of more insight. For now I'll stick with what worked well over the last few weeks: going with the EUR's strength, taking short-term longs and being aware that the air is getting thin up here for EUR based on positioning data.

The reaction to the ECB and Lagarde looks like the market was shooting for a bit too much. The post-ECB sources showed that hawks in the GC are losing steam and even uber-hawk Müller argued for patience after the dismal German Factory Orders print on Friday. The falling CESI is a bad sign for EURUSD and positioning is clearly bearish, so I expect the Euro to be weaker going forward. Changing the bias accordingly.

***** GBP *****

>>BULL<<

▶︎ Inherent strength

▶︎ CESI is still still going strong

▶︎ CSII has been going up

▶︎ Yields are outperforming, 2s10s are bear flattening

▶︎ Bearish sentiment

>>BEAR<<

▶︎ PMI has worsened

▶︎ COT positioning is now bearish 6B as well

▶︎ Bearish seasonality

>>SUMMARY<<

It's still showing strength, it's the only currency with a good-looking CESI and 2s10s are bear-flattening. Last week's hot CPI print means a mess for the economy but the BoE will likely have to do more, and GBP likes that so far.

We'll probably get another 25 bps from the BoE on Thursday. The UK is the only G8 economy with CPI still in double-digits, so I can imagine them coming in on the hawkish side but the MPC vote split has been a mess and there hasn't been much in terms of hawkish commentary in the last few weeks. Based on how GBP has traded recently, the bar for a happy market reaction is probably pretty high.

***** AUD *****

>>BULL<<

▶︎ Commentary in last week's PMI sounded extremely upbeat

▶︎ Surprise hike by the RBA but dovish-sounding statement

▶︎ 25-delta risk reversal is looking bullish

▶︎ CPI and GDP projections lowered in the SOMP

▶︎ Bear flattening in 2s10s

▶︎ AUD is up this week despite the bad PMI prints out of China

▶︎ CESI has picked up markedly

▶︎ CSII is higher

>>BEAR<<

▶︎ It's just not trading well despite the positive data from China

▶︎ It hasn't traded well when data out of China was positive, so this still remains a bearish factor

▶︎ Weaker PMI on the Bloomberg heatmap

▶︎ Bearish seasonality

▶︎ Bullish sentiment

▶︎ Weaker CPI this week

>>SUMMARY<<

Market pricing for the RBA this week is 100% for no change and even if they came in hawkish in the statement it probably won't turn the tide for AUD. No change to the bias.

The RBA surprised, China data was bad and AUD is higher on the week. I'm sceptical that this will last, though, but I'm open to be proven wrong. If AUD managed to turn around and go higher it would be a positive sign for my overall macro bias. I'm leaving it at bearish for now.

***** NZD *****

>>BULL<<

▶︎ 25-delta risk reversal is looking bullish

▶︎ Hot labour market print this week

>>BEAR<<

▶︎ Bullish sentiment

▶︎ It's inherently weak

▶︎ CPI way below expectations last week

▶︎ CESI is dropping, the CESI spread AUD-NZD is rising

▶︎ CESI has dropped, the CESI spread AUD-NZD is rising

▶︎ CSII has dropped too

>>SUMMARY<<

I don't see anything that would make me change the bias now. Still liking it less than AUD because of the CESI spread but that bias is very vulnerable to the RBA this week.

The CESI spread AUD-NZD and the divergence in inflation surprises (CSII) are clearly in favour of AUD and not NZD.

***** CAD *****

>>BULL<<

▶︎ Another hot labour market report on Friday

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

▶︎ 25-delta risk reversal is looking bullish

>>BEAR<<

▶︎ The BOC and Macklem sound dovish compared to almost everyone else

▶︎ Crude oil has shown weakness

▶︎ CESI is lower

▶︎ PMI weakening on the heatmap

▶︎ Bullish sentiment

>>SUMMARY<<

The summary has been unchanged for a few weeks plus now CL could be going lower: 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.

The economy isn't doing too badly and the labour market is hot. On the negative side, the BOC isn't helping and commodity performance including crude oil is bearish (correlation CAD vs. CL is about 0.40-0.80 at the moment). I'm changing the bias to neutral because I changed the USD bias too.

***** CHF *****

>>BULL<<

▶︎ The SNB is still sounding hawkish

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

>>BEAR<<

▶︎ COT positioning is now bearish

▶︎ COT positioning is bearish and doesn't confirm CHF strength

▶︎ CESI is dropping

▶︎ Weaker PMI on the heatmap

▶︎ Another CPI miss this week and a dropping Citi Inflation Surprise Index

>>SUMMARY<<

It looks pretty overextended and COT positioning is now bearish. Sentiment is still very much in favour of it and SNB speakers don't miss a chance to tell everyone they'd hike more if necessary.

