Here’s a run down from some of the worlds biggest and brightest financial institutions on their calls for tonight.
- TD: Jan taper announcement
- Citi: Dec taper 40%
- BNP: No Dec taper, Mar is baseline
- Barclays: Mar taper, tho NFP increased Dec odds
- Goldman: 7.0% unemp Fed suggested would stop QE. Tapering in March
- Nomura: Expects first taper to occur at Jan meeting
- HFE: Nov NFP adds fuel to the fire for the pro-taper camp
- MS: odds more towards a Jan start relative to our March base case
- Credit Suisse: increased Dec odds, but look for Jan taper
- Pierpont: no Dec taper.
- DBank: Dec taper, $10B Tsys
- Jefferies: $5B Dec taper. CRT: no boost to odds of a Dec taper
- BMO: lifts Dec tapering odds, but still lean toward a January shift
- JPM: Dec taper close call, but Fed will hold off till Jan
- BOFAML: 15% chance taper Dec, 30% Jan, 35% March, 20% later
- RBS: Core view for no taper in December
- Soc Gen: Thinks January is more likely
Only two of the seventeen here are looking at a taper tonight, and six go for Jan (albeit while being very flakey over the matter). Three go for March and the others either sit on the fence or have made no calls. So what can we gauge from all that wonderful analytical experience? Sweet Fanny Adams as usual. None of them or us have an effing clue what’s going to happen
We know we can’t all be right just as much as some will be and some won’t be. I’m still pretty much middle of the road at 45/55 over them tapering tonight. I’m not going to give you chapter and verse over what may happen as I did all that last time and it came to naught then. What we are more interested in is how we trade it. One piece of analysis I’ll say is that a no taper pushes the boat into the New Year and we get to do this all over again but most importantly it’s what we’ve learnt from the price action here and in September. It’s confirmed that the market buys into the taper each and every time. One way or another a taper is coming and so trading against that we should always be looking from the dollar long side after the noise has died down. I’m not talking about trading the everyday noise in between but that if you want to trade an eventual taper then falls in the dollar will be your opportunity.
I think whatever happens we’re going to get a knee jerk reaction.
No taper and the dollar gets sold. Anything 100+ pips lower in USD/JPY will have me scaling in longs on the basis I’ve just said.
On a taper the dollar will likely be bought. Is a sell off in the Euro going to last given it’s back to it’s teflon best? We do a lot of moaning about how strong it always is yet very few of us jump on such strength. Again, a decent sell off may give us a good opp to get on board.
I always like to take a step back and gauge the overall picture so that I get a general idea of direction, and so I see that whatever happens the market is pricing in a taper more and more as the months roll on. It’s like a wedge on a chart in that sooner or later we’ll hit the break point. The closer we get to that point the less room and opportunity we’ll get to jump onboard what could be the next big move. Forget the taper, the real question is whether the US is really going to recover well. If it is then QE and the taper will become by-products of what will happen in the markets. It all tells me that the risk reward is from playing the long side for the medium term. If a proper sustained recovery takes hold the market will be looking at rate rises no matter what Ben, Janet or Uncle Sam says. That’s the nature of the beast.
And that’s the beauty of the markets folks. Whatever transpires tonight we will get ample opportunities going forward. It’s going to be fun one way or another. If you’re sitting on your hands then make sure you’ve got a few cold ones in the fridge. If you’re trading over the event, the very best of luck to you.
