• Markets stuck in neutral, somewhat weak dollar
• Really nervous but not moving on a day-to-day basis
• Bond market volatility has nearly collapsed back to lows
• Consider buying long-term options in terms of 6-months+
• Swedish CPI may be last chance for SEK to resist more weakening
• Headline risk is still driving equities as US/Russia tensions spark sell-off
• We're still in a range-trading environment for Q2, difficult to trade this
• FOMC minutes see downside risk to the economy from trade war
• Fed is basically continuing its normalisation/hawkish tilt
By Clare MacCarthy
Markets are jammed in neutral and bond market volatility has collapsed in an increasingly nervous environment on fears the Trump/Putin war of words will deteriorate into something far worse. But though nerves are on edge, assets "aren't really moving on a day-to-day basis", says John J Hardy, Saxo's head of FX strategy. This muddled, frightened atmosphere is very difficult to trade, he adds, though perhaps one strategy would be to consider buying long-term options in terms of six months-plus.
Today's economic calendar offers little of interest now that the FOMC's hawkish minutes are out of the way. Still, do keep an eye on the Swedish inflation release as this might provide the krona with a final opportunity to resist further weakening.
Source: Saxo Bank
Meanwhile, Peter Garnry, head of Saxo's equity strategy, says that that the geopolitical situation is the driving force in equities too but that "we're still in a range-trading environment for Q2". Adding to the bleak political picture is the fact that we've had some negative corporate earnings revisions – the first time this has been seen since 2017.
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.