Macro Strategist, Saxo Capital Markets

Kay Van-Petersen

Macro Strategist

Saxo Capital Markets

Thematic (Sector/Industry)

Probably the next most important thing is actually not the Brexit, but the next few Fed hikes<ul><li>Whilst Jun is live, I think Jul or Sep are more likely with the second hike in Dec, those Fed minutes from last week left very little to the imagination. They were hawkish</li><li>Fed implied probability of two rate hikes by year end is too low at 25%, should be closer to 50. The street is behind the curve on this and/or does not believe it (ripples with 2015)</li><li>Where does the DXY go, given we got to 100.17 (Nov 30) going into just one rate hike in Dec last year? Where do US 10yrs go, given we are at 1.83% &amp; we were c. 2.30% in Dec last year?</li><li>Flash PMI themed week ahead, including key GDP readings out of Europe. UK will get 2nd GDP reading with mkt expecting +2.1% YoY</li></ul>

Probably the next most important thing is actually not the Brexit, but the next few Fed hikesWhilst Jun is live, I think Jul or Sep are more likely with the second hike in Dec, those Fed minutes from last week left very little to the imagination. They were hawkishFed implied probability of two rate hikes by year end is too low at 25%, should be closer to 50. The street is behind the curve on this and/or does not believe it (ripples with 2015)Where does the DXY go, given we got to 100.17 (Nov 30) going into just one rate hike in Dec last year? Where do US 10yrs go, given we are at 1.83% &amp; we were c. 2.30% in Dec last year?Flash PMI themed week ahead, including key GDP readings out of Europe. UK will get 2nd GDP reading with mkt expecting +2.1% YoY

Global Macro Take: WK 21 – The Fed To Hike Over The Next 3 Meetings [Jun 15, Jul 27, Sep 21]

<ul><li>Key close on DXY above 94.50 on a Friday, liquidating my thesis on a tactical USD liquidation phase. Seems like we’ve now had a very sharp V-shaped bounce from the pullback 2 wks back</li><li>If the strong USD trend continues, we’d expect risk-off to be the flavour of the moment with EM, Commodities &amp; equities in general set to decline</li><li>Check out the long NOKSEK SaxoStrats idea flagged by our Head of FX Strategy John Hardy – I like the thesis, it definitely worth doing some heavy lifting on this</li><li>Plus a few links to the Sohn Investment Conference where movers &amp; shakers such as Chanos &amp; Druckenmiller were talking their views </li></ul>

Key close on DXY above 94.50 on a Friday, liquidating my thesis on a tactical USD liquidation phase. Seems like we’ve now had a very sharp V-shaped bounce from the pullback 2 wks backIf the strong USD trend continues, we’d expect risk-off to be the flavour of the moment with EM, Commodities &amp; equities in general set to declineCheck out the long NOKSEK SaxoStrats idea flagged by our Head of FX Strategy John Hardy – I like the thesis, it definitely worth doing some heavy lifting on thisPlus a few links to the Sohn Investment Conference where movers &amp; shakers such as Chanos &amp; Druckenmiller were talking their views 

Global Macro Take: WK 20 – The US Dollar Just Won't Die

FX Strategist

Greg Gibbs

Fundamental analysis of topical themes in FX

Amplifying Global FX Capital

Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is a licensed in Australia to provide financial services.

We are producing a regular trading view orientated macroeconomic analysis of topical themes in global financial markets, with a particular focus on foreign exchange. We invite you to view an “executive summary” of these reports in “AmpGFX Reports” under our “Research” menu.

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Greg Gibbs has spent his working life of more than 26 years in financial markets, beginning in 1989 at the Reserve Bank of Australia, after completing a Bachelor of Economics Degree (Honours) at the Australian National University. He has been a CFA Charterholder since 2005. He has worked in Sydney, Singapore, New York and London for major global banks and presented on foreign exchange markets to major financial institutions and companies around the world, and maintained a high profile in the financial media.

Before Amplifying Global FX Capital, Greg was the Head of Asia Pacific Market Strategy at the Royal Bank of Scotland based Singapore. He now resides in Breckenridge Colorado.

Macroeconomics

Global equities look tired and are exhibiting investor fears over diminishing capacity for and returns from further global monetary policy easing.  Policymakers are admitting problems and looking more impatiently to governments to step up efforts to stimulate growth with fiscal stimulus and structural reform.  However, significant progress on this front almost seems hopeless and central banks are being forced reluctantly to do more.  These same fears have returned in China with its capital markets displaying a lack of confidence in the sustainability of policies aimed at boosting growth, as rapid credit expansion yields little overall economic advance. In this environment we expect gold to continue its advance.  However, gold has been boosted recently by the surge in JPY and overall weakness in the USD.  These trends may be tired with Japanese policy makers stepping up their threats of intervention and further policy easing, while US rate hike expectations have been pushed further out and strength in US labor data this week may support the USD.  As such we now see long gold/short JPY as offering a better reward for risk.

Global equities look tired and are exhibiting investor fears over diminishing capacity for and returns from further global monetary policy easing.  Policymakers are admitting problems and looking more impatiently to governments to step up efforts to stimulate growth with fiscal stimulus and structural reform.  However, significant progress on this front almost seems hopeless and central banks are being forced reluctantly to do more.  These same fears have returned in China with its capital markets displaying a lack of confidence in the sustainability of policies aimed at boosting growth, as rapid credit expansion yields little overall economic advance. In this environment we expect gold to continue its advance.  However, gold has been boosted recently by the surge in JPY and overall weakness in the USD.  These trends may be tired with Japanese policy makers stepping up their threats of intervention and further policy easing, while US rate hike expectations have been pushed further out and strength in US labor data this week may support the USD.  As such we now see long gold/short JPY as offering a better reward for risk.

