Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Global Macro Strategist
Summary: APAC Morning Global Macro & Cross-Asset Snapshot
To see this wk’s Macro Monday click here
APAC Morning Macro Brief
Huha… KVP finally back on the desk after being quarantined & contagious with lord only knows what for the last two days. With +100 folks on the floor in our SG hub, you know someone is walking around Ebola-Squared… personally I blame the Bubonic Belgian to my right. Anyhow scapegoats aside, not yet 100 delta, yet just happy to be somewhat functioning. As they say,
Health = Wealth
When your sick, it’s the universe telling you that you need a break. Generally sleep, salt & lemon water are KVP’s go to. Anyhow, lets get crackin'...
The Federal Reserve:
So we got the Fed o/n & for those of you who did not see Fed Chair Powel’s Statement & Press Conference here are KVP’s takeaways & current subjective thoughts in italics:
Market Price Action:
Market Price action was quite positive from the Fed, US equities closed up SPX +0.29% 3142, bond yield closed towards the low of the day (curve flattened) with UST at 1.7914%, gold 1475 +0.72% & silver 16.8628 +1.19% rose & volatility fell VIX 14.99 -4.4%.
What was interesting, was despite Powell’s very measured & neutral stance we saw continued weakness in the dollar as the DXY pulled back by about a third to 97.11 – bringing us to the 3rd consecutive down day. The 97.00 handle is a key resistance, but its really all about 96.00 before we can really confirm USD liquidation is taking place. So far we are still within recent trading ranges. Aussie 0.3876 +0.98% & Kiwi 0.6586 +0.63% continue to fly & EURUSD 1.1130 +0.34% is firming up as it grinds higher.
Likely Focus Today:
At least on two things…
One will be ECB’s first meeting with Lagarde at the helm, whilst not much is expected, could be interesting if she looks to set some kind of precedent.
Two will be the more anticipated UK parliamentary elections (see link to John piece on this below), where based on the price action of cable, now over 1.3200 – tells you that the market is expecting a comfortable win by Bojo’s Conservatives/Tories. Worst case scenario for the sterling bulls is some kind of hung parliament, where labor leads the charge.
Here is the FT UK Election tracker
Kudos to those that have profitably played the positive sterling convexity.
They say fortune belongs to the brave… what they forget is, it’s actually the 'selectively brave'. You have to know when & which opportunities to pick from. If your brave all the time, you will burn through your capital & be thrown out the game. To win in the game, you have to stay in the game.
Cable’s move from c. 1.2000 just a few wks back to these 1.3200 lvls, is +10% unlevered – bearing in mind that +5x to +10x leverage in currencies is not aggressive (some folks flirt with 50x to 100x insane lvls) that is a +50% to +100% return in a little over a month.
And that’s why KVP loooooooooves global macro & its cross-asset palette.
Have a great, profitable & healthy day everyone.
Namaste,
-KVP
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On The Radar Today:
What We Are Reading From SaxoStrats: