The Mega FOMC conference results!!!

The Mega FOMC conference results!!!

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Macroeconomic Analysis
Is a Perfect Storm Brewing for the Week Ahead?
White House Drama and FOMC Could Push Volatility Higher This Week
By Ricky Cove
Mar 19, 2018 | 8:08 AM
Stock markets brace for higher volatility
White House drama dominated US market movement last week. After Trump fired US secretary of state Rex Tillerson via Twitter, President Trump fired FBI deputy director Andrew McCabe days before his retirement to undercut Robert Mueller’s probe into Russia meddling in the US elections. If we put political risk aside, markets were still on the edge last week due to the possibility of a second round of tariffs. Economic data reported last week indicated slower growth in inflation, but higher industrial production and consumer confidence overshadowed the weak inflation report.

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US market performance
Equity markets in the US remained under pressure amid increased political uncertainty and the possibility of another round of tariffs. Broad market ETFs like the SPDR S&P 500 (SPY), the Deutsche Bank’s Dogs of the Dow ETN (DOD), and the PowerShares QQQ Trust Series (QQQ) fell in the previous week. The US dollar rallied against major currencies after the industrial production and consumer confidence reports, while the US bond (BND) markets managed a minor recovery as lower-than-expected February inflation growth reduced fears about faster rate hikes.

VIX Index speculators continue to bet against volatility
The CBOE Volatility Index (or VIX), which is a measure of investor expectations for future volatility and tracked by ETFs such as the iPath S&P 500 VIX short-term futures (VXX), rebounded last week. The S&P VIX 500 closed at 15.8 as compared to the previous week’s close of 14.64. As per the latest Commitment of Trader’s (or COT) report released by the Commodity Futures Trading Commission (or CFTC), large speculators have decreased their long volatility positions from 76,918 contracts to 53,612 contracts. With the FOMC March meeting in focus and the ongoing political drama in the White House, we can expect bouts of higher volatility this week.

In the rest of this series, we’ll analyze the performance of various asset classes and discuss their outlook for the week ahead.

How Large Speculator Positions in S&P 500 Index Trended Last Week
By Ricky Cove
Mar 19, 2018 | 8:08 AM
S&P 500 Index back in the red
For the week ending March 16, the S&P 500 Index closed at 2,752.01, a fall of 1.2%, as news about a possible second round of import tariffs could be announced soon and because of the increased political uncertainty at the White House. Global trade war concerns reemerged last week, dragging US and global equity into negative territory. The other concern for markets last week was the inflation report. Inflation in February was reported to have increased at a slower-than-expected pace, which allayed fears about rates rising too quickly, at least one positive outcome for the markets. Two of the major S&P 500 sectors, utilities (XLU) and the real estate (XHB), managed to record gains last week, while the financials (XLF) and the materials sectors were the worst-performing sectors last week.

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Speculator positions on S&P 500 Index                                           
Large speculators of the S&P 500 Index increased their net bullish positions last week. The net long contracts increased from 11,809 contracts to 13,917 contracts. This data was reported by the Commodity Futures Trading Commission (or CFTC) through their weekly commitment of traders report. This data was only up to Tuesday, March 13, which was before the firing of the deputy director of the FBI and retail sales, consumer confidence, and industrial production releases. The SPDR S&P 500 (SPY) and the iShares S&P 500 (IVV), ETFs that track the S&P 500 Index, have witnessed higher inflows of $8.3 billion and $917 million, respectively.

The S&P 500 Index outlook
There are two major event risks for the US indexes this week. One major risk could be political as Robert Muller moves ahead with the special counsel investigation. President Trump could get even more aggressive, which could rattle investor sentiment. The other risk is the FOMC, which is scheduled to meet this week. A hawkish statement along with a higher dot plot and improved economic projections following an almost priced in 0.25% hike could signal a higher possibility of another three rate hikes this year. A faster rate or interest rate increase could have a negative impact on the indexes last week.

