Time of day flip

FOMC FOMO

It’s a weird setup as we had a huge jam higher in EURUSD and friends yesterday as some short gamma, exotic barrier action, and a huge scoop of FOMO combined to push EURUSD to a 3-year high. Overnight action in precious metals (and the USD) was another disappointing Asia session for the dollar bears as the Asia time zone fondness for selling USD and buying gold has not been a thing for quite some time.

If you recall, in April and May, gold and EURUSD went up almost every day in Asia. Now, it’s the opposite, as you can see here:

I think the explanation is two-fold. 1) The US jobs data has driven a good bit of the performance and most of the recent drop in US yields has also come in US time. 2) Asia sold the USD they needed to sell in April and May and so did Europe. They bought the gold they wanted to buy. They were early.

In case you are curious… Same deal with gold.

This, again, is more about economic data than any particularly persistent directional flow from US investors. It’s just everyone reacting to data that comes out in US time.

Speaking of time zone performance, everyone keeps waiting for Japan to sell USDJPY and cross/JPY because the JPY is cheap, Japanese yields have risen, and if GPIF and friends were ever going to rotate into JGBs, the time would be now. But you can see in the chart at right (see the black line) that Japan has been net nothing in USDJPY for five months.

This is in the context of a long history of USDJPY selling in Tokyo due to directional current account flow. USDJPY has historically gone down in Asia time, with the exception of two main regimes (both marked on the chart on the next page). 1) During Abenomics, GPIF and pension funds (and everyone else) bought USDJPY and cross/JPY in Asia and 2) During the Russian energy crisis, oil importer demand for USDJPY in Tokyo time outmuscled the LHS flow. Here’s the time zone chart zoomed way, way out:

FOMC day

For the DXY, the long period of dovish FOMC days ended in November 2024, while SPX results have also been mixed in recent years. Today’s outcome is going to be interesting as we have the possibility of some dissents for 50bps and you might even get a Miran vote for 100bps, just for clicks.

Final thoughts

Good luck with FOMC today.

Here is a podcast filmed yesterday with Tony Greer in which we talk about macro, my hero, and my heartache. Markets plus some surprisingly random personal stuff.

An ethical question: If you believe that social media is tearing apart the fabric of society by amplifying rage bait through an addictive slot machine interface, and that social media gives a voice to the dumbest and most psychotic individuals in the world… Are the people who innocently post there also complicit?

That is, if I contribute to the network effects of Twitter by posting funny or useful content about finance, am I complicit in the collapse of society? Should those who believe social media is a cancer not proactively cancel our accounts? Or at least acknowledge the hypocrisy of complaining about social media’s deleterious existence while we actively create the scaffolding upon which social media builds its castle of doom?