Less is More

Last night from the Chinese we learned
That growth there just might have returned
The market reaction
Showed some satisfaction
‘Bout Aussie, while dollars it spurned

Under the heading, less is more, today’s note will be extremely brief. Recent price action does not make for a very compelling story in any currency. Broad underlying themes remain in place, but the day-to-day activity is just uninteresting right now. As such we have once again seen a pretty dull overnight session. While the USD is generally softer, it is by no means universal. Norway and Australia are the leading gainers, with the Aussie story predicated on stabilization in China’s economic data (IP, Fixed Asset Investment and Retail Sales all released in-line to modestly better) and the Norwegian saga one of higher inflation readings indicating potential higher interest rates in the future. But you know that when I am leading with AUD and NOK that things are just not that interesting. The euro, yen and pound are all trading within pips of yesterday’s closing levels and quite frankly there has been little of real interest regarding any of these currencies. It appears that we are in the midst of the summer doldrums and the combination of thinly staffed trading desks due to summer holidays and lack of new policy information has reduced activity. In fact, CLS, which is an interbank, intraday settlement system, announced that daily volume has fallen by 16% in the past month. I think that is a pretty good indication of the reduced interest in the FX market right now.

In the emerging market space, yesterday saw both BRL and CLP rally more than 1%, with BRL the beneficiary of central bank intervention while CLP was responding to the rally in Copper. But outside of those two currencies, even this space has been quite dull.

I have not changed my long term views (equities and bonds are overpriced and the dollar has room to rally) but with no US data on which to focus and no scheduled speakers of note today, quite frankly I believe hedgers will be able to spend their time better on other tasks today.

Good luck and good weekend