FOMC Could Decide the Fate of the US Dollar This Week
By Charles Graham aka Vanilla spilla
Mar 23
US dollar helped by softer tariffs
The US Dollar Index appreciated for a fourth consecutive week due in part to the impressive industrial production and consumer confidence numbers that were reported at the end of the previous week. Earlier in the previous week, lower-than-expected inflation growth and retail sales numbers had little impact on the US dollar as markets have already priced in a rate hike from the US Fed at its March meeting. The turmoil in the White House had a marginal negative impact on the US dollar as the pressure from the Mueller probe reached the Trump businesses last week. The US Dollar Index (UUP) closed for the week ending March 16 at 90.2, a weekly gain of 0.17%.

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Speculator positions as of March 13
As per the latest commitment of traders report, released on March 16 by the Chicago Futures Trading Commission (or CFTC), large speculators and traders have increased short positions in the US dollar for a third consecutive week.

As per Reuters calculations, the net US dollar (USDU) net short positions increased to -$14.6 billion as compared to -$11.5 billion in the previous week. This amount is a combination of the US dollar’s contracts against the combined contracts of the euro (FXE), British pound (FXB), Japanese yen (FXY), Australian dollar (FXA), Canadian dollar (FXC), and the Swiss franc.

Key events for the US dollar this week
The major event for the US dollar this week is the FOMC meeting that will begin on Tuesday. The statement will be released on Wednesday. The FOMC meeting will be followed by a press conference and an update to economic projections. Markets may be looking for hints about the FOMC’s future plans. An unambiguously hawkish FOMC could trigger a US dollar rally, but any hint of dovishness could unwind the recent gains in the US dollar.

Why Bond Markets Returned to Worrying about Flattening Yield Curve
By Ricky Cove
Mar 19, 2018 | 8:08 AM
Inflation miss triggers yield curve flattening worries
The US bond markets moved marginally higher in the previous week as investors’ worry about rising bond yields fell after the February inflation print showed stable growth. The Consumer Price Index (or CPI) grew by 0.2% in February, taking the annual growth in core inflation to 1.8%. The bond market responded to the inflation report with a fall in bond yields after the inflation report. Weaker-than-expected housing starts and building permits have also added to the downward pressure on the bond yields last week. The Vanguard Total Bond Market (BND) ETF, which tracks the performance of the bond markets, ended the previous week at 79.5, appreciating by 0.26% for the week ending March 16.

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Bond market performance and speculator positions
For the week ending March 16, the ten-year (IEF) yield closed at 2.8%, depreciating by five basis points. The two-year yield (SHY) closed at 2.3% (up by three basis points), and the longer-term 30-year yield (TLT) closed at 3.1% (down by nine basis points). The decline in long-term yields reignited the fears of yield curve flattening, which is a negative signal for the economy.

As per the latest commitment of traders (or COT) report, released on March 16 by the Chicago Futures Trading Commission (or CFTC), speculator short positions decreased for the first time in four weeks. The total net bearish positions as of Tuesday, March 13, fell by 90,781 contracts from 362,150 contracts to 271,369 contracts. Stable inflation growth in February allayed bond market investors’ fears about interest rates increasing too quickly, resulting in a decrease in short positions in the US bond (BSV) markets.

The week ahead for the bond markets 
This week, the focus of bond market investors will likely be on the FOMC meeting. It is highly expected the Fed will increase rates by 0.25% at this meeting, but the focus will be on the language of the statement, which could push bond yields either way. Bond market bulls might be hoping for a dovish Fed, which could lead to lower yields and higher bond prices, while bond bears might be hoping for an unambiguously hawkish Fed, which could increase the odds for a fourth rate hike in 2018 and thereby push bond yields higher and bond prices lower.

Why the Euro Was under Pressure Last Week
By Ricky Cove
Mar 19, 2018 | 8:08 AM
Euro hit by dovish comments
The euro-dollar (FXE) exchange rate closed the week ending March 16 at 1.22, a fall of 0.15% against the US dollar (UUP). The decline in the European currency was fueled by the dovish European Central Bank (or ECB) statement, which was echoed by ECB members in their speeches in the last week. ECB members were clear about their intention to keep the policy guidance unchanged as the European inflation growth remains subdued. A strong euro could further depress import costs, resulting in lower inflation.

