- Fed Willams was hawkish on the margin and much of what was said was in line with Dudley and Bullard today/ this week in what looks like an attempt to give the USD a support as it slipped and closed below the 2yr average today and struggles to find support despite 5-consecutive days of selling.
1. Given USD weakness I like GBPUSD shorts at 1.32 if possible if not 1.318 is good enough (be prepared to hold for some time if the market moves higher 1-2wks possible), but more importantly given the dovish ECB minutes I like short EURUSD at these high levels and after 5-days of back to back selling this looks like a good statistical level to sell into.
2. Possible hedges include short USDJPY on the inevitable risk backdrop that is ever waiting to happen as US equities now struggle to cling on to making new records and the excitement of doing so - a is coming so long yen at good levels makes sense here. Also long the antipodes with the 6-9m high yield trend in mind and likely to continue (especially as poor USD data continues to weigh on the pairs especially given the above average employment report from both which may indicate signs of firming too), whilst it has been tough (especially in aussie) this week, consistency/ sticking with the trade has proven profitable when buying dips as aussie or kiwi selling hasnt lasted more than 18hrs in reality and i expect this to continue with little reason to sell either now the biggest and only real risk e.g. RBNZ and RBA and then employment data has passed possibly as well as antipode bulls could have hoped. Given the AUDNZD complex lower kiwi longs look better vs USD but technically we require a firm breakout from the 0.733 12m highs before any real commitment buying will or can be seen behind kiwi thus aussie given 120pips of free topside room looks more attractive though the RHS has remained illusive as yet.
Fed Williams Speech Highlights:
-FED'S WILLIAMS WARNS THAT WAITING TOO LONG TO RAISE RATES RISKS HARD LANDING OR EVEN -RECESSION
-WILLIAMS SAYS U.S. ECONOMY IS STRONG
-WILLIAMS SAYS RESTARTING RATE HIKES EARLIER ALLOWS MORE GRADUAL PACE
-WILLIAMS SAYS ON COURSE TO MEET 2-PCT GOAL
-WILLIAMS SAYS U.S. ECONOMY IS GENERATING JOBS AT UNSUSTAINABLE PACE
-FED'S WILLIAMS SAYS WANTS GRADUAL INTEREST RATE INCREASES OVER THE NEXT COUPLE OF YEARS
-WILLIAMS SAYS NEGATIVE RATES IN THE U.S. WOULD HAVE BIGGER COSTS THAN BENEFITS
-FED'S WILLIAMS SAYS WEAKNESS ABROAD IS ONE REASON FED HAS NOT RAISED RATES AS FAST AS HAD EXPECTED
-WILLIAMS SAYS THERE IS VERY LOW RISK OF NEEDING TO GO TO NEGATIVE RATES U.S.
-WILLIAMS SAYS FED NEEDS TO TAKE AWAY THE 'PUNCH BOWL' OF LOW RATES
-FED'S WILLIAMS: WAGE GROWTH BEGINNING TO PICK UP
-FED'S WILLIAMS CALLS FOR RAISING RATES SOONER RATHER THAN LATER; DELAYING RISKS RECESSION
1. FEDâS WILLIAMS: SEP RATE HIKE SHOULD DEFINITELY BE IN PLAY
- OK with uncertainty over exact timing
- Not in hurry to hike but can't let the economy overheat
The bar has been set v v low though at 1.2% for GDP though the durables goods has been set alot higher at 2.9% and 0.2% vs -0.9% and -3.9% last time.. if GDP was to come in lower than 1.2 all hell would break loose and tbf i can even see USD selling if its a 1.4 figure given a way off 2%