APAC Global Macro Morning Brief – Happy Macro Wed 6 Nov 2019:

Macro 1 minute to read

Kay Van-Petersen

Global Macro Strategist

Summary:  Morning APAC Global Macro & Cross-Asset Snapshot


(Note that these are solely the views & opinions of KVP, they do not constitute any trade or investment recommendations of any kind.)

To see this wk’s Macro Monday click here

APAC Global Macro Morning Brief

 

Happy Macro Wed 6 Nov 2019: What’s going on with the 7.00 lvl in USDCNH?



So overnight saw a decent beat in US ISM Non-Manufacturing at 54.7a 53.5e 52.6p (previous month experienced a big miss). Interestingly enough the Markit final Service PMI missed at 50.6a 51.0e/p – yet as it’s the US… its all about the ISM reading…

The ISM beat resulted in a much stronger USD, that saw the DXY finish up +0.49% to 97.983 – and this post a positive Monday session of +0.27%. Yields also broke out higher with UST hitting 1.8708 at one point before close at 1.8584

The higher yields & a stronger dollar, resulted in a punch in the face to the gold bulls as we dropped from above 1500 to close down -1.74% to 1483. Silver bulls on the other hand, received two punches to the face, as it fell -2.65% to 17.58 lvls

Equities also lost some start post the numbers, after what seemed like a very bullish day in the making – net-net, all this is price action that suggests the Fed is doing nothing in a while, let alone Dec. Current rate cut prob for 11 Dec 2019 & 16 Dec 2020, stand a t7.9% and 67.3%

The latter is still way too low for KVP – who is still in US economy deceleration camp & could be dead wrong here. One piece I forgot to add on this wk’s Macro Monday was a comment from our excellent economist Dembik on the US’s job data from last Friday.

“Due to ongoing uncertainty, US companies have cut CAPEX but not jobs yet. The latest payroll published on last Friday is rather encouraging regarding the state of the US economy.

The headline was a big surprise for most market participants, as the NFP beat consensus at 128k vs 85k expected. The figure is even more impressive considering that the General Motors strike had a very negative impact on employment and subtracted 41k from the figure according to the BLS.

On the top of that, the net 95k upward revision for August and September tends to confirm that the economy is more resilient than most expected.

There is not much market slack as the number of “people not in the labor force but still wanting a job” is back to pre-crisis level.”

                For Dembik’s full piece click here. US Employment Growth in Cyclical Sectors

-


Yet none of this is the most interesting thing that happened yesterday & is currently on the radar…

That was the breaking down of USDCNH through the 7.00 level after Mon close of 7.0330, and saw a session low of 6.9866 before coming back to close at 7.0026. This is important as USDCNH is probably the best barometer of the US / CH trade negotiations

For those without context, over the last year, the range of USDCNH has been from 6.6777 to 7.1940, we are still c. +5% on a spot basis from the lows in April, before the tit-for-tat tariffs kicked off

We initially in the Asia session yesterday had positive comments from Wilbur Ross on the tape – yet it did not seem (to KVP at least) different from previous rhetoric around the trade deal. A move like this (-0.43% is a big move on USDCNH) suggests someone/s behind some serious positioning knows something

Or perhaps someone/s are not as bearish on the trade negotiations & no longer believe USDCNH to be asymmetrically skewed to the upside (i.e. weaker yuan, stronger USD). KVP still remains sceptical of an actual deal, let alone one that can be respected & held by the Trump administration – yet the price action, is the price action

Respect the price action…

Yet also be aware we have oscillated between high outcomes of a trade deal in the making, to low outcome of trade deal in the making. China still wants a tariffs lift to be part of the process

And yes, it is paradoxical that we get a big strengthening of the yuan vs. the dollar, yet the dollar rises against most currencies. Welcome to Global Macro folks, home of trends, counter trends, and ripples within ripples…

Which is why the most important backdrop in every global macro & global investors thinking should be, what is the meta trend?

And as we have covered many times on Macro Monday & our dailies… the Meta Trend is unchanged… you can run from Global Macro for a while… but you cannot hide forever

Have an incredible day everyone

Namaste

-KVP


Today:

  • NZ: U/R 4.2%a 4.1%e 3.9%p, Employment Change Q/Q 0.25a/e
  • JP: BoJ Minutes out
  • EZ: GER Factory Orders, Final Serv. PMI 51.8e/p
  • US: Crude Oil Inventories, 10yr Bond Auction
    • FOMC’s Evans @ 21:00 SGT (08:00 ET), William s@ 22:30 SGT (09:30 ET)
  • CA: Ivey PMI 49.3e 48.7p

 

Other:

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 is not intended to and does not change or expand on this. 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/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
Rooms 2001-02, 20/F York House
The Landmark
15 Queen's Road Central
Hong Kong

Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.