Well, it’s Monday morning and former FX trader Richard Breslow has once again managed to capture pretty much everything we’ve been saying for the past 72 hours in one paragraph plus six bullet points.
Breslow hits all the high points including the hilarious fact that markets seem more relieved that polling has been “made great again” than they are about the fact that Macron will likely be the French president. There’s also a nod to the amusing fact that a stronger currency is now a risk-on event despite years of what amounts to competitive devaluation by the ECB. Thomas Jordan (who we advised FX traders not to fuck with over the weekend) gets a mention as well. Springtime in Paris, Breslow concludes, “can indeed be very enchanting.”
Read the full note below which is dripping with wonderfully refreshing sarcasm.
Via Bloomberg
The pollsters won the first round of the French presidential election. In other news, Emmanuel Macron and Marine Le Pen have advanced to the next phase. There were times last night when there seemed to be as much relief from the forecasts being accurate as the diminished likelihood that one of the extremists will win the ultimate prize. Despite the far-right representative coming second and ahead of either of the main party candidates.
- I guess it shouldn’t come as a huge surprise. It truly unnerved the commentariat that the unpredictable seemed to be unpredictable. The second vote is apparently now knowable with certainty. Europe is saved. Populism is about to be vanquished. A strong euro is a good thing for the economy. And ECB President Draghi can begin normalizing rates. Presto chango. Not bad for a result that was everybody’s base case
- Some of the other big winners include SNB President Thomas Jordan as EUR/CHF made a new high on the year. This is a good one to keep an eye on as 1.0850, where it peaked, is where heavy technical resistance begins. If the “everything is right with the world” meme is to hold, the cross needs to show it. Game theory would suggest it wouldn’t be a bad time for him to give it a little nudge
- The BOJ has to be feeling a bit better. And will feel a whole lot more sanguine if EUR/JPY can stick above the really pivotal 120 level. It was just last Monday that 115 was under threat. The U.S. can’t really fault the Japanese for this yen weakness, as they will be referred to the French ministry
- Gold is interesting. I’d have expected it to leak more than it did. It may require Treasury yields to push higher. As we speak, they left a nasty gap and sit right where the bulls were hoping they wouldn’t have to see anytime soon. This may be the most interesting asset of all
- Equities are happy. Think of all that hard-earned wealth creation. And they get to ignore the Shanghai meltdown and potential U.S. government shutdown. Make tax cuts, not war. Another one-half percent higher in the E-mini and dreams of new all-time highs will be dancing in traders’ heads
- Springtime in Paris can indeed be very enchanting
Well good luck with the notion of ECB Draghi normalizing anything.