Read on the Trading Floor - 26 June 2024
Today’s focus… Intervention watch and election hedges
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Macro Themes At Play
Theme 1 - Dull, Dull, Dull
Theme 2 - Yentervention Watch
Theme 3 - On the campaign trail in France
What else is being read on Harkster?
Theme 1 - Dull, Dull, Dull
Another quiet session, USD drifting stronger as Corp t+2 flows flush through the pipes. When quarter end rebalancing is the highlight of the day, you know it's a dull one. Not quite as bad as watching the England vs Slovenia nil all draw, but none the less its tough to get enthused by today's price action. July 4th normally signifies the holiday season in markets, it looks like it could be quiet until Labour day as investors will have little incentive to add new risk ahead of the US POTUS elections. Even the Fed won't change policies beforehand! Once again, the economic calendar is sparse, with a $70bln 5yr auction a potential session highlight. Will the foreign investors turn up, continue to rotate away from OATs? The 2yr auction stopped on the screws, with the highest bid to cover in over a year.
Theme 2 - Yentervention Watch
As we clear 160.00, the market's focus is on where the BoJ/MOF will come in... The difference this time is US fixed income is settled, 10s back hugging the summer lows 4.30% and yet Yen continues to decline. Crucially for those looking for another wave of USD supply from local authorities, the pace of weakness has not yet triggered the BoJ ... we may have to wait until ~170.00 for them to intervene???? The pace of recent deprecation is far from alarming and vol remains low.
Steno Research - NO ACTION FROM MOF / BOJ AROUND 160
Nikkei Asia - Yen falls below 160 to dollar, hitting lowest level since 1986
Across The Spread by Weston Nakamura - Markets Are Yenterventilating - Keep Calm (For Now)
Steno Research Positioning Watch - Markets are buying into US Fixed Income, but fast money don’t agree
USDJPY vs US10s
Source: tradingeconomics.com
Theme 3 - On the campaign trail in France
As the French electorate prepare to head to their local polling stations, the mkt is setting its hedges for the inevitability of co-habitation. It won't be a surprise if Le Pen comes back, what would be surprise is if the left can outflank the right... After quarter end, will EUR head into the weekend at ytd lows? If you're a market maker, and get given EUR in the next few sessions, why would you hold them over the wkd? Get them and sell them as quickly as possible... Career risk if you don't. #quoteandclear
Bloomberg - Emmanuel Macron’s Defeat Would Be a Defeat for Europe
FT - Macron versus vibes
Saxo Markets - French election: Is this a new Meloni moment for Europe?
ABN Amro - France snap election: Radical parties come to the fore
EURUSD drifting back to YTD range lows.
Source: tradingeconomics.com
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