A. An Economist dollar cover that they've ripped off from someone else.
Yes, ladies and gents, we have a double whammy potential dollar cover curse this week, as both Der Spiegel and The Economist put the falling dollar on the cover. Amusingly, they both use the same metaphor, that of a plane going down in flames. Note that Der Speigel came out earlier in the week, so the next time an Englishman tells you about the great English wit, ask him why they need to steal ideas from the Germans!
In any case, the dollar on the cover of The Economist traditionally spells the end, if only temporarily, of rallies in EUR/USD. For those who are relatively new to this space, take a walk with Macro Man down memory lane, back to December 2006.....
....and February 2004.
At this point, Macro Man is not prepared to say that the buck is going to quit going down, especially given yesterday's open letter calling for a maxi-reval of GCC currencies. By the same token, after a nice run it's not terribly difficult to bank profits on longstanding short dollar exposure.
Macro Man therefore closes EUR/USD at 1.4750 spot, and will bid 109.80 for $15 mio USD/JPY to partially hedge his straddles.
Elsewhere, the risk aversion trade may be slowly morphing, however temporarily, back to a liquidity trade. Yesterday's price action in equities was broadly encouraging....and yet bonds rallied like a banshee. Emerging markets have come roaring back as well. And all of this has happened in a context of broadly poor US macro data!
If it continues, the portfolio should benefit, as Macro Man is long both equities and fixed income. Another day like the last couple, however, and he will probably look to set some hedges and lock down profits. For the meantime, though, he is humming AC/DC under his breath, as the blog portfolio is "back in (the) black" with just the London and New York sessions until month end.
Finally, a milestone of sorts was reached while Macro Man was nursing a modest hangover on the train this morning; fourteen and a half months after he started scribbling his thoughts down in cyber-space, the 100,000th visitor passed through his electronic door. Thanks to all and sundry for reading, and especially to those who thoughtfully pointed out the Economist cover via email or the comments section last night!