One of the most important things to remember when trading markets (or when living life in general) is to avoid the tendency to ascribe causality.
We’re always looking for the “becauseâ€. Indeed we can barely operate without it. Without the “because†there is no press. When was the last time you read a story on one of the main wires that started and ended with something like “well, we really have no idea why X happened.â€? Never, that’s when.
But even as the overwhelming tendency to ascribe causality is generally a mistake and can very often lead us astray, correlations are hard to ignore. Hence it’s hard not to attribute this morning’s sea of red screens to jitters over Donald Trump’s decision to go full-racist-retard by (essentially) banning Muslims from entering the United States.
What’s truly incredible about the controversial executive order is that you’d be hard pressed to find anyone who outwardly supports it with maybe the exception of Steve Bannon who, thanks to yet another Trump order, has a seat on the National Security Council. Indeed it kind of seems like Bannon may be the architect of a lot of what we’re seeing from the administration. Now there’s something to be nervous about.
And so, we start the week on shaky footing with losses across Europe and the Nikkei off despite a meandering USDJPY.
The dollar was lower out of the gate Sunday and in keeping with post-election precedent, yields and futures followed the greenback down. Leveraged accounts pared USD longs against the euro and the yen, traders in Asia said consistent with the latest CFTC data.
We did see a recovery around 3 a.m. as macro names scaled back shorts versus Asian currencies, a trader told Bloomberg. USDJPY and EURUSD 1-week implied vols are elevated going into this week’s trio of central bank meetings. The tenor also captures Friday’s jobs number. Â