AmpGFX - Frustration, Despair and Case for Gold/JPY

Asia Economist and CEO, Centennial Asia Advisors

Manu Bhaskaran

Asia Economist and CEO

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

<ul>
<li>
We were wrong about BOJ policy action: The BOJ kept its monetary policy unchanged last week despite the desultory economy. Consequently, the Yen surged, which was the last thing that the economy needed.</li>
<li>
Economic data almost uniformly bad: Industrial production rose 0.1% y/y in Mar 16, after falling 1.2% in Feb 16, with the earthquakes that struck Kyushu likely to depress production in 2Q16. Retail sales fell 1.1% y/y in Mar 16, following a 0.4% y/y gain in Feb 16. And deflationary pressures…</li>
</ul>



We were wrong about BOJ policy action: The BOJ kept its monetary policy unchanged last week despite the desultory economy. Consequently, the Yen surged, which was the last thing that the economy needed.

Economic data almost uniformly bad: Industrial production rose 0.1% y/y in Mar 16, after falling 1.2% in Feb 16, with the earthquakes that struck Kyushu likely to depress production in 2Q16. Retail sales fell 1.1% y/y in Mar 16, following a 0.4% y/y gain in Feb 16. And deflationary pressures…


The non-policy decision by the BoJ, creates considerably uncertainty over when the BoJ will consider easing policy further.  Kuroda suggests he simply needs more time to assess the effects of NIRP, in the order of six months or more, which pushes action out until at least late-July.  It seems he and other policymakers are willing to live with a stronger JPY and a lull in economic conditions over coming months.  In consideration of the rising trend in JPY this year, the risk is high that it continues to rally sufficiently to put pressure on the BoJ and government to act, and this may be closer to a USD/JPY level near 100.  A stronger JPY has tended to spill over to a weaker USD more generally in the immediate wake of the non-policy easing.  However, the sharp rise in JPY in early-February tended to add to global risk aversion and delayed the recovery in emerging market assets and currencies.  Perhaps this time the shock value of a stronger JPY is less, and commodity markets are on a firmer footing, such that a stronger JPY may not dampen risk appetite as much.  Nevertheless, the tendency for JPY to rally is likely to accentuate other possible global disturbances to risky assets, such as renewed concerns over China or Brexit vote.  As such we might expect non-dollar risk havens, such as gold, to remain underpinned with upside risk.

The non-policy decision by the BoJ, creates considerably uncertainty over when the BoJ will consider easing policy further.  Kuroda suggests he simply needs more time to assess the effects of NIRP, in the order of six months or more, which pushes action out until at least late-July.  It seems he and other policymakers are willing to live with a stronger JPY and a lull in economic conditions over coming months.  In consideration of the rising trend in JPY this year, the risk is high that it continues to rally sufficiently to put pressure on the BoJ and government to act, and this may be closer to a USD/JPY level near 100.  A stronger JPY has tended to spill over to a weaker USD more generally in the immediate wake of the non-policy easing.  However, the sharp rise in JPY in early-February tended to add to global risk aversion and delayed the recovery in emerging market assets and currencies.  Perhaps this time the shock value of a stronger JPY is less, and commodity markets are on a firmer footing, such that a stronger JPY may not dampen risk appetite as much.  Nevertheless, the tendency for JPY to rally is likely to accentuate other possible global disturbances to risky assets, such as renewed concerns over China or Brexit vote.  As such we might expect non-dollar risk havens, such as gold, to remain underpinned with upside risk.

AmpGFX - Lack of BoJ Action to Support JPY and Other Non-Dollar Risk Havens like Gold

Japan

TOPIX ETF is an Exchange-traded fund which holds a portfolio representing all stocks in the Tokyo Price Index (TOPIX).  The objective of the trust is to provide investment results that corresponds to the price and yield performance of the component securities of the Tokyo Price Index.

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Nomura ETF Topix (1306 JP)

Global Macro Take: WK 21 – The Fed To Hike Over The Next 3 Meetings [Jun 15, Jul 27, Sep 21]

Probably the next most important thing is actually not the Brexit, but the next few Fed hikes Whilst Jun is live, I think Jul or Sep are more...

Kay Van-Petersen

Global Macro Take: WK 20 – The US Dollar Just Won't Die

Key close on DXY above 94.50 on a Friday, liquidating my thesis on a tactical USD liquidation phase. Seems like we’ve now had a very sharp...

Kay Van-Petersen

AmpGFX - Frustration, Despair and Case for Gold/JPY

Global equities look tired and are exhibiting investor fears over diminishing capacity for and returns from further global monetary policy easing. ...

Greg Gibbs

Japan: Huge Policy Dilemma Raises Risks

We were wrong about BOJ policy action: The BOJ kept its monetary policy unchanged last week despite the desultory economy. Consequently, the Yen...

Manu Bhaskaran

AmpGFX - Lack of BoJ Action to Support JPY and Other Non-Dollar Risk Havens like Gold

The non-policy decision by the BoJ, creates considerably uncertainty over when the BoJ will consider easing policy further. Kuroda suggests he...

Greg Gibbs

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