Thread by @VaradMarkets

#Macroscope: Weekly Snapshot

1⃣ Tapering: Divergent views
- Bullard wants taper to start in fall/Sep21, end by Q1’22, Delta temporary
- Brainard, possible Fed Chair, wants to see Sept jobs data (out on 8 Oct) to judge progress
- Overall Dec’21 announcement remains base case
1/10

2⃣ Virus
▪️ US cases further up; Delta now >80% of cases but more localized where vaccination remains low
▪️ "experts don't expect Delta to cause nationwide surge like winter wave"
▪️ To watch school re-opening
▪️ Herd immunity threshold probably pushed up, vaccination key
2/10

▪️ Drop in UK cases encouraging
▪️ China virus situation worst since Wuhan last yr; while absolute number still small, worth monitoring
▪️ Israel with 57% vaccination seeing rising "hospitalized cases but more serious condition significantly delayed"

3/10
scmp.com/news/china/pol…

3⃣ CFTC COT FX Positioning:
▪️ 6th consecutive week of reduction in long EUR position (since Jun FOMC)
▪️ Short AUD added ahead of RBA tomorrow
▪️ Long CAD further reduced - close to neutral now
▪️ Short JPY now stands out as largest Long USD equivalent followed by short AUD
4/10

4⃣ #Australia RBA MPC 3 Aug
▪️ NSW & Victoria represent bulk of new cases, forced into lockdown
▪️ QE A$ 5bn/wk to 4bn/wk till Nov – mkt already pricing chance tapering would be deferred
▪️ If looks beyond recent lockdowns, sticks to taper timeline=>AUDXXX can retrace higher
5/10

5⃣ #China slowdown theme continues
▪️ Enough discussed about recent regulatory crackdown & few mkt calming comments from authorities
▪️ Both Official (50.4) & Caixin Mfg (50.3) PMI continued to ease off, lower than expectations, barely in expansion zone

6/10

6⃣ #FX last week
▪️ DXY -0.5% but reasonable divergence within FX
▪️ JPY best (+0.65%), EUR, GBP, CAD also up
▪️ AUD worst (-0.55%), NZD, NOK also in red
▪️ Non-Asia EM did well: ZAR, TRY, COP, HUF, CZK +>1.0% v/s USD
▪️ TWD, PHP best in Asia, CNH again failed above 6.5000

7/10

#AUD, still in downtrend, interesting ahead of RBA in backdrop of China-driven nervousness
▪️ Dovish surprise=>could pierce thru 7300 support => would completely unwind reflation pricing since Nov'20
▪️ Should wait for >7415 for any clear sign of revival of reflation theme
8/10

▪️ #Dollar had been disconnected with Equities & Real rates but few now looking for catch up of EUR & JPY with recent collapse in US real yields ▪️ A bumper Friday NFP (>1000k, BBG +900k) could put that off with renewed USD bid with calls for Sept tapering announcement

9/10

7⃣ $550 bipartisan Infrastructure Bill likely to be passed by Senate this wk but may be held back in House unless Budget Resolution ($3.5trn Dem-only) also cleared by Senate

Senate vote by itself not a massive market mover but worth watching this space

bloomberg.com/news/articles/…