Opinión de mercados
Energy becomes a main driver in markets. Dollar reigns
Today we start the nineth absolute return strategy of the year aiming to capture an annualized return of 4.01% on November 2nd.
The last strategy, which expired yesterday, closed with a monthly negative result of -0.16%. Both Usd, and Gbp automatic defence strategies were activated as expected and they consumed the risk premium embedded in the original strategies and a bit more. As noted in other communications, the profile of these absolute return strategies seeks the maxim “In range we win, in trend we lose a little or double win”. This last strategy lost a little as the Gbp spot movement was erratic both upwards and downwards during the month. This behaviour is not probable, but possible and we design the strategies and their defence to manage it when occurs. This is the first loss in the gbp strategy in 27 months. The Usd strat, on the contrary ended in a slight profit that compensated somewhat the Gbp’s underperformance.
MARKET
We are entering the last quarter of the year with a sense of risk off created by the multiple drivers accumulating at a time where monetary policy makers start to think of lifting ultra-ease policies.
Surging Treasury yields on bigger FED taper expectations, inflation concerns on the global energy crunch, and concerns on China property sector are pushing the Usd higher and stocks lower. (S&P 500 September -4.8% was worst month since March 20202). And a short term one: October 18 deadline for raising U.S debt ceiling.
Natural gas prices in Europe spiked by 500% YTD, 20% only yesterday. The impact of this moves on inflation, growth and external accounts are to be considered, and from a foreign exchange perspective the relative impact across the globe as the move becomes global is what cares for currencies direction.
According to Deutsche Bank estimates the impact in eurozone current account could be in the order of 2% of GDP, wiping out Europe’s trade surplus. In Asia, mostly Japan and South Korea, could struggle if follows Europe price move by 5% In negative terms of trade with big consequences for growth and inflation.
On the other hand, biggest producers like Norway, Russia, Australia, may see exports rise as much as 30% of GDP in the case of Norway if current prices persist.
An interesting observation is the movements and changes seen in the speculator community as they ran no underlying exposures being hedged, have tight stops, are sensitive to changes in fundamentals or technical factors. The U.S Commodity Trading Commission (CFTC) releases a report every Friday with data from the week ending the previous Tuesday.
On this end, EUR long positions have been reduced to net back to neutral, and without including the latest fall in euro prices from mid last week so we maybe well in short euro position now.
The relative evolution of real rates is also showing support for usd as they are climbing faster.
This may have clear consequences for EURUSD going into year end, as well the potential liquidity squeeze of usd.
There is big controversy among specialists on whether the Usd will keep its pace up or will regain its bearish momentum towards +1.20 levels. For the time being, a risk off environment is supporting the Usd well and fading the reflation trade for now.
