Thursday, April 05, 2007
Easter was one of Macro Man's favorite times of year as a boy, and he can still remember the pleasure that he used to feel as the holiday approached. Easter was a herald of spring, a sign that the long, cold winter had come to an end. It was a time when heavy jackets could be put away and windbreakers donned instead.
Then there were the Easter egg hunts, and of course, the candy on Easter morning. Macro Man always had a weakness for jelly beans, preferring them to chocolate. His mother used to stuff little plastic eggs with jelly beans and put them Macro Man's easter basket. Upon discovery, Macro Man would consume the parceled jelly beans with what in retrospect was alarming speed. The only downside to the whole experience (other than subsequent liabilities to dental professionals) was stuffing a handful of jelly bean into his mouth and sensing the sickly sweet taste of the dreaded black jelly bean.
As much as Macro Man loved most jelly beans, he loathed the licorice-y black ones. He'd normally pick them out and given them to his father, who loved 'em. However, during the occasional frenzied consumption binge, one would slip through. Rarely has he tasted disappointment more acutely than when a black bean would connive its way into a handful of fruity goodness.
So where are the black jelly beans now? Over the next thirty hours or so, there is plenty for the market to get its teeth stuck into, notably today's BOE meeting and tomorrow's payroll data from the US. Whether either will mean much in the fullness of time is up for debate. After all, if the BOE doesn't go today, they'll probably go next month. And US payrolls are notoriously noisy, with more information in the inevitable revisions than there is in the headline data.
Yet with many markets pricing perfection, either of these events could provide a black jelly bean to ruin the market's experience. Bank Indonesia has already surprised markets today by not cutting rates. Should the BOE surprise some in the market by not hiking, will it have an impact? There's been a lot of sterling bought (and a lot of fixed income sold) over the past week or two- could an innocuous decision to delay send markets scurrying for cover? Carry is almost ludicrously well bid....until it isn't. Macro Man will take a punt and buy 1000 Dec short sterling futures at 94.17, setting a stop loss at 94.09 (which would be a new low.)
Similarly, US payroll data could put a few black jelly beans in the market's Easter basket. Macro Man's Bloomberg message box is now filled with analysis on how the last three Good Friday payroll figures have seen an unusual amount of volatility. Perhaps tomorrow will be no different, particularly as yesterday's services ISM is being viewed as yet another nail in the US economy's coffin. Equities shrugged it off, but could they do the same with a low payroll print that for once doesn't benefit from revisions?
Macro Man doesn't know what the data will say, and neither do you (unless you work for the BLS). What he does know, however, is that the amount of volume required to shift a price, almost any price, is dwindling almost by the hour. Best to stay on guard, therefore, and try to pick out the black jelly beans as much as possible.
(And if you know FX and haven't filled in the Voldemort poll yet, please do so!)