Global Macro Insights

Follow the Money!

5/18/2019

Follow the Money!
As macro-traders, we are mainly interested in the long-term trend: where we are in the trend, and how long it will continue. This is true not just for particular trading products, or monetary policy, but for geopolitical trends and capital allocation trends. In fact, the interdependency between these and other factors are what make the financial markets resemble what Paul Tudor Jones coined a “3-dimensional chess game”. Today, let’s look at some current trends to see where capital is likely to go in the next 10 years.

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Future Direction of the Euro

4/6/2019

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First a little background: in the wake of the financial crisis in 2008-2009, the ECB had been compelled to cut interest rates to negative; they currently sit at -0.4 %. The intent of negative rates is to encourage institutions to lend money rather than park it at the ECB. If euro banks aren’t lending, then they are forced to pay the ECB to sit on their cash, or take greater risks in their lending practices. This has been hurting EU bank profits for quite some time, as the chart below indicates.

Well, some relief may be on the way for EU banks, but this doesn’t necessarily bode well for anyone who is long the EURO.

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