These Days, Everyone Needs To Be A Macro Trader

There’s a lot to grapple with out there and unfortunately for those of you who would rather remain inside your single stock bubbles (no pun intended), everyone now has to become a macro trader.

That means that each morning you have to read the FX and rates tea leaves if you want to have a clue what’s going on. This week its bund-[insert other sovereign] spreads that matter. Oh, and the yen. Oh, and of course the dollar.

Bringing things together for us on Tuesday morning is former FX trader turned Bloomberg contributor Richard Breslow, whose latest you can find below.

Via Bloomberg’s Richard Breslow

All FX eyes were on the yen yesterday. That wasn’t particularly surprising. It blew away all of its G-10 counterparts. By a lot. And the battle to trigger stops was so obvious in the price action that it seemed like the monitor had subtitles.

  • But through it all, and today too, I can’t help but feel it wasn’t really the yen I should be watching. Unless you are pricing in some event risk for the Abe visit to the White House this Friday. My takeaways for what may have more lasting consequences were the shocking widening of core as well as peripheral sovereign spreads in Europe. And how quietly well the dollar has been trading
  • Speculation on Japanese rates heading higher is way overdone. And it’s going to take a bigger steepening of the JGB yield curve to create a flood of repatriation trades. Unless you think there’s nothing attractive in the rising European yields. And it’s hard to think there is when German yields were off 4bps on the day
  • When Australian 10-year yields gapped down this morning, it never occurred to me that it had anything to do with the pending RBA decision. And made me very curious to see how the likes of Brazil trade today
  • ECB President Draghi warning the European Parliament on risks to market liquidity if any tapering is done without great care were not the soothing words traders might have expected. But he had no choice. In a world where reflation is an enduring meme, the German numbers are a political hot potato. From Frankfurt to Brussels to Washington D.C.
  • Stop to think about the implied additional expense of debt service from an Italian yield that’s risen over 50bps just this year
  • As for the dollar, it doesn’t have to be in a relentless trend to be tradable. Has it come off hard so far this year? Yes. Did it hold the 50% retracement of the September-to- year-end move? Yes. Is it quietly up five days in a row? Yes. Is the Fed mantra likely to soften anytime soon? No, unless things get uglier elsewhere. Does it now have a well- defined stop if it craps out? Yes, that 50% retracement at DXY 99.14, just under the Feb. 2 low. If it can close above 101, you’ve got nice location
  • If it fails, it fails. But if there’s one lesson from this year, the crowd’s had a bad track record
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