SHORT USDJPY LONG NZD/AUDUSD: FED KAPLAN SPEECH HIGHLIGHTS
Fed Kaplan unsurprisingly maintained the tune of his fellow members and kept the tone hawkish, with no mention of recent data undershoots but also interestingly on the hawkish side like the others failing to mention the record highs in the US Equity markets.
From here USD is in a tricky position, a open-close below the 2yr MA may signal a broader and more sinister USD selling trend that may stay for a while (unltil Nov/ Dec) given election year, poor data and Fed unlikely to hike until Dec despite their best efforts to convince the market otherwise BOJ style - much of which near term focus now shifts to Fed Chair Yellens speech next week and the infamous GDP/ Durable goods orders, where if misses, will no doubt cause USD selling and USD STIR selling on an unparalleled scalem imo regardless of what Yellen says (100% going to be hawkish in a bid). However all may not be lost for the USD/ FOMC rate hike cycle, this USD selling could bring some needed life to near-term inflation and give the Fed the data they so badly seemingly desire, of which many are overlooking.
Nonetheless, preparing for the worst yen shorts seem appropriate, as the US equity rally is waiting to pop anytime and markets shift into risk-off where yen and gold longs will dominate to new yearly highs. Also the HY kiwi and aussie pairs which have little in the way to stop them post RBA/ RBNZ and after an above average employment report this week leading them into a 0-data week next week and only AUD Retail Sales eyed the week after for the two; thus any next week USD selling would be matched perfectly by kiwi and aussie buying if it is the case, whilst the yen longs are likely to be a 1-4wk play as we wait for risk assets to pop.
USD Feds funds rate opt implied P of a sept rate hike currently trades at 18% vs 15%yday up on hawkish Fed speakers though the USD/ DXY got sold net on the day regardless hinting that the USD selling is becoming less of a Fed function and more of a medium-term trend/ election pricing. Dec was down on the day at 40.3% vs 41.7%yday.
Fed Kaplan Speech highlights:
-FED'S KAPLAN: AN AGING WORKFORCE IS ONE OF THE BIGGEST THREATS TO THE US ECONOMY
-FED'S KAPLAN: POLITICAL SCENE DOES NOT / SHOULD NOT AFFECT THE FED & MONETARY POLICY
-FED'S KAPLAN: THE DOLLAR HAS BEEN STRONG AND HAS HURT EXPORTS, CHINESE GROWTH COMING DOWN
-FED'S KAPLAN: BREXIT EFFECT IS MANAGEABLE IN US
-FED'S KAPLAN: THERE IS ROOM TO CHANGE RATES BUT NOT MUCH DUE TO LOW NEUTRAL RATE
From here USD is in a tricky position, a open-close below the 2yr MA may signal a broader and more sinister USD selling trend that may stay for a while (unltil Nov/ Dec) given election year, poor data and Fed unlikely to hike until Dec despite their best efforts to convince the market otherwise BOJ style - much of which near term focus now shifts to Fed Chair Yellens speech next week and the infamous GDP/ Durable goods orders, where if misses, will no doubt cause USD selling and USD STIR selling on an unparalleled scalem imo regardless of what Yellen says (100% going to be hawkish in a bid). However all may not be lost for the USD/ FOMC rate hike cycle, this USD selling could bring some needed life to near-term inflation and give the Fed the data they so badly seemingly desire, of which many are overlooking.
Nonetheless, preparing for the worst yen shorts seem appropriate, as the US equity rally is waiting to pop anytime and markets shift into risk-off where yen and gold longs will dominate to new yearly highs. Also the HY kiwi and aussie pairs which have little in the way to stop them post RBA/ RBNZ and after an above average employment report this week leading them into a 0-data week next week and only AUD Retail Sales eyed the week after for the two; thus any next week USD selling would be matched perfectly by kiwi and aussie buying if it is the case, whilst the yen longs are likely to be a 1-4wk play as we wait for risk assets to pop.
USD Feds funds rate opt implied P of a sept rate hike currently trades at 18% vs 15%yday up on hawkish Fed speakers though the USD/ DXY got sold net on the day regardless hinting that the USD selling is becoming less of a Fed function and more of a medium-term trend/ election pricing. Dec was down on the day at 40.3% vs 41.7%yday.
Fed Kaplan Speech highlights:
-FED'S KAPLAN: AN AGING WORKFORCE IS ONE OF THE BIGGEST THREATS TO THE US ECONOMY
-FED'S KAPLAN: POLITICAL SCENE DOES NOT / SHOULD NOT AFFECT THE FED & MONETARY POLICY
-FED'S KAPLAN: THE DOLLAR HAS BEEN STRONG AND HAS HURT EXPORTS, CHINESE GROWTH COMING DOWN
-FED'S KAPLAN: BREXIT EFFECT IS MANAGEABLE IN US
-FED'S KAPLAN: THERE IS ROOM TO CHANGE RATES BUT NOT MUCH DUE TO LOW NEUTRAL RATE
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