Market Friendly Fed
So, the ridiculous dots were moved…The Dollar would have some recovery, even without the Fed meeting.
GBPUSD at 1.42, USDCNH at 1.38, USDJPY at 110.75 and EURUSD at 1.22 were all at key resistance areas…
So, the ridiculous dots were moved, as at this week’s FOMC meeting they signalled rates will be going up in 2023, twice. Even more ridiculous, the Fed has suddenly become hawkish. High inflation and inflation expectations meant the Fed had to react, but it has done the minimum it might have; potentially, they could have been more aggressive in reducing QE, particularly MBS and corporate bond buying.
‘Selling Volatility at current low levels might seem a risk, but then the Chinese Forex and Bond markets have led the global trends…While markets have been prepared to sell Volatility at the lower prices, yields are also at the low, so while Puts may be bought, the skew has been steep’, Macro Thoughts, June 9, 2021. Having hit a low, potentially yields could return to the top of the range, 1.75%, while being short options Volatility will become increasingly risky.
We are not sure why markets might have thought the Fed might be more dovish than at their March and April meetings; CPI data had been strong, PPI stronger, and actual inflation even stronger. Having forecast in August 2020 that price rises would be fast and prolonged, we also commented that, as base affects drop out, central banks will need to focus on the continued rise in actual costs.
Macro Thoughts Ltd
Since 2012, top tier global Hedge, Pension, Investment and Insurance Fund managers, as well as corporates and private individuals, have benefited from Macro Thoughts’ proven insight, market commentary, hedging, and investment strategies to leverage opportunities, with positive returns on over 75% of strategies, producing double digit returns for our clients over consecutive years.
Macro Thoughts is independently researched and draws on extensive macroeconomic and market experience gained in Fixed Income, Futures, Derivatives, Bond, Forex, Commodity and Equity Index markets and from strong Global Macro investment, risk taking and strategy backgrounds. Far-reaching product knowledge across asset classes enables us to consider hedging and investment strategies that reflect our expected market trends. Macro Thoughts is directed by Keith Grindlay, whose experience spans, somewhat uniquely, both the buy and sell side, having managed trading and investment desks at top tier institutions, ensuring all strategies are evaluated for risk/reward and the optimal instrument(s) for best leveraging the strategy suggested are employed.
Globally recognised for strong analytical skills, aligned with a particular aptitude for anticipating global economic events ahead of the majority of commentators, Macro Thoughts’ independent fundamental economic research and analysis and resultant strategies have a track record that assures exceptional results, with a service that surpasses the model of bank-supplied, partisan research and stands out from the general contributions on platforms that your clients and peers already have access to. The support and value offered by Macro Thoughts, delivering written research and analysis, presentations and consulting services, is backed by decades of macroeconomic and market experience and can be tailored to your specific requirements.
Member of the Royal Economic Society & EuroIRP, the European Association of Independent Research Providers.
www.macrothoughts.co.uk
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