Antipodean Capital Macro Strategy Daily Jan 10 - Do markets need more from the Fed? A hiking pause has boosted stocks, but do they need the Fed Fund cycle high to be 2.5%, and balance sheet contraction to also stop?

Macro: Lots of things to talk about today. The Fed’s dovish tilt has finally weakened the USD, with more to come. Stocks are reaching key resistance points as the Fed & trade positives are now priced in. What would be required for stocks to really get the all clear? AU & NZ data is looking pretty soggy, so the story outside of the US in data terms looks uniformly weak.

Summary: Markets consolidated their 2 week gains last night, supported by 4 further Fed speakers arguing for a policy pause, and FOMC minutes that revealed patience was wise given subdued inflation pressures. The USD weakened sharply by almost 1%, perhaps finally in recognition that an on hold Fed and weaker US data implies a weaker FX rate. Commodities continued to be buoyed by this. Yields edged a little lower.

New trades: Buy Feb VIX at 20.2.
FX: Short $JPY at 107.50 risk 110. Long EUR$ at 1.1360 risk 1.1260 target 1.18. Short NZDJPY at 72 risk 75. Long JPYKRW at 9.85 risk 9.76 target 10.30
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s short NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Bought US 10’s at 2.91% risk 3.1% target 2.6%. Sold HYG at 83.55 risk 85 target 80.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Stay short 1 unit Homebuilders at 751. Short US Banks Index at 93.25 risk 100 target 80. Stay short Dow Transports at 10375 risk 10800 target 9000.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Long Silver 14.08 risk 13.85 target 14.80+. Bought Gold at 1243 risk 1230 target 1300.