Trade Ideas Survey: The Market is Getting the Fed Wrong

Responses were collected on 28 July.

Macro Hive Network

• Markets have overpriced Fed cuts. History agrees. So does Participant 6; they’ve gone long EDZ2EDH3. Participant 13 added the other new trade (US 5s30s steepener) following Chair Powell’s speech post-FOMC. And on exits, 6 cut their ERZ3ERZ3 flattener and US 2s10s 1Y forward steepener while 13 closed their short T-notes, bunds, and EDH2 trades.
• Participant 8 thinks the post-FOMC USD market reaction was unwarranted. They’ve increased their short GBP/USD position as a result. Meanwhile, Participant 7 opened the only new trade this week in FX, short AUD/USD. It’s a trade we’re considering. And on exits, Participant 2 is no long EUR/GBP while 12 has cut short EUR/USD, and 6 closed their 7.00/7.25 USD/CNH call spread.
• Participant 13 closed all the positions they had last week, three of which were in equities (XLE and QQQ put spreads, and short Eurostoxx). I remain bearish on equities while John sees room for equities to hit new lows on earnings downgrades.
• Participant 7 has closed short copper after it turned back above $350/lb. Meanwhile, Participant 12 now sees the best value in being long gold outright rather than versus silver.
• In credit, Participant 13 is no longer short HYG.

Bilal’s Trades and Views

I began adding new trades last week, starting in EM. I selected them from the pool of 12 additional trades we’re considering. However, this week, I leave my trades (long USD/INR; pay 2Y INR and THB; and 1s5s MYR flattener) unchanged.

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)