Here we are on payrolls Friday after a week in which a lot of sh*t happened. But really, when you think about it, not much happened at all.
The Fed was a complete snoozer. I mean even more so than people expected it to be. “Deer in headlights” comes to mind. Or maybe it’s that the implicit (and likely Erdogan-style explicit) pressure from the White House has tied the committee’s hands as long as the dollar seems predisposed to rising on pesky rate differentials that certainly seem to suggest the greenback should be stronger.
Then there was the BoE. The commentary was hawkish. The market didn’t read it that way. Or that’s the story you got from the media. My take is that the market wasn’t reading it at all. Rather, the market was reading the Brexit white paper and therein lies the problem for cable. It was like the market, in the middle of reading the roadmap for Brexit, suddenly realized it was … wait for it… reading the roadmap for Brexit. This is real. This is reality. Hence the plunging pound.
As for the BoJ, it’s Trump versus Kuroda. Not stepping in to anchor JGB 10s plays right into the new President’s hands. So defend the target range they will. Yield curve control lives after all.
Below, find the latest from former FX trader turned Bloomberg contributor Richard Breslow who, heading into the NFP print asks: “are you feeling lucky?”
Via Bloomberg’s Richard Breslow
“Are you feeling lucky?” Well, no. I get the sense that everyone is feeling a little bit punk. At the end of a very busy week, there’s no feeling of resolution. No one has changed their view. And nothing is really working for any trader trying to be proactive in this mess
- Central banks met, and in the face of upbeat numbers, we got no indication that there was a discernible sense of optimism. Yes, things are going OK. Seem to be headed in the right direction. But they feel no compunction to do anything. Or even more so, none to push traders’ views in a particularly bullish direction. Even they’ve gone agnostic on numbers. Data dependence has given way to event dependence
- And then there was non-farm payrolls. The biggest number of the month. A number where the whispers for a beat sound more like thunder. Yet suddenly there’s no energy to position for a break-out trade. The world may be marching to a different drummer, but Murphy’s Law hasn’t been repealed
- Sure, the dollar has averted implosion. Which wasn’t at all sure in the wee hours of yesterday. U.S. Treasury yields are steady at recent elevated levels and equities refuse to budge at all. But the optimism that greeted the week has been sapped from the zeitgeist
- Any number of times this week, traders tried to position for some hawkish surprise — only to get promptly burned. FOMC may signal a strong March possibility? Not so fast buster. Let’s put on some pounds. After all, the Bank of England might take back that post-referendum cut given consumer optimism that’s made hash of forecasts. Not on your life. In fact, they laid out a set of inflation forecasts that sent short sterling contracts rocketing. BOJ might raise the target yield on the 10-year JGB? Shame on you for betting on it
- The thing about trading is you have to keep picking yourself up from the mat and going again. Eventually, numbers will out. As the old saw says, discipline and appropriate position size will keep you in the game. I’ve yet to see any analyst that’s lowered their earlier forecast for this number. But then again, no one’s feeling lucky