Saturday Links: 16-20 January 2017

This week I liked three articles/blog posts in particular.

How Deutsche Bank Made a $462 Million Loss Disappear -- Bloomberg Businessweek -- Excellent investigative article shedding light on a dubious 2008 deal between Deutsche Bank and Monte Dei Paschi that threw the Italian private bank into jeopardy and Deutsche into a sustained legal battle.

Taming the Chaebols -- Project Syndicate -- Insightful commentary by Korea University professor Lee Jong-Wha on the power of chaebols, South Korea's large and mostly still family-owned conglomerates. With the impeachment of South Korea's president Park Geun-hye and her government trapped in a web of corruption, this is a timely and interesting read about the connections between the chaebols, including Samsung Electronics (which makes up 20% of the country's GDP), and South Korean politics.

Fundamental Principles of Statistics -- Frank Harrell: Statistical Thinking -- Short blog post by Mr. Harrell listing principles that he follows in his practice of statistics, and which I fully share. If your work entails statistical analysis (and how to communicate the results), you'll most likely agree, too.

Watching NZDJPY for breakout

Let's be honest: It's been a rather boring week in FX and I'm happy it's drawing to a close. Yellen's comments didn't really provide any new information, yesterday's Draghi presser was a snoozer, volatility in G10 FX was subdued. Only Theresa May's Brexit speech moved markets by giving a short-lived boost to the GBP, but that's unlikely to persist with actual Brexit negotiations on the horizon.

Looking forward, Trump might stir things up from early next week. I still favour USD long trades but, as I've said before, I'm waiting for a catalyst before entering into a new position.

I also like NZDJPY long with a potential breakout above 83.29-.75 that might extend to 88 or even 93. In addition, the pair offers a bit of a carry pickup. On the sidelines as of now, but standing ready to open that trade if momentum doesn't fade.

NZDJPY 20/01/2017G10 Interest Rates 20/01/2017Open positions as of 20/01/2017 9:00am CET: Flat

Realized YTD return: +0.7% from 2 trades

Draghi to serenade markets today, likely non-event

Mario Draghi will preach his usual sermon of persistent risks to the growth outlook today. Like most analysts, I don't expect any changes in the ECB's rhetoric. Draghi & Co. will likely resist changes to their outlook for policy rates or the APP despite the recent uptick in inflation.

With Yellen signalling "a few" rate hikes per year through 2019, this is the ECB's chance to keep the EUR at the current low or even lower levels vis-à-vis the USD. I'm not paying a lot of attention to Trump's statement that the USD was too strong, by the way, because the dollar's path will be determined by the Fed, not by the tweeting POTUS.

Open positions as of 19/01/2017 9:00am CET: Flat

Realized YTD return: +0.7% from 2 trades

Short-term: USD long view challenged

I'm still waiting for that ingenuous trade idea to pop into my head. Everything seems to be challenging my USD long view right now - at least in the short run.

Given that lack of inspiration I'm turning to a country that's known for being just as neutral: I like the EURCHF chart below. Nice trendline that's been confirmed a couple of times since 2007.

Open positions as of 18/01/2017 9:00am CET: Flat

Realized YTD return: +0.7% from 2 trades

Risk-off ahead of Theresa May speech, but GBP rebounds

The GBP rebounded somewhat from its Monday low and currently trades around 1.2120. This is despite a broad risk-off sentiment ahead of Theresa May's speech at 11:45am London time today: Gold and the JPY are up, equities and the USD are down from yesterday. Market participants expect May to announce that her government will favour a "hard" Brexit rather than a "half in, half out" agreement.

Cable is still trading close to its lows with negative momentum intact. GBP futures positions are still deep in negative territory but less extreme than in mid-2016, suggesting that the fall in the GBP might well continue. Hard Brexit + Trump = GBPUSD approaching parity? That seems extreme at the moment, but it's something I consider.

With this much uncertainty in the markets but no real story to play just yet I feel comfortable on the sidelines. Waiting for ECB on Thursday and, more importantly, to finally see some actions by Trump and his cabinet beginning early next week after his inauguration on Friday.

Open positions as of 17/01/2017 9:00am CET: Flat

Realized YTD return: +0.7% from 2 trades