Macro Dragon: Volcano Eruption South of Manilla Could See Philippine Peso Flight
Summary: Macro Dragon = Daily Cross-Asset Global Views
Macro Dragon: Volcano Eruption South of Manila Could See USDPHP flight
Before we get into it, for those that are back – or on the way back in – from what was hopefully a restful year-end holiday break, Happy New Years!
Let me sincerely (hand on liver) wish you, your families & teams the best of 2020. May your health, vigor & experiences be excellent & full of fun + laughter. May you continue to grow & develop yourself. May you be awash in gratitude & contribution plus fall [tail] backward into more money than Bezos.
We’ll be shaking things up from KVP’s side, so expect a lot more trade views going forward, as well as 20 long-term trades views for 2020 – which KVP will do a special piece & mini-series on.
Ok let’s get after it…
The Taal Volcano...
So to say that 2019 is not messing around is an understatement, we kicked of the year with US/Iran which was pretty much wks 1 & 2…& well covered in our Macro Dragon Foundation piece – you’d think we’d get some respite in wk 3, but no, volcano eruptions
So situation is quite fluid & only kicked off over the Asia weekend, yet there is a volcano eruption c. 40 miles south of the capital, Manila, where the metro population is over 13m (c. 13% of population). There is not much detail apart from the evacuation of settlements from the actual island where the Volcano is located. The danger level is a 4 out 5 which means more eruptions could anything from hours to days away - worth noting the initial eruptions have cause over 50 earthquakes.
Some of you may recall in 2010 the eruptions of Eyjafjallajökull (no that’s not my cat running over the keyboard, that Icelandic) in Iceland, than lead to a lot of volcanic Ash & disruption of air travel across Europe. European travels related stocks in particular were hit hard during that period.
Whilst KVP is not saying this will be the same, for all we know the worse is behind us, or this is just the first in a series of eruptions to come. Yet c. 40miles is not far if winds were to blow North into Manilla.
However its worth noting that the Philippine Stock Exchange has suspended trading for today – so looks like they will not be open and the bond market should also be close.
The airport has also suspended all landing & takeoffs. The peso is set to open in about 15mins, c. 09:00 SGT/HKT – USDPHP closed at 50.576 on Friday for a -0.98% strengthening of the peso vs. the US dollar.
KVP reckons we potentially could get some panic selling on USDPHP (do note we offer NDFs on USDPHP), as people may be looking to hedge their exposure to their assets in the Philippines. A move to above 52, so c. +2.8% is not far fetched by any means. Obviously one needs to stay abreast of the news, volcano, weather & other developments. Its worth bearing in mind, other SEA currencies may also be affected both ways – i.e. relative value wise vs. the PHP short, yet also as an overall hedge if folks think they could get better liquidity vs. just direct heading on the PHP.
…Did you miss?...KVP also gave recent perspectives on the Phase-One Signing (due this Wed on the 15th), Trump Impeachment saga, the risk-on party & most importantly the Half-life Fed – do please check them out if you missed the Friday epic piece. If you can only read one, the read the Half-life Fed…
Many thx for the feedbacks on Macro Dragon, much tougher to do a daily than weekly – funnily enough it was not an A+ day attitude wise for KVP on Fri (was grouchier than the grinch), yet was still stunningly productive. Which just goes to show, sometimes it’s just about sticking to the process.
Good luck out there today & for the wk ahead – big project for KVP this wk is getting out the 20-4-2020… 20 strategic cross-asset trades… feel free to send through your highest conviction 1-2 trades for the year. As they say, good artists copy, yet the best artists steal – more than happy to give props (or keep it incognito) if its an idea not currently on radar.
Wishing everyone a great, profitable start to the year. Best of luck in 2020, may it be your finest yet
On The Radar Today:
(Times would be SGT)
Japan is out on public holiday…
- US: Federal Budget Balance
- CA: BoC Business Outlook Survey
- UK: GDP M/M 0.0%e/p, Mfg. Production, Trade Balance, Industrial Production
- EZ: German WPI m/m, Italian Retail Sales
What We Are Reading From SaxoStrats:
- Jakobsen & SaxoStrats team with our sensational 2020: Outrageous Predictions
- Creagh on the devastation in Aus: Impact of blazing bushfires leave cost of inaction obvious
- Ole’s Commodity Weekly: Volatile start to 2020
- Peter-G on equities in the new year: What to expect in 2020? & Green stocks are the next mega trend in equities
- Hardy latest FX Update: US NFP Payrolls change next test for USD recovery
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.