I’m traveling again. Full regular update tomorrow but here the Swiss team’s latest in the mean time.
(Updating as i travel).
Here Fitzpatrick
And an update on the oil trade:
And here some nice longer range work on where we are in the cycle:
And here Danske on rates:
More to come
Here the FX weekly report from CS, hot off press today.
The most notable issue here for me is the fall in FX volatility we are seeing.
If volatility continues to ease like this, the positive trading profits from the FX will not sustain for much longer. A falling FX volatility would likely lead to falling bullion volatility as the two are positively correlated. What FX event may unfold next is likely the Chinese devaluation to the US$ and the knock on removal or adjustment of the Hong Kong $ peg. Either or both of these events would send fx volatility sharply higher. (A good asymmetric trade in fact if volatility sustains lower for the next few months). The trigger event will be the US$s strength to the euro and yen. A Chinese devaluation would have a negative impact to both economies of Europe and Japan and likely lead to strong bullion inflows.
The over night Chinese pmi data stronger than anticipated at 50.1 though it indicates zero expansion). Its unlikely to be a near term news event this yuan issue but again its timing will be defined by the US$s move and Chinese economic weakness.
Here the excellent CS chart pack:
And its quite a set of conclusions the guys at CS make here. Notably, short bonds calling an end to the bond bull (how many times have i heard that one?) and neutral equities.
Note the ASX 200 in Australia rising 15% in a few weeks thanks to the RBA cutting rates. As approximately 45% of the Australian index is finance related this explains the move in the index but it does look very impulsive. Australia’s boom housing market is still rising even as unemployment rises and its economy sags. Lower rates may extend the property boom yet higher and support consumption and credit expansion higher still. Currency debasement and wealth creation via residential property price booms is the fashion again and can cure all economic ills, at the near term. A global phenomena. I wonder how long before Australia joins the zero rate club?
http://www.businessinsider.com.au/new-record-the-rise-and-rise-of-australian-household-debt-2015-2
All the best
Rich