Macro Man is somewhat lacking in inspiration, though how much of it is the disappointing final result of the USA-Portugal match and how much of it is fatigue after a glorious summer's weekend is difficult to say. To be sure, the market itself is the source of much of his lethargy; much like the USA's pedestrian "talisman" Michael Bradley, it entered this year full of hype and has thus far failed to live up to expectations.
That's not to say that there haven't been interesting sub-currents, of course. The strength in energy prices has been a notable talking point, though 9 month highs in WTI haven't managed to push at-the-pump gas prices above their April levels.....yet. If and when that happens, it's probably worth taking notice.
At the same time, it feels like the market kind of wants to have a go at the dollar after a Fed announcement that was broadly perceived as a little more neutral than some had forecast. True, the euro (and by extension DXY) aren't really going anywhere, but that's more of a function of the ECB , than the dollar. For those countries that are not actively trying to submarine the value of their currencies, however, it feels like the market may just be in accumulation mode. Cable north of 1.70 is an obvious signpost, as is Kiwi at 0.87, a mere 2% from its all-time highs. While Thursday's ramp in gold may or may not mean anything in the long run, it certainly raised a few eyebrows. The pair that epitomizes the dollar downdrift, however, is USD/CAD, an erstwhile macro favourite.
It was only a few months ago that BOC governor Poloz was dropping heavy hints about the loony and monetary policy- it seems much longer than that. Last week's CPI more less confirmed that the worm has turned, with the core figure printing way above expectations at 1.7%. Suffice to say that rate cut hopes have vanished, and with them a major reason to be short CAD. As the chart below illustrates, USD/CAD has broken all notable supports as it takes a drive lower on the Boulevard of Broken Dreams.
(The HSBC China PMI has just crushed expectations as Macro Man writes this; cue another round of USD selling...)
Ultimately, Macro Man would be leery of putting too much stock into current dollar weakness. Like it or not, the Fed will be in play in a few months' time, which should offer some decent support to the buck. That having been said, summer romances may not last, either, but it doesn't mean that they're not a lot of fun whilst they do. If the market wants to romance dollar weakness, it would be rude to interject and force a premature break-up.
That's not to say that there haven't been interesting sub-currents, of course. The strength in energy prices has been a notable talking point, though 9 month highs in WTI haven't managed to push at-the-pump gas prices above their April levels.....yet. If and when that happens, it's probably worth taking notice.
At the same time, it feels like the market kind of wants to have a go at the dollar after a Fed announcement that was broadly perceived as a little more neutral than some had forecast. True, the euro (and by extension DXY) aren't really going anywhere, but that's more of a function of the ECB , than the dollar. For those countries that are not actively trying to submarine the value of their currencies, however, it feels like the market may just be in accumulation mode. Cable north of 1.70 is an obvious signpost, as is Kiwi at 0.87, a mere 2% from its all-time highs. While Thursday's ramp in gold may or may not mean anything in the long run, it certainly raised a few eyebrows. The pair that epitomizes the dollar downdrift, however, is USD/CAD, an erstwhile macro favourite.
It was only a few months ago that BOC governor Poloz was dropping heavy hints about the loony and monetary policy- it seems much longer than that. Last week's CPI more less confirmed that the worm has turned, with the core figure printing way above expectations at 1.7%. Suffice to say that rate cut hopes have vanished, and with them a major reason to be short CAD. As the chart below illustrates, USD/CAD has broken all notable supports as it takes a drive lower on the Boulevard of Broken Dreams.
(The HSBC China PMI has just crushed expectations as Macro Man writes this; cue another round of USD selling...)
Ultimately, Macro Man would be leery of putting too much stock into current dollar weakness. Like it or not, the Fed will be in play in a few months' time, which should offer some decent support to the buck. That having been said, summer romances may not last, either, but it doesn't mean that they're not a lot of fun whilst they do. If the market wants to romance dollar weakness, it would be rude to interject and force a premature break-up.
1 comments:
Click here for commentsPerhaps the $CAD is trading in line with the middle east tinder box. There used to be a good correlation btwn oil and $CAD, though it broke down after 2011.
More military news out of Israel isnt good for oil either. I still think its appropriate to be taking profits on oil stocks vs buying them here, but I am on the lookout for a shock.
Silver is looking interesting for a punt