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
- WTO meeting in Buenos Aires - Does EU/Mercosur trade deal pass? December 10, 2017 – December 13, 2017
- Alabama special election December 12, 2017
- FOMC meets on interest rate policy* December 12, 2017 – December 13, 2017 Summary of Economic Projections and a press conference by the Chair.
- Puigdemont ruling December 14, 2017
- Brexit: European Council Summit (do 27 EU states agree to move forward?) December 14, 2017 – December 15, 2017
- Catalan Elections December 21, 2017
- Deadline for tariff decision on solar manufacturing January 12, 2018
- 6th round of NAFTA negotiations in Montreal, Canada January 23, 2018 – January 28, 2018
- Chair Yellen's term ends (if not reappointed) February 3, 2018
- Fed: Yellen's term expires February 3, 2018
- Extraordinary summit in Brussels February 23, 2018 If no Brexit deal is reached in December 2017, then this summit marks the next best chance to come with a breakthrough.
- Fed: Lockhart (Centrist to slighly dovish) retires? February 28, 2018
- Italian Parliamentary Term ends March 15, 2018 Elections must be held no later than 20 May 2018, that is to say no later than the last Sunday of the seventy days after the natural expiration of the current five-year parliamentary term -- Wikipedia
- NAFTA negotiations "soft" deadline March 30, 2018
- Treasury's Currency Report April 13, 2018
- (TENT) Italian National Elections May 20, 2018 Voters will elect the 630 members of the Chamber of Deputies and the 315 elective members of the Senate of the Republic for the 18th Parliament. -- Wikipedia
- 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
- China's Singles Day November 11, 2018
- UK official departs EU March 29, 2019
- Term of Jean-Claude Juncker, Head the European commission, ends October 31, 2019
- Draghi term at ECB ends October 31, 2019 ECB ends