Macro Dragon WK # 24: BoC, ECB, CBOR, US Inflation

Macro 4 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Quasi-Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon WK # 24: BoC, ECB, CBOR, US Inflation & Crypto


Top of Mind…

  • TGIM & welcome to WK #24
  • Last week we touched on the MEME | WSB | Shorted stocks… Is Beyond Meat the next GameStop? Thoughts on the Jan-Feb Short Squeeze.... THE HIVE, AMC, GME, BB & BYND...
  • Whilst these names generally pulled back on Fri, overall for WK #23 they were mostly up with some interesting divergences such as AMC +81% vs. GME -2% for the wk.
  • We also touched on what we felt could be some key triggers to watch for the month of Jun: An Event-Driven June: NFP, Fed, Inflation, Fiscal Spending, Re-openings & Crypto..
  • So we got the NFP figure last Fri for the month of May, that was a subpar 559K a vs. 675K e, there was also a minor revisions of +12K to the previous Apr figure – that had initially missed by a spectacular -734K
  • A few things:
  • We still have c. 7.6m jobs to regain, to take us back to pre-covid lvls. As per our original Dragon thesis, looks like we are right (so far) that the Apr print marked the low in the NFPs & we are generally only going to go up from here… at least until we have that final 1-2m jobs to go. And yes, its not going to be linear.
  • Tech & growth in general, loved the print, as we lifted +1.8% on Fri from the Nasdaq-100… interpretation from the market is a Fed that is going to continue to stand down, hence we are in a goldilocks sweet spot for another few wks.
  • Volatility continues to fall (unless you’re a WSB/MEME name), with the VIX closing last wk at 16.42… the lowest in 2 months. So this means option premiums are cheap (historically at least), making buying options something for people to consider. Be that as tail-risk hedges (say puts on gold, TLT etf) or as expressions of directional positioning (upside calls in names like ABNB – one of a kind & reopening theme – or COIN  – Crypto proxy).
  • Its worth remembering that tail-risk is symmetrical – there is an overwhelming bias to focus on tail-risk to the downside, i.e. classic risk off (so long calls on bonds, gold, dollar, staples, healthcare, utilities, etc), with not enough bandwidth being made for focus on tail-risk to the upside.
  • Key events to still keep on the radar are naturally this Thu 10 Jun US inflation Print, the Fed meeting in c. 1.5wks time on Wed 16 Jun (remember updates on forecasts, plus Q&A is worth noting. And further down the line we got FOMC mins on Jul 7th (focus naturally on taper discussions or lack thereof) & next NFP is on Jul 1 for the month of Jun.
  • Again as a reminder, there have been at least 23 states opting out of the Federal unemployment, insurance & healthcare benefits with the objective of influencing people to get back to work.  Most of those benefits for those 23 states will expire over the course of Jun & we should start to see them in the Jul & Aug NFP release dates. For the other states, the benefits don’t expire until Sep 6th – so there are some potential structural uplifts to the noise.
  • Lastly for the wk ahead, keep an eye out for the Central Bank of Russia rate decision on Fri, economists are expecting a +25bp hike… yet we could be in for +50bp… USDRUB 0.7282 continues to look interesting from the short side, given the Dragon’s bullishness for energy & as a reopening proxy.
  • A break of around 72.50, could open us fast for a move to 72 then all clear for 70 handle. Perhaps some cheeky 1-2wks short dates USDRUB puts? Always tough to know what’s priced in… perhaps the Thu US inflation print can provide a better set-up for the Fri rate decision… hmmm…
  • A key event risk to keep in mind for all RUB crosses & Russian Assets is the scheduled meeting between Biden & Putin that should be going down next wk on Fed Wed in a summit in Switzerland. No doubt some of the topics being discussed behind closed doors will be Ukraine, Belarus & Cyber Attacks.
  • Lastly a big structural development that is not being fully appreciated (yet) in the crypto market, is something that we’ve been postulating since 2017. That it was only a question of ‘When’ not ‘If” that a government would look to make Bitcoin/Crypto as a formal part of its economic system. The President of El Salvador, is looking to make the country the first to take Bitcoin as a legal tender. The bill would still have to be approved by congress, but the point here has already been made. Precedent.
  • Now some people may say, who cares it’s a poor country with less than 7m people & a GDP lower than $30bn. Perhaps… but remember the pioneers are almost always ridiculed at first by the majority, then celebrated later (assuming they are correct).
  • One last thing, don’t get lost in the weeds of Bitcoin, Ethereum, Cardano, Ren, Ripple, Polkadot, Flow, Origin, DeFI, NFTs, etc… at the end of the day, the META Trend is decentralization.

Rest of the Week & Other Reflections

  • Econ Data: Economic wise & on known unknowns, its set to be a much quieter wk on the data front with really the US inflation figures due on Thu likely to be most closely watched. A big miss (reverse of last month’s big beat) could send risk-assets higher & still continue to bring bond yields lower, gold higher & the dollar softer.
  • US CPI: +4.7%e +4.2%p, CORE 3.4%e 3.0%p
  • Otherwise we have German Factory orders, China loan data, US 10yr auction & continued G7 meetings.
  • CB: BoC 0.25% e/p, ECB 0.25% e/p, CBoR 5.25%a 5.00%e (could see a +50bp hike)  
  • Fed speak: We should be in blackout, no one scheduled to speak.
  • Hols: NZ out today      
  • Dragon Interviews U-Tube Channel for easier play-ability… Check out our recent Crypto Interview with The Spartan’s Group Casper B. Johansen & yes, the increased volume for regulation coming out of the US is actually a massively positive structural aspect for the space. Translation: Regulation of Crypto = Acceptance of Crypto.

-

Start<>End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.

This is The Way

Namaste,

KVP

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zürich
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed here or within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.