Macro Man | Jan 09, 2013 12:35AM ET
After the hectic start to the year seen last week, this week so far has been somewhat of a damp squib. This leaves short term overbought or sold signals a bit of time to come back from extremes, for USD/JPY in particular. But given TMM are long relatively short-dated USD/JPY puts, they would rather see this correction pick up a bit of panickyness, as opposed to what can so far be considered by bulls to merely be a "healthy consolidation" before a further move higher.
Another notable twist in market dynamics is how the complete lack of shouty news has left the market chasing flow. Moves being blamed on any old news headlines have rapidly morphed into low level debate over who has done or may do what. Yawn. Basically its suddenly gone pretty quiet. So we press on with our Non-Predictions.
2) The Polish Zloty will NOT underperform the Czeck Koruna even if the NBP cut rates aggressively.
Let's start with Poland. Although CPI has surprised to the downside over the past few months, this will not last. The National Bank of Poland often stress that they want real interest rates to remain positive. The model suggests that CPI should remain above 3% for the coming year, which implies a floor for rates. And even if they do cut rates aggressively, TMM reckon that it will not be long before they are once again tightening.
Putting those together, TMM like both being long PLN/CZK but also paying the 9x12 FRA in Poland.
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