Unchanged from last week: It looks pretty overextended and COT positioning is now bearish. Sentiment is still very much in favour of it and SNB speakers don't miss a chance to tell everyone they'd hike more if necessary.

***** JPY *****

>>BULL<<

▶︎ Tokyo Core CPI still >3%, it's surprising and it's not coming in deflationary

▶︎ Ueda left the door open to a pivot, and inflation forecasts in the BOJ's Outlook have been upgraded

>>BEAR<<

▶︎ Still the most dovish central bank out there, and Friday's SOMP or the announced policy review didn't change anything about it

▶︎ Still the most dovish central bank out there

▶︎ Bullish sentiment

▶︎ Inherent weakness

>>SUMMARY<<

That was definitely an interesting Friday for JPY, and the communication around their new policy review was pretty bad. But when I try to boil it down it's not all that dovish: they upped their inflation forecasts, Ueda said the planned review doesn't stop them from doing whatever they want, and announcing a 12-18 month review as a way of forward guidance (which they could very well have done explicitly) seems weird. Also, Tokyo Core CPI on Friday surprised to the upside and came in above the previous print. Price action in JPY was very clear and IV in USDJPY declined, so the market is going with the dovish version for now."

There's been nothing new since last week but Cash Earnings are expected to come in higher this week, and we'll get the BOJ Summary of Opinions on Friday. Since JPY is mostly trading as a safe haven currency at the moment (correlation to VIX >0.7), I don't expect the market to listen to the fundamentals too much."

已保存差異

原始文本

Open file

"29.04.23
***** MACRO *****
     >>BULL<<
▶︎ FX volatility is still pretty low and falling
▶︎ The VIX term structure is steep and well above cash VIX, the VIX-VVIX divergence has closed
▶︎ COT data for the ES is very bullish
▶︎ No sign of credit spreads widening again
     >>BEAR<<
▶︎ Risk-on currencies aren't performing
▶︎ Most Asian and EM PMIs are weaker again
▶︎ Market breadth isn't looking healthy
▶︎ Treasury futures COT positioning is mostly bullish
▶︎ VIX/VVIX correlation signal has triggered and is still in effect
▶︎ Industrial metals aren't performing
▶︎ CL has closed the OPEC gap on the chart: the cut is bearish
     >>SUMMARY<<
Zooming out a bit on most macro charts I look at, nothing seems to have changed for months: stocks, commodities, bonds, DXY etc. all going nowhere. The banking crisis (or better: mini-crisis?) saw a bit of a resurrection this week but the market doesn't seem to care much. Tech earnings surprised but the OPEC cut tells the story about global growth/demand, and metals confirm it. Equity sectors look better than I thought last week, and stocks are trading way stronger than they ""should"". Honestly, I'm confused but I suppose I'm not the only one.

***** USD *****
     >>BULL<<
▶︎ COT positioning is still bullish
▶︎ Positive seasonality
▶︎ Q1 GDP was bullish under the hood, GDPNow for Q2 starts at 1.7%
     >>BEAR<<
▶︎ CESI has dropped, CSII is lower too
     >>SUMMARY<<
It's a bit weird to see that USD sentiment is neutral while every other G8 currency is either bullish or bearish. I still don't see a good reason why USD should trade higher when we're in the trough of the dollar smile. The Fed is expected to hike by 25 bps and then hold, maybe they put in some hawkish undertones but I doubt USD strength will last long in that scenario.

***** EUR *****
     >>BULL<<
▶︎ Hawks in the GC are still pushing for higher rates
▶︎ PMI commentary was very positive
▶︎ Inherent strength
▶︎ Sentiment is bearish
     >>BEAR<<
▶︎ CESI is heading lower
▶︎ German PMI on the heatmap is weaker, Eurozone isn't improving
▶︎ COT positioning is at a bearish extreme and Large Trader net positions aren't confirming the strength
▶︎ Bearish seasonality
     >>SUMMARY<<
The ECB has sounded more hawkish than the Fed for a while now, and we'll see if we get some forward guidance this week or at least some sources after the rate statement for a bit of more insight. For now I'll stick with what worked well over the last few weeks: going with the EUR's strength, taking short-term longs and being aware that the air is getting thin up here for EUR based on positioning data.

***** GBP *****
     >>BULL<<
▶︎ Inherent strength
▶︎ CESI is still still going strong
▶︎ Yields are outperforming, 2s10s are bear flattening
▶︎ Bearish sentiment
     >>BEAR<<
▶︎ PMI has worsened
▶︎ COT positioning is now bearish 6B as well
▶︎ Bearish seasonality
     >>SUMMARY<<
It's still showing strength, it's the only currency with a good-looking CESI and 2s10s are bear-flattening. Last week's hot CPI print means a mess for the economy but the BoE will likely have to do more, and GBP likes that so far.

