The rise of the fringe

"Now is the winter of our discontent."   So sayeth the voters in Germany, where Angela Merkel's CDU received a stern rebuke in state elections as yet another protest party moved in to fill the gap.  So too in Brazil (OK, there it's the summer of discontent), where a record number of demonstrators turned out to protest against Dilma's kleptocracy.

Although Macro Man attempts to keep this place studiously free of partisan political commentary, the phenomenon of political protest and the rise of fringe candidates/parties is too notable to ignore.  That the movement really started in the Middle East is an irony that has escaped at least one notable anti-establishment candidate (as well as indeed the primary beneficiary of Merkel's scuffles in Germany.)  Ultimately, this bespeaks a deep-seated unhappiness with the state of the world that is a product of both the aftermath of the financial crisis and idiosyncratic local factors.

Obviously, as the Brexit vote approaches and the US presidential election kicks into high gear, the volume of noise generated by political considerations will grow ever louder, rendering this even more of a trader's market.   While this may of course be obvious, sometimes Macro Man finds it useful to repeat obvious things as a way of remembering them!

In the meantime, we of course of the other two G3 central banks announcing policy this week.  Little is expected from the BOJ after the chastening rejection of its descent into NIRP at the end of January.  In fairness, the Topix banks index has nearly hit the 61.8% retracement level of its plunge after the previous BOJ meeting, though it's still way below its highs of last summer.

The yen, of course, remains very much at the strong end of its range over the last year or two; Draghi paid lip service to the G-20 "no deval" mantra....will Kuroda?  The chart at least suggests selling it 40 pips or so above current levels (113.90) with a stop just above 115.

As for the Fed, Macro Man will address them further in coming posts,   Suffice to say, however, that given oil's up 20% since the last meeting, the SPX is up 5%, and there was a large positive surprise in the core PCE deflator, it really is remarkable that just 3 of the 90 economists surveyed by Bloomberg expect a rate hike.  Well, perhaps "remarkable" is the wrong word; "sad" is another one that springs to Macro Man's mind (though not, of course, those of certain outspoken individuals who own several hundred billion dollars worth of bonds.)

From a purely selfish perspective, Macro Man sure would like to see a little "fringe" monetary policy out of Yellen and co.  In the meantime, it wouldn't be a surprise to see a little profit-taking in a lot of the trades that have done well over the last few weeks....