And the winner is.....

Why is it that the office air conditioning only goes out on the hottest day of the year? Such is the case today; while Macro Man is usually loathe to criticize UK weather for being too warm, he has to concede that being trapped in a trendy building with no open-able windows and no aircon is not the most pleasant environment in which to confront a new week's trading.

First things first, however. Macro Man is proud to announce the winner of the first annual Banking Dead Pool. It was a close vote, and at least one reader suggested privately that he had followed Al Capone's maxim to "vote early and vote often", which casts some doubt on the validity of the result. But the contest auditors
have verified the poll results, and the winner is.....Lehman Brothers (pictured above, left.) Macro Man extends hearty congratulations to LEH and is pleased to present them with the coveted Golden Coffin Trophy, pictured left. Better luck next time to Bradford and Bingley, which missed out on victory by the narrowest of margins (2 votes out of 477 cast.)

The market has a clearly summery feel to it, and you can easily see a few days of back-and-fill price action before US Q2 GDP on Thursday and Unenjoyment Day on Friday.

In the meantime, there are a few developments in the EM space that Macro Man is tracking:

1) Mexico becomes embroiled in the currency/inflation conundrum. Until a few months ago, the market consensus had Banxico on hold and USD/MXN was going nowhere fast. Since then, Banxico has hiked rates 0.50% and looks primed to do more, thanks to rising headline and core inflation (chart below.) Unsurprisingly, this has lent a bid to the peso, which has strengthened 4% against the dollar since the end of April. It was 5 percent, as USD/MXN spent the middle part of last week just above 10.00, and looked a dead cert to hit "El Nueve" imminently. On Friday afternoon, however, Banxico announced that they were halting their dollar selling program, which spurred a rather nasty short squeeze in USD/MXN. In the fullness of time, will Mexico choose to fight inflation or go fort growth? Inquiring minds want to know.


2) China switches tack. One country that does appear to have made the decision to go for growth is China, where the Politburo made a weekend policy announcement suggesting that China is moderating its inflation concern to support growth. This has led to a bit of short-covering in USD/RMB. Usually, it would mean a bid for something like AUD/USD, but the news of losses at ANZ have taken the lustre off of the Ozzie for the time being.

3) Big decision in Turkey. Will they or won't they? We'll hopefully get a decision this week on whether the ruling AKP party will be banned or not. Turkey is a darling of the carry crowd but has ground to a halt recently in the build-up to the decision (though the equity and bond markets have been pummeled over the last few months.) There should be quite a tasty move in either direction once the decision is announced.