***** AUD *****
     >>BULL<<
▶︎ Commentary in last week's PMI sounded extremely upbeat
▶︎ 25-delta risk reversal is looking bullish
     >>BEAR<<
▶︎ It's just not trading well despite the positive data from China
▶︎ Bearish seasonality
▶︎ Bullish sentiment
▶︎ Weaker CPI this week
     >>SUMMARY<<
Market pricing for the RBA this week is 100% for no change and even if they came in hawkish in the statement it probably won't turn the tide for AUD. No change to the bias.

***** NZD *****
     >>BULL<<
▶︎ 25-delta risk reversal is looking bullish
     >>BEAR<<
▶︎ Bullish sentiment
▶︎ It's inherently weak
▶︎ CPI way below expectations last week
▶︎ CESI is dropping, the CESI spread AUD-NZD is rising
     >>SUMMARY<<
I don't see anything that would make me change the bias now. Still liking it less than AUD because of the CESI spread but that bias is very vulnerable to the RBA this week.

***** CAD *****
     >>BULL<<
▶︎ COT positioning is bullish, Dealers are near multi-year long levels
     >>BEAR<<
▶︎ Crude oil has shown weakness
▶︎ CESI is lower
▶︎ PMI weakening on the heatmap
▶︎ Bullish sentiment

>>SUMMARY<<
The summary has been unchanged for a few weeks plus now CL could be going lower: 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
▶︎ It's the currency with by far the worst sentiment; USDCHF and EURCHF are still the two FX pairs with the most bulls
     >>BEAR<<
▶︎ COT positioning is now bearish
     >>SUMMARY<<
It looks pretty overextended and COT positioning is now bearish. Sentiment is still very much in favour of it and SNB speakers don't miss a chance to tell everyone they'd hike more if necessary.

***** JPY *****
     >>BULL<<
▶︎ Tokyo Core CPI still >3%, it's surprising and it's not coming in deflationary
▶︎ Ueda left the door open to a pivot, and inflation forecasts in the BOJ's Outlook have been upgraded
     >>BEAR<<
▶︎ Still the most dovish central bank out there, and Friday's SOMP or the announced policy review didn't change anything about it
▶︎ Bullish sentiment
▶︎ Inherent weakness
     >>SUMMARY<<
That was definitely an interesting Friday for JPY, and the communication around their new policy review was pretty bad. But when I try to boil it down it's not all that dovish: they upped their inflation forecasts, Ueda said the planned review doesn't stop them from doing whatever they want, and announcing a 12-18 month review as a way of forward guidance (which they could very well have done explicitly) seems weird. Also, Tokyo Core CPI on Friday surprised to the upside and came in above the previous print. Price action in JPY was very clear and IV in USDJPY declined, so the market is going with the dovish version for now."

更改後文本

Open file

"06.05.23
***** MACRO *****
     >>BULL<<
▶︎ FX volatility is still pretty low and falling
▶︎ The VIX term structure is steep and well above cash VIX
▶︎ COT data for the ES is very bullish
     >>BEAR<<
▶︎ Risk-on currencies aren't performing sustainably
▶︎ Most Asian and EM PMIs are weaker
▶︎ Market breadth isn't looking healthy
▶︎ Treasury futures COT positioning is mostly bullish
▶︎ VIX/VVIX correlation signal has triggered and is still in effect
▶︎ Industrial metals aren't performing
▶︎ CL has closed the OPEC gap on the chart: the cut is bearish
     >>SUMMARY<<
Things are as unclear as they were last week (and the weeks before). The debt ceiling is coming up and regional banks are still not out of the woods but stocks are higher rather than lower with pretty bad breadth. The global economy still isn't doing well, all four Chinese PMIs this week disappointed and commodities aren't seeing any upside. To me, it's still a market where I just don't want to take risk.

***** USD *****
     >>BULL<<
▶︎ The labour market just isn't cracking
▶︎ COT positioning is still bullish
▶︎ Positive seasonality
▶︎ GDPNow for Q2 has started strong
     >>BEAR<<
▶︎ Dovish FOMC statement, the door is open to a pause
▶︎ Powell tried to sound hawkish but the hawks aren't going for it with Bullard very tame on Friday
▶︎ CESI has dropped, CSII is lower too
     >>SUMMARY<<
The forward pricing of short-term rates is at odds with the higher-for-longer message the Fed has sent, and positioning is clearly in favour of the dollar. We'll get CPI and PPI data this week with a slight inflationary bias (Core CPI lower, though). There's a risk we might see USD strength here. I'm still looking towards a short because of the trough in the dollar smile but my conviction has dropped markedly. I'm changing the bias to neutral.

