USD has it’s best day for a month, but the rally is unconvincing
This Daily Digest will cover:
- 🇺🇸 USD has it’s best day for a month, but the rally is unconvincing
- 🇨🇳 China back ANT Group to raise money
- 📝 FOMC minutes in focus later
The first day of the year yesterday was not short of movement as fairly thin markets saw above 1% ranges in most major markets.
In FX the USD used the new year to reassert itself as the Euro fell from 1.0670 to the low 1.05’s and GBP traded as low as 1.1901. Oddly this was done against a backdrop of US yields moving down nearly 4% at one stage before recovering. The USD up move was only half the story as the bounce that followed retraced a significant part of the move and left a few early p/l bruises to start the year.
Stocks got off to a flying start in Europe with the FTSE leading the charge early, until the states walked and took away any feeling of joy as all their indexes sold off and closed in the red. Overnight Asian bourses are mixed with tech stocks rallying hard on the Chinese approval for ANT group to raise extra funds. This could be a significant development for China as it could mark a change of tact from authorities, perhaps sensing the need to back businesses as they reopen from Covid. The AUD has not really joined the reopening party to this point but shows signs it might be about to. If China is serious about reopening and refuelling its economy this trade could well have legs to run.
I wrote yesterday about how the first week of the year is often characterised by unsustainable moves, so whilst I should be cheering the Euro and GBP lower I am holding back and letting it settle down before diving in (yes I got caught out by the bounce yesterday!) sticking to our plan of short cross YEN as the purest play.
A quiet day in crypto yesterday unless you were cheering the rally in SOL which is long overdue. Not much has changed overnight, although ETH has started to join the party. Long time readers will know this is our preferred medium term play and whilst I am not suggesting the low is in place with my macro view for Q1, I wonder if, like SOL, the FTX fall out flow is starting to diminish. If so, we are too low…
Good luck as always!
