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8 Followers
Write a Squawk to Patto
  • Squawk / Friday at 20:45 GMT
    Managing Director / Technical Research Limited
    New Zealand
    “We’re going to be living with Obamacare for the foreseeable future” said Speaker Paul Ryan after President Trump’s repeal & replace bill failed to get the 216 votes needed. Markets were unperturbed, with only minor losses in stocks. Bonds and USD were steady.

    Trump will now turn his attention to other parts of his agenda such as calling out “Currency manipulators”.

    Last year the Swiss National Bank sold CHF67 billion for EUR, USD, JPY, GBP to hold down the franc. It’s been doing this for years and has to invest those FX reserves somewhere. It now owns $US100 billion in equities, the rest mainly in EUR and US bonds.

    The other main suspect is the Bank of Japan.

    Both central banks now have balance sheets equal to the size of their economies, far outpacing the ECB and Federal Reserve (see chart below)

    See: https://www.tradingfloor.com/posts/bank-of-japan-swiss-national-bank-becoming-huge-hedge-funds-8543239
    Read the Squawk
    2d
    Patto Patto
    10-15 votes short of 216 needed.......Major set back for Trump and his Republican party. There will be a "circular firing squad" among the leadership. But surprising how...
    10h
    Jim Earls Jim Earls
    10-15 votes is not that much to overcome. Markets have more to worry about than healthcare. A Debt Care Bubble is the larger issue.
  • 2d
    AlexF AlexF
    just a timing question, would think if the bill pass then eur could see the 1.07
    2d
    FBT431 FBT431
    Thanks for idea
    2d
    seas seas
    Looks like a no-go at the moment. The bill is deeply flawed.
  • 3d
    Patto Patto
    As of now the money market is fully pricing in a rate hike by March 2018 with a 30% chance of a move as soon as this...
    3d
    Acho Acho
    great analysis McKegg should we buy NSD/USD at what level
  • 4d
    benlouro benlouro
    VERY GOOD ARTICLE and coincident with my view and philosophy of investing in the next year or so...
    3d
    Patto Patto
    Growth in the Fed's balance sheet via bond buying has driven down the term premium on US Treasuries (about 1% according to the fed). That's what is...
  • 2d
    Max McKegg Max McKegg
    taking profit 1.1157
    2d
    ChristianK ChristianK
    Hi Max. What is your time horizon for the upwards trend? Have a good weekend.
    2d
    Max McKegg Max McKegg
    imminent
  • Squawk / 17 March 2017 at 20:47 GMT
    Managing Director / Technical Research Limited
    New Zealand
    More evidence today that the Fed’s move from the New Normal to the “Old Usual” will be slow.

    Inflation expectations among consumers over the next 5-10 years fell to 2.2% from 2.5% previous. The lowest reading since 1980

    The yield on the 10-year Treasury slipped to 2.5%; odds on a June rate hike back to 50/50 and stocks held steady.

    USDJPY fell in line with the 10-year yield.

    Traders have yet to figure out that medium term US bond yields will not move much higher until the Fed reduces its balance sheet. Hence, neither will USDJPY

    As the chart below show, it’s the reduction in the term premium that has pulled down the yield. In turn, Fed buying is what has driven down the term premium

    The term premium is the extra yield normally earned on longer dated bonds relative to shorter terms
    Read the Squawk
    18 March
    Patto Patto
    Here is a chart of what Max is saying re inflation expectations. The Fed won't like the look of it ..........
    18 March
    seas seas
    You have to wonder why anyone would expect further rate hikes in the US.
    19 March
    Jim Earls Jim Earls
    Seas-no doubt-especially in consideration that retail bankruptcies are now higher this quarter than in Q4-2008 and Q1-2009.
  • Article / 17 March 2017 at 1:50 GMT

    Bank of Japan, Swiss National Bank becoming giant hedge funds

    Managing Director / Technical Research Limited
    New Zealand
    Bank of Japan, Swiss National Bank becoming giant hedge funds
    Both the Bank of Japan and the Swiss National Bank signalled full steam ahead in their policy statements. The two central banks have accumulated risk assets equal to the size of the Japanese and Swiss economies respectively. And both are open to forex, interest rate and stock market risk
    Read the article
    17 March
    Patto Patto
    I'm not sure whether the SNB with $670 billion is assets qualifies as a "huge" hedge fund........But they've got a great business model: buy EURCHF and...
    17 March
    Acho Acho
    what action should we take with JPY/USD
    17 March
    Stefan Vegh Stefan Vegh
    Thx Max, very good overview. Interesting how the SNB reserves are rising despite there the cap was removed on EURCHF. The interesting thing many don't know that...
  • Trade view / 16 March 2017 at 1:16 GMT
    Short term
    /
    Buy

    Anticipating an AUDUSD bull run

    Managing Director / Technical Research Limited
    New Zealand
    Bullish Elliott Wave and classical charting structures in AUDUSD. Support is about 0.7680, 0.7650/.7635 maximum. Upside targets are 0.7835, 0.8000, 0.8340 and 0.8500.
    Read the Trade View
    16 March
    brian1983 brian1983
    i waiting to see if aud can pullback. a bit risky at 77 entry
    16 March
    Max McKegg Max McKegg
    Bought "early" at .7691 as can't risk a deeper correction given the Upside potential
    2d
    FBT431 FBT431
    Price below 0.7620. Is this trade still valid? Thanks!
  • 13 March
    opportunist opportunist
    Plus Mnuchin, Ross on fundamental side pressing $ lower - see G20 comm this week.
    13 March
    opportunist opportunist
    Interesting reasoning here:
    https://ftalphaville.ft.com/2017/01/25/2183104/that-mnuchin-guy-might-have-a-point/
    What other CCYs could be lifted ?
    14 March
    seas seas
    Getting killed here. Going to double down at 106
  • Squawk / 10 March 2017 at 21:22 GMT
    Managing Director / Technical Research Limited
    New Zealand
    GREAT AGAIN: 235000+

    That was President Trump’s response to today’s labor market report.

    The markets were less enthused: USD and bonds lost ground; the S&P 500 made a small gain.

    235k continues a run of “Great” numbers: Last week Fed Chair Dr Janet Yellen said “employment has been growing at a pace – around 180,000 new jobs per month – that is notably above the level estimated to be consistent with the longer run trend in labour force growth”.

    As a result, the unemployment rate is falling and wage growth increasing. See charts below. Just what the doctor ordered.........

    While US 10-year bond yields dropped a few basis points to 2.58%, German bunds jumped to 0.48% narrowing the rate differential and thereby boosting EURUSD.

    More on that situation here https://www.tradingfloor.com/posts/ecb-inflation-forecast-at-the-whim-of-crude-price-forex-moves-8527997
    Read the Squawk
    10 March
    Patto Patto
    Perhaps the EURUSD rally today has something to do with the fact the market is now pricing in a 10 basis point rate increase in May 2018...
    10 March
    Treve Treve
    great trading call on EURUSD yesterday Max!
    11 March
    Max McKegg Max McKegg
    Thanks. I'll also provide something for TradingFloor on Monday on EURUSD
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