Blog
Flatter Yield Curves a Headwind for Risk Assets
The US and global yield curves steepened briefly last summer and steepened further after Trump’s election, but it has been rolling over almost all year. This has a negative read through to growth and key risk assets. The yield curve is one of the key things we track...
read moreEUR: Tactically Overbought; Macro Headwinds
Macro headwinds are building up for long EURUSD positions in addition to signs that EURUSD is becoming very overbought technically. A few weeks ago we noted that EURUSD sentiment was one of the most bullish (contrarian indicator) among the 50 major FX pairs we track....
read moreNo Turnaround in Sight for C&I Lending
We are seeing multiple signs of a slowdown in lending in the US, as discussed in our recent thematic US Banks Stocks: Exposed to the End of the Credit Cycle. The top chart shows a coincident relationship between sales-to-inventory ratios and C&I lending. As...
read moreCapital Leak from China Stemmed for Now
China’s FX reserves stabilized for the third month running, in a sign that China has made some serious headway in tightening capital controls. The top chart shows that PBoC selling of FX reserves has not been significant since January this year. The bottom-left chart...
read moreBoJ Underscores Support for USDJPY
Data and policy continue to line up for a weaker JPY. Kuroda has re-iterated his commitment to stimulus, stating, “it’s premature to discuss in an exact way about exit strategy”. Kuroda continues his battle against the deflation mindset; and, as the top chart shows,...
read moreStretched Sentiment Leaves EM Vulnerable
Liquidity conditions have deteriorated meaningfully for EM equities. The left chart below shows that the steep drop in G7 Excess Liquidity points to a risk of much lower EM equity prices in about 3-4 months’ time. This materially worse backdrop for EM equities is...
read moreLong GBPUSD: Short Squeeze and April Seasonality
(from our Weekly report of 4th April 2017) GBPUSD remains range bound, with the triggering of Article 50 last week widely expected by the market. Since the Brexit vote, speculative positioning on GBP has been persistently very bearish; however, the latest Commitment...
read moreReflation in Danger Due to Low Liquidity
Over the past few weeks we have expressed scepticism on the Trump reflation trade and we have argued that bank stocks should underperform. We have shown previously that when you look at the 3 and 6 month change in Commercial & Industrial lending as well as the...
read moreBuy USDJPY Dips
Fundamentals in Japan still support a weaker JPY. Yield differentials are one of the most important drivers of currencies and, as the top chart shows, this shows that USDJPY is becoming stretched to the downside. Also, as we highlighted in our Themes for 2017, the...
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