***** EUR *****
     >>BULL<<
▶︎ All in all, the ECB statement was a mixed bag but Lagarde tried to sound hawkish and no one argued for unchanged rates
▶︎ Inherent strength
▶︎ Sentiment is bearish
     >>BEAR<<
▶︎ CESI is heading lower
▶︎ German and Eurozone PMIs on the heatmap are weaker
▶︎ COT positioning is at a bearish extreme and Large Trader net positions aren't confirming the strength in EUR
▶︎ Bearish seasonality
     >>SUMMARY<<
The reaction to the ECB and Lagarde looks like the market was shooting for a bit too much. The post-ECB sources showed that hawks in the GC are losing steam and even uber-hawk Müller argued for patience after the dismal German Factory Orders print on Friday. The falling CESI is a bad sign for EURUSD and positioning is clearly bearish, so I expect the Euro to be weaker going forward. Changing the bias accordingly.

***** GBP *****
     >>BULL<<
▶︎ Inherent strength
▶︎ CESI is still still going strong
▶︎ CSII has been going up
▶︎ Yields are outperforming, 2s10s are bear flattening
▶︎ Bearish sentiment
     >>BEAR<<
▶︎ PMI has worsened
▶︎ COT positioning is now bearish 6B as well
▶︎ Bearish seasonality
     >>SUMMARY<<
We'll probably get another 25 bps from the BoE on Thursday. The UK is the only G8 economy with CPI still in double-digits, so I can imagine them coming in on the hawkish side but the MPC vote split has been a mess and there hasn't been much in terms of hawkish commentary in the last few weeks. Based on how GBP has traded recently, the bar for a happy market reaction is probably pretty high.

***** AUD *****
     >>BULL<<
▶︎ Surprise hike by the RBA but dovish-sounding statement
▶︎ CPI and GDP projections lowered in the SOMP
▶︎ Bear flattening in 2s10s
▶︎ AUD is up this week despite the bad PMI prints out of China
▶︎ CESI has picked up markedly
▶︎ CSII is higher
     >>BEAR<<
▶︎ It hasn't traded well when data out of China was positive, so this still remains a bearish factor
▶︎ Weaker PMI on the Bloomberg heatmap
▶︎ Bearish seasonality
▶︎ Bullish sentiment
     >>SUMMARY<<
The RBA surprised, China data was bad and AUD is higher on the week. I'm sceptical that this will last, though, but I'm open to be proven wrong. If AUD managed to turn around and go higher it would be a positive sign for my overall macro bias. I'm leaving it at bearish for now.

***** NZD *****
     >>BULL<<
▶︎ Hot labour market print this week
     >>BEAR<<
▶︎ Bullish sentiment
▶︎ It's inherently weak
▶︎ CPI way below expectations last week
▶︎ CESI has dropped, the CESI spread AUD-NZD is rising
▶︎ CSII has dropped too
     >>SUMMARY<<
The CESI spread AUD-NZD and the divergence in inflation surprises (CSII) are clearly in favour of AUD and not NZD.

***** CAD *****
     >>BULL<<
▶︎ Another hot labour market report on Friday
▶︎ COT positioning is bullish, Dealers are near multi-year long levels
▶︎ 25-delta risk reversal is looking bullish
     >>BEAR<<
▶︎ The BOC and Macklem sound dovish compared to almost everyone else
▶︎ Crude oil has shown weakness
▶︎ CESI is lower
▶︎ Bullish sentiment

>>SUMMARY<<
The economy isn't doing too badly and the labour market is hot. On the negative side, the BOC isn't helping and commodity performance including crude oil is bearish (correlation CAD vs. CL is about 0.40-0.80 at the moment). I'm changing the bias to neutral because I changed the USD bias too.

***** CHF *****
     >>BULL<<
▶︎ The SNB is still sounding hawkish
▶︎ It's the currency with by far the worst sentiment; USDCHF and EURCHF are still the two FX pairs with the most bulls
     >>BEAR<<
▶︎ COT positioning is bearish and doesn't confirm CHF strength
▶︎ CESI is dropping
▶︎ Weaker PMI on the heatmap
▶︎ Another CPI miss this week and a dropping Citi Inflation Surprise Index
     >>SUMMARY<<
Unchanged from last week: It looks pretty overextended and COT positioning is now bearish. Sentiment is still very much in favour of it and SNB speakers don't miss a chance to tell everyone they'd hike more if necessary.