highlights

Calendar Mania

So many events in just five days.

April 28, 2025

Sea cucumber skin under a microscope

Current Views

Long 12MAY 168/163 put spread in CHFJPY
~31bps off 175.25

Events!

This week’s calendar offers plenty of food for thought, so let’s go through some of the biggies. Today is corporate month end, a day when US corporates generally buy USD vs. EUR, AUD, GBP, and JPY. The JPY is exempt today because its month-end value date was Friday due to the Shōwa Day holiday. Here’s the performance of GBPUSD on corporate month end, for reference.

It’s important to note here that corporates have become more discretionary in their hedging activities over the past year and seem to focus more on levels than on the t-2 date. You can see the returns of going short GBPUSD on t-2, for example, have turned positive. AUDUSD looks the same. This used to be a reliable trade, but like real money month end, once hedgers’ behaviors start to incorporate the fact that everybody knows that everybody knows about the effect, EMH kicks in.

Next on the calendar comes the Canadian election (results tonight). I don’t see this as a market-moving event, unless Pierre Poilievre manages an upset. In that case, you might see a 50 point drop in USDCAD, at most. Carney goes off as a ~80% favorite with Pierre Poilievre trading at 20% on Kalshi and Polymarket.

Tuesday, we get Consumer Confidence, which is close to irrelevant as we have about 1,415 soft sentiment releases telling us that the mood is dour, and we don’t really need #1,416. Then we get JOLTS, which is also pretty meaningless because it’s for March. What we want here is data that shows a potential shift in the US economy post Liberation Day. Aussie CPI and China PMIs might have a small influence on the AUD. I liked AUDNZD on a 1.06 handle but whiffed and maybe missed my chance.

Wednesday is so full I could barely fit it all on the spreadsheet!

Wednesday Highlights:

German CPI is important as the ECB says it’s getting close to neutral and therefore the June meeting will hinge partly on this release. A full cut is priced in for the ECB on June 5, and paying that meeting seems close to a free option, perhaps? It would take a massive disruption in financial conditions to elicit pricing of more than 25bps, but with strength in stocks, major uncertainty, an ECB close to neutral, and another 38 days before the meeting… A booming German CPI figure might turn some heads. The month-over-month figure is forecast to come in at 0.3%, but Pantheon is calling for 0.7% (!), ING is at 0.5%, and the bulk of the estimates are 0.2% or 0.3%.
US ADP. This is one of the first labor market releases other than Initial Claims and reports the situation for the week of April 12. With claims still bobbing up and down around 220k, there is hardly any evidence of labor market weakening in the headline numbers so far. A negative ADP release might get some people excited. There is a theory that Initial Claims are being held down by the emergence of the gig economy. If you lose your low-paying job, you can sign up to drive for Uber instead of filing a claim for Unemployment Insurance. Maybe ADP will support that theory.
GDP feels pretty much irrelevant and backward looking while the Treasury Refunding announcement will capture some attention but probably deliver nothing new. Bessent has criticized Yellen for not rolling out the debt when rates were low, but now rates are still high and Bessent already told us they are a long way from replacing bills with longer-term debt. For now, they just pray that buyers remain abundant and investors and stablecoin issuers keep buying US debt.
Month end is tricky as global equities performed well and the US ended flat. As such, the main driver of month-end (US equity returns) has no signal, and I would expect that hedging behavior will be less systematic because those entities that need to buy USD might just not bother buying them as the regime shift toward a lower USD makes it sensible to increase USD hedges organically.
MSFT and META will be closely watched after the close. Not for their earnings (backward looking) but for their outlook with regard to corporate advertising and capex intentions. Are capex and advertising still on track? As uncertainty builds, it would make sense for companies to cut back on advertising because that is often one of the first and easiest places to pause discretionary spending when the outlook gets foggy. Watch for NVDA to move if MSFT and META offer upside clarity or downside fear on capex.
Finally, we get the BOJ late Wednesday night. Pretty much nothing is priced in, which makes it an attractive meeting for JPY longs. You never know if there is some kind of lean towards one last hike as there is an OK window here to play nice with the USA and get rates up with the Nikkei mid-range, inflation still running above target, and USDJPY stable and buffered by plenty of gamma from 140 down to 135. Again, probably a nothingburger, but short USDJPY into the meeting doesn’t look horrible if we’re close to 144.

For reference, here’s the USDJPY chart. I had noted that JPY longs would get tricky at 140 due to mega gamma and a huge technical level (see here). Now the chart looks like a top of the range sell. You can see the April 8 support was 144.25 and that has now become important resistance at 144.00/25. And the cloud comes in just above 144.00, too. Getting short USDJPY into 144 for the BOJ meeting is nice.

Thursday’s ISM looks irrelevant, because as mentioned we know what sentiment is doing. AAPL and AMZN after the close and again their outlooks are what matters. Huge beat + bad outlook = stock goes lower.

We end the week with Friday’s US jobs report. Here is the forecast distribution from Polymarket.

Economists are at 130k and Kalshi is at 155k. We keep waiting for the US jobs market to roll over and we keep waiting and keep waiting… Still waiting.

Final Thoughts

The pattern of Asia buying gold and selling USD has subsided. This does not mean the trends are over but could mean the consolidation view dominates until there is some meaningful new information. 1.1250/1.1500 EURUSD, 140/144 USDJPY, 1.38/1.40 USDCAD, etc.
Nice chart from State Street showing how rent could offset tariff-driven price rises.

Have a cool, green day.

Megacap Earnings Next Week

These images are all polarized images of sea cucumber skin under a microscope

Pretty insane!

Resembling a boat’s anchor, these are the minuscule projections from the skin of a sea cucumber, known as spicules. These needle-sharp structures are composed of a transparent, brittle mineral formed from calcium carbonate. The microscopic spines, called anchors, are embedded into the thin, transparent body wall and help the sea cucumber burrow through the sand.