European equity markets, which are tracked by the Vanguard FTSE Europe ETF (VGK), had a mixed performance last week. The German DAX (DAX) ended the week lower by 0.23%, the Euro Stoxx (FEZ) was up 0.27%, and France’s CAC gained 0.11% for the week ending March 16.

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Euro speculative bets increased last week
As per the latest commitment of traders report, released on Friday, March 16, by the Chicago Futures Trading Commission (or CFTC), speculator positions on the euro increased by 13,408 contracts last week. The total net speculative bullish positions on the euro (EUFX) increased from 132,972 contracts to 146,380 contracts as of March 13.

Outlook for euro
This week, the European currency price action is likely to be impacted by the US dollar demand and the FOMC statement. A hawkish FOMC statement could lead to the appreciation of the US dollar against the euro. Several economic data releases from the euro area are expected this week, but they are unlikely to have a major impact on the European currency’s performance this week. In the next part of this series, we’ll analyze why this week is important for the British pound.

Why the British Pound Could Turn Volatile This Week
By Ricky Cove
Mar 19, 2018 | 8:08 AM
British pound posts minor losses last week
The British pound (FXB) appreciated 0.66% against the US dollar (UUP) for the week ending March 16. The pound (GBB) closed for the week at 1.394 as compared to a close of 1.385 in the previous week. There weren’t any major economic data reports from the UK last week, but a weaker euro led to increased demand for the British currency.

British equity markets (BWX) were impacted by increased concerns about global trade wars and closed lower last week. The FTSE 100 Index (EWU) was down 0.84% for the week ending March 16 and closed at 7,164.14.

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Speculators decrease bullish positions
As per the latest commitment of traders report, released on March 16 by the Chicago Futures Trading Commission (or CFTC), speculators have increased their overall bullish positions by 2,763 contracts in the previous week. The total outstanding net long contracts increased from 5,264 contracts to 8,027 contracts as of March 13.

The week ahead for the British pound
This week is filled with events and economic data releases that could drive the British pound’s volatility higher. The most important event is the EU summit on Thursday and Friday, where they could look at cementing a Brexit transition deal with the EU. As per recent news reports, there could be a deal at this meeting, which could have a positive impact on the British pound. The Bank of England is also scheduled to meet this week, but no major changes are expected after a surprisingly hawkish statement at the last meeting. Overall, a transition deal, if accepted by both sides, could lead to the appreciation of the British pound this week. In the next part of this series, we’ll analyze the price action of the Japanese yen in an uncertain political and economic environment.

What’s in Store for the Japanese Yen This Week?
By Ricky Cove
Mar 19, 2018 | 8:08 AM
Japanese yen appreciated 0.73% last week
The Japanese yen (JYN) managed to claw back its losses after the scare about a second round of tariffs hit the global financial markets last week. The possibility of the second round of tariffs from the Trump administration, especially to target Chinese imports, ignited fears of a trade war. There weren’t many economic data releases from Japan, but the minutes from the Bank of Japan’s meeting last week indicated that the central bank was in no hurry to tighten policy. In the week ending March 16, the Japanese yen (FXY) closed at 106.0 against the US dollar (UUP), appreciating by 0.73%. Japanese equity markets (EWJ), on the other hand, continued to appreciate despite a global decline in risk appetite with the Nikkei 225 (JPXN) posting a weekly gain of 0.97% in the previous week.

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Speculators decreased bearish bets on the yen     
The Japanese yen (YCL) speculators decreased their net short positions on the yen for a fifth consecutive week, as per the latest commitment of traders report, released on March 16 by the Chicago Futures Trading Commission. As of Tuesday, March 13, Japanese yen speculators had a net short position of 79,539 contracts as compared to 86,845 short contracts in the previous week.

The week ahead for the Japanese yen
This week’s price action of the Japanese yen could be driven by demand for the US dollar, especially depending on the outcome of the FOMC meeting. A hawkish FOMC could lead to further depreciation of the Japanese yen against the US dollar, while the opposite could lead the yen to appreciate. Japan’s February exports, March manufacturing, and inflation reports are expected this week.