A Beer on Merve

Merve the Swerve says something and the market decides to listen - this time. As we know, the market should have given up listening to Merve months ago and so really should ignore his last pompous departure monologues. But his comments appear to have landed on a market as short as GBP as they are confident that Jpy will fall. Which is quite a lot.

The resultant move in GBP has therefore solicited cries of "squeeze" rather than a volte-face.   But considering that the original move down is based on expectation of a volte-face on BoE policy then any volte-face on the volte-face should be considered as a double volte-face which, like a double negative, is a nothing. Dales comments this morning are hardly supportive of a new regime

BANK OF ENGLAND'S DALE SAYS TALK THAT CENTRAL BANKS SHOULD FOCUS MORE ON GROWTH IS "DANGEROUS"

BOE'S DALE SEES "CONSIDERABLE FLEXIBILITY" IN CURRENT INFLATION TARGETING REGIME TO SUPPORT OUTPUT, JOBS

BOE'S DALE - UNCLEAR THAT BOE COULD SIGNIFICANTLY BOOST ECONOMIC GROWTH WITHOUT GENERATING INFLATION

So perhaps the original premise of GBP going yennish, so beloved by 5 minute macro, is indeed seeing a classic squeeze. Playing cable on long term arguments is fine if you have deep pockets, but to paraphrase a "bearish website", "In a long enough time frame volatility on Cable moves to zero". Ok that isn't quite right but some members of TMM have been around for a while and mentally map cable as "1.70 plus or minus a bit".  Considering all the momentous events that have occurred globally and selectively to the US and UK over the past 25 years cable really is a mean reversion specialist.

So much for "trending to the outright forward" so beloved by various FX models.

The real widow maker in the short GBP basket has been Eur/GBP which has gone nowhere since the start of Feb when the mood of GBP bearishness really got underway. Which just highlights how messy Euro is in its own quiet way.

In general FX is in squeeze mode within a pretty dull background (if you strip out gbp and jpy) and we remain short of AUD/USD and AUD/ZAR  re. the post of couple of days ago. Though we have been accused of complicating the AUD trade by using ZAR as a counter, considering the whiplash in USD over the past few days, we suggest that using ZAR instead of USD in this environment may have actually have simplified it. And added some carry. ,

We are going to be away for a few days sliding down Alpine hills so will probably not be back until the end of next week. But this reminds us:- The TMM holiday FX indicator. "GBP will always base the moment we make our last purchase on a foreign holiday". For once we may have to thank Merve for something. A free beer.