Plato's Bunker

After a big stress this year BRL seems to be trying to recover some ground recently. If it wasn't always hard to deal with EM currencies, a very important election turns things to a nightmare.  Will try here to break through some of the noise to find some sense of the recent market. As the candidates are finally showing up in the media recently, market seems to be realizing that there is no chaotic scenario even with a less liked candidate. To make things even better, a perfect candidate in the market's view is showing some life now. That might be too early but some risks must be discounted in the price after all... technically USDBRL is trying to break some important levels now. comparing with a EM basket since last year is possible to see that a lot of bad news have been priced... specially if compared to a more fundamental long term view... also looking through a model based on PPP, country risk and commodities... I ran a simple simulation with

It seems to be clear from the last few days that USD index (broad and narrow) is not dead. After  a long cliff since Trump's election it seems now to have found a bottom in the short term, and probably medium term also. Signs of a bit stronger inflation in US and weaker than expected Euro numbers have worked their way through the currency market despite the narratives of US twin deficits that had been hovering around. As usual, narratives and bondwagon effect have their influence in the short run, specially when supported by rate differences. Some charts below with recent trend and short/medium term aspects to watch. USD spot index...trend is (or was) your friend? short positioning of Non commercial players 2 years rate difference between US and other G7 German DAX/SPX relative value and EUR lag year %   Euro/US core CPI difference and EUR lag Year % and finally unemployment rate difference between G7 and US. Despite the short term influence

It's been 6 months since I last wrote about global trade growth, so it's time to have a look again. After a pretty good recovery since early 2016 and reaching 5% growth on year over year basis it seems now that it has lost some momentum, at least for a while. But what makes me more worried about next few months ahead is that most US and Germany economic surveys are at multi year highs. That should be a good news if it wasn't for he fact that historically those indexes hardly hold much longer at those levels. And when they turn they usually impact global trade, financial markets and stocks for a while. Let's look first at some global trade indexes: CPB Global trade volume looks to be loosing some steam... RWI Index also has slowed. Now some surveys in Germany and US: Germany IFO and Europe Consumer Sentiment.  US surveys also at multi year highs: Now some industrial production indexes around the globe: EM looks p