Thursday, January 18, 2007
Busy day today, so only a brief post this morning. The BOJ has left rates unchanged, and wire reports suggest that the LDP is applying pressure on them to keep rates steady until the second half of the year. Unsurprisingly, carry trades have fared extraordinarily well, and obvious funders like the yen and the Swissie have been shellacked. If CPI is benign, then the last impediment to the carry trade will have passed, and Macro Man may relectantly be dragged into to slapping on the beta exposure.
The P/L has suffered overnight thanks to all things UK. Short sterling has come off sharply the last couple of days as markets focus on hawkish commentary and the slightly better than expected decline in unemployment. Macro Man continues to believe that the BOE is badly misinterpreting the data but concedes that momentum is against him at the moment. The LM7 position is down nearly 500k, and Macro Man is not prepared to add without a significant P/L cushion elsewhere.