Chart of the Day
Non-commercial traders have been positioned short on the USD against other major currencies since Covid hit and US interest rates fell toward those in other countries (even though the USD jumped in March 2020 due to safe-haven flows). Now, with the Fed hinting about tapering to come, traders have reduced their position so that it is essentially neutral. That has coincided with the slight rebound in the USD and could be a sign of things to come if the Fed announces tapering later this summer.
Macro
US retail sales rose by 0.6% MoM in June, while control group retail sales – which feed into the GDP data for consumption – rose by 1.1%. Those were both better than economists expected.
It was a mixed picture, with lower major purchases for furniture and cars but higher purchases for electronics and clothing.
The other data showed that the US business inventories-to-sales ratio rose to 1.26 in May. That is still very low compared to before Covid, but it is the first rise in a while and maybe a sign global supply shortages are getting better.
The US University of Michigan Consumer Confidence Index fell back in July, maybe due to the further rise in gasoline prices.
The eurozone goods trade balance fell to 1.0% of GDP in May, partly because the region’s carmakers are unable to produce due to the world microchip shortage.
Markets
Traders are still positioned short on small caps, following the Russell’s recent underperformance.
Traders’ overall positioning in cyclical type trades, like long oil and equities, has continued to fall.
Despite some signs of weakness for cyclical trades, the copper/gold ratio has yet to follow bond yields lower.
Is the VVIX telling us VIX will rise this week?
Like what you see? Please forward this email to your friends and colleagues, or use the button below to share it on social media. They can also follow us https://twitter.com/macro_daily
Got a question? You can reply directly to this email to get in contact.
