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Morning Call: Softer dollar boosts commodities, stocks

Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.

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Article / 25 May 2018 at 9:21 GMT

Macro Digest: Reaching critical levels in the BTP 10-year yield

Steen Jakobsen

Chief Economist & CIO / Saxo Bank

Denmark

By Steen Jakobsen

My friend Andrew Baptiste of Tag618.com, whom I rank among the top three technical analysts in the world, tells me that 2.42–2.45% is the last line of defense in the Italian BTP 10-year yield...

...and we are trading at that level now.

Action:

We still recommend my earlier EURCHF short as the best proxy trade here.

We see both the euro (weaker on Italy and Turkey) and CHF (stronger on an explosive industrial production print and a falling balance sheet) working here, and USDCHF is a big sell from a purchasing power parity perspective.

Below we can see an excellent chart from investment research firm GaveKal; we are looking at it now and will put on a new, separate trade if it is triggered.

CHF

Let's also take a look at the generic Italian bond curve as well as the weekly bar chart Baptiste sent to me last week:

Sources: Bloomberg, Tag618.com, Saxo Bank

Finally, this is absolutely critical reading on Italy from former International Monetary Fund chief economist and colleague Olivier Blanchard – the best scenario and top-down analysis I have seen:

How worried should we be about an Italian debt crisis? (PIIE.com).

— Edited by Michael McKenna

Steen Jakobsen is chief economist and CIO at Saxo Bank

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helicongrowth

How will Mario squirm at the next ECB presser, on the cusp of debt monetisation if the ECB carry on buying BTPs after Sep. Pressure must increase for ECB to step aside as only debt mkts can control populist government's ambitions

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rafal171271

How to find isin of the 10year on Go

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rafal171271

Both Italian and Greek

For Chinese visitors:
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