Weekly review.
The week starting Monday 3 February began with a flurry of tariff news, which caused 'risk off' sentiment. Similar to the previous Monday's sell-off caused by the 'deepseek' news, the negativity didn't last too long. Although it was a bumpy ride with a lot of 'back and forth' making very dramatic viewing. Ultimately tariffs on Canada and Mexico were delayed for 30 days, which appeased the market. But we are still awaiting news from China and Europe and it's likely the next 'bout of madness' won't be too far away.
*Side note, the fact the VIX bearley went over 20 during the height of Monday's madness was a fair indication that the negativity wasn't overly 'powerful'.
In other news, US data (in the main) continues to air on the side of soft, the lower ISM service number in particular is good for the 'soft landing narrative'. I am curious about the 'higher yields' reaction to the mixed NFP data. And I'll be keeping an eye on the US 10YEAR as the new week begins .
The UK cut interest rates, which was expected, what wasn't expected was the 'dovish turn' from board member MANN (a steadfast hawk). I'm still undecided about the trajectory of GBP. The UK still has one of the higher interest rates but the possibility of a further four cuts this year could see GBP come under pressure.
A currency not under pressure to cut rates is Japan, with growing calls for a 'higher for longer' Japanese interest rate. One article I read suggested a slow and steady rise to 2%. With multiple bank predictions for USD JPY heading below 150. Which....
A) If the JPY continues to strengthen in a 'risk on' environment, could potentially leave us with only CHF( possibly EUR) to short when the market is 'risk on'.
B) Poses the question if the JPY is longable on pullbacks as a standard trade?
Of course, my preference (hope) remains for the JPY to weaken in a positive environment and for now I'm reserving judgement.
A couple of final things to note from busy a news week... It was interesting to hear MR BESSENT suggest the US administration is focused on lower yields rather than lower in rate (qué MR TRUMP suggesting the opposite in the near future?).
Finally, company earnings (in the main) remain robust, the stand out comment for me this week is that profit margins are growing. Which is another tick for the soft landing checklist.
I'll begin the new week without a strong bias, assessing the reaction to Friday's NFP and INFLATION EXPECTATIONS data. But 'mildly hopeful' of a positive environment and viable 'risk on' trades.
On a personal note, despite the influx of news, I only felt confident in one trade.
Looking at the charts in hindsight, it 'looks like' USD shorts should have been placed from Monday evening when Canada's tarrifs were delayed...but, at the time, the air was volatile and there was talk of an imminent phone call with china (which as far as I know didn't materialise).
So although it looks like a missed opportunity, if you put me back in the same situation on Monday, I would still think it's a good decision to wait.
By Thursday I did have confidence in a 'risk on' trade and placed an AUD USD long with a stop loss behind 'nice 1hr support'.
Results:
Trade 1: AUD USD +1.5
Total = +1.5%
Total since start of blog = +34.6% (risking 1% per trade)