What a Treat

For many who wanted to Tweet

Their thoughts would remain incomplete

But Twitter’s been troubled

And so they have doubled

The size of a Tweet. What a treat!

The most noteworthy news I could find this morning was that Twitter would be doubling the number of characters allowed on their app to 280. Personally, I understand the benefits of this as I used to work hard to tweet my limerick by itself and fit it into the allotted space. This often required significant editing or, at the very least, the creative use of character abbreviations. And while this may have absolutely no impact on the FX markets, I think it is indicative of the broad changes that many businesses will need to make going forward in order to remain competitive. After all, the 140-character limit was the very essence of what Twitter was about. Short, pithy comments were its bread and butter. However, as the market evolved, and growth for Twitter was elusive, they needed to do something. I have no opinion on whether this will help the company, but I do think that it represents something much bigger. For the past nine years, companies were able to achieve a level of success by virtue of the fact that financing was dirt-cheap and financial engineering was a viable, low-risk option. Perhaps we are beginning to see that corporate management is going to refocus on the actual business rather than simply the share price. And even more importantly, perhaps investors are going to do the same, look at the long-term prospects of a company as a critical investment criterion. (One can always dream, no?) Only time will tell, but it may well be the first encouraging act.

But as I look at the FX markets, and truly equities and bond markets as well, there is just nothing to discuss today. The dollar is modestly softer this morning against nine of its G10 brethren with only the British pound failing to rally. The story behind the pound seems to be yet more political troubles for PM May as she may be forced to fire her International Development Secretary, Priti Patel, after Ms Patel engaged in some unauthorized diplomacy. The problem is this has the appearance of PM May losing control of her cabinet and may well lead to a shake-up of the Tory leadership. Of course, with the next Brexit talks due to start tomorrow, the last thing May can afford is any sign of weakness. All told, it is no surprise the pound suffered, falling 0.4% after the news hit the tape, and I expect the pressure to remain on the currency. But away from the pound, small gains have not yet offset yesterday’s losses. With a lack of data due and no scheduled commentary from central bank speakers, I expect we will continue to see lackluster trading in the space.

The EMG picture is a bit more mixed with both gainers and losers on the screen, but none showing significant movement. The biggest gainer today is BRL, +0.55%, as news that President Temer is back supporting pension reforms has been taken as a positive. Pension reform is something that is desperately needed throughout the world, so any country that addresses the issue may well see its currency benefit as investors applaud the actions. It is certainly something desperately needed in the US at both the Federal and State levels. And I am quite confident that if Congress were to address it in a meaningful way, we would see the dollar benefit immediately. (More dreaming on my part!) But away from BRL, no other currency in this bloc has moved more than 30bps and despite President Trump’s trip to Asia, there has been nothing of substance on any particular nation to drive trading. In other words, look for limited activity here as well today.

There is no US data on the slate today, nor are there any Fed speakers scheduled. Equity futures are little changed this morning and Treasuries have moved less than 1bp. Adding it all up leads me to believe that there will be very limited action in the FX market today. Arguably, the lack of volatility will provide a good opportunity for hedgers to enter the mix.


Good luck