While the negative correlation between the DXY and risk appetite as waned recently, an encouraging sign for the bulls, it does clearly show that the “carry trade” has had a large part in fueling the gains in risk oriented markets. It feels to me like it’s been much more laborious for the US markets to make a new high, given that important sectors such as the financials are seriously lagging and risk averse industries such as health care being being rotated into as a defensive stand.
What we are seeing now is the market trying to ride the bike now that the training wheels are coming off. Will it fall? I think so at the end.
Note, the Aussie dollar has been trading more in lockstep with the risk trade so I am focusing on this pair. Given the ugly cockroaches we’ve uncovered recently in the form of Greece, and Dubai, I think there are other roaches out there. We are already in a very fragile situation and any adverse or negative global surprise could just be too much for the risk markets to handle.
Proceed with Caution
Upcoming Key Macro Events
- NAFTA talks in Ottawa September 23, 2017 – September 27, 2017 Ottawa Contentious issues, such as Mexican wages, local content rules and the U.S. trade deficit would be addressed in those sessions = Key meeting.
- French President outlines plan for EU integration September 26, 2017
- Soft deadline for firm contours of Tax reform September 29, 2017
- U.S. Gov't Spending Bill due September 30, 2017
- Deadline for Debt Ceiling increase September 30, 2017
- In Spain, Catalonia Referendum October 1, 2017 Spain, Catalonia Referendum
- (TENT): EU Summit (end of Phase 1 of Brexit talks: soft deadline) October 1, 2017
- CBO estimates US Gov't runs out of cash Early to mid-October October 2, 2017
- (TENT): Brexit talks resume October 7, 2017
- (TENT): China's 19th Party Congress to meet October 14, 2017
- China: Leadership transition to 19th Congress begins October 18, 2017
- (TENT): Target date for completion of budget w/inx for tax reform October 20, 2017
- Japanese snap election October 22, 2017
- FOMC meets on interest rate policy October 31, 2017 – November 1, 2017
- China's Singles Day November 11, 2017
- Deadline for tariff decision on solar manufacturing November 13, 2017
- Deadline to determine status of Canadian Softwood tariffs announced no later than Nov 14 November 14, 2017
- (TENT) Debt ceiling deadline December 8, 2017
- FOMC meets on interest rate policy* December 12, 2017 – December 13, 2017 Summary of Economic Projections and a press conference by the Chair.
- Gov't funding deadline (shutdown if not passed) December 15, 2017
- (TENT) Italian National Elections January 1, 2018
- Chair Yellen's term ends (if not reappointed) February 3, 2018
- Fed: Yellen's term expires February 3, 2018
- Fed: Lockhart (Centrist to slighly dovish) retires? February 28, 2018
- D-day anniversary June 4, 2018 at 3:30 pm – 4:30 pm 1944
- Fed: Fischer's term expires June 12, 2018
- Austrian general election due by Sept 2018 September 1, 2018
- (TENT) Xiangshan military forum September 30, 2018
- Draghi term at ECB ends October 31, 2019 ECB ends
- Term of Jean-Claude Juncker, Head the European commission, ends October 31, 2019