Macro coma

The current state of macro

We got yet another Goldilocks soft landing NFP release today, and the macro landscape remains one of tick-for-tick oil correlation and not much else. This chart shows how FX, rates, and oil are all the same thing and have all been the same thing for weeks. Today’s U.S. data was good, but not good enough to clear the extremely high bar required to price in Fed rate hikes.

That keeps EURUSD locked in a Rowdy Roddy Piper chokehold as flows into U.S. tech remain a source of USD demand while PBoC policy, MOF intervention and possible recycling, and USD-negative rate differential and carry/vol stories are still sources of USD supply. The ultimate unlock for the upside in the USD would be if the market decides to start pricing rate hikes, but we’re not seeing hot enough data for that.

And we won’t get any visibility on Kevin Warsh’s lean until June 17 FOMC. So you either trade your view on oil, or you trade idiosyncratic RV or long carry stories like Brazil and Hungary. One thing I will say: With client interest low in G10 right now and positioning de minimis—there is a boatload of capital ready to chase any new narrative that comes along. If you see a new narrative develop, get ready to pounce.

For now, VIX is on a 16 handle and 1-month EURUSD volatility is 5.5% and the sad base case is that the market has expended much energy trading the war over the past two months and we could settle into a boring bull market summer where SPX traces out 30bp ranges and currencies oscillate rangebound.

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Calendar

The highlight of next week’s calendar could be the Bessent/Japan meetings, and while there is some talk that they might talk about FX—Bessent did already cover exchanges rates with the prior Japanese administration in a September 11, 2025 statement.    https://home.treasury.gov/news/press-releases/sb0245

• they reconfirmed their recognition of the G7 commitment that fiscal and monetary policies will remain oriented towards meeting respective domestic objectives using domestic instruments and will not target exchange rates for competitive purposes;
• they agreed that any macroprudential or capital flow measures will not target exchange rates for competitive purposes;
• they agreed that other government investment vehicles such as pension funds continue to invest abroad for risk-adjusted return and diversification purposes, not targeting exchange rates for competitive purposes; and
• they concurred that, in cases when intervention in foreign exchange markets may be considered, it should be reserved for combatting excess volatility and disorderly movements in exchange rates, with the expectation that this tool would be considered equally appropriate for addressing excessively volatile or disorderly depreciation or appreciation. 

At the time, this was viewed by a few as a tacit agreement to allow FX intervention, and the market sold USDJPY for an hour or two on some Bessent comments afterward. The end result, however, is that was the ding dong low in USDJPY (145.50) and on October 4, Takaichi won in a landslide and USDJPY gapped higher and never looked back. That was one of the rare Sunday gaps that has still never closed.

The key point here, however, is that meeting was with Katsunobu Kato and it was before Takaichi won the election. Takaichi is pursuing a policy of looser fiscal, dovish BOJ, and not-too-weak-yen, so there is some scope for a more JPY-positive outcome this time. And JPY bulls can dream of a yen appreciation accord. I expect some sidelines comments that sound mildly yen-positive, but nothing earth shattering. But I’m ready for anything.

You can see in the calendar that Donald Trump visits China later in the week. That is likely to yield a bunch of word salad and nothing substantive. The market is not particularly fussed about the trade war with China as we have moved on to the more recent conflict with Iran.

The market is getting bored of that and perhaps will soon focus on conflict with Canada and Mexico as the USMCA comes up for renewal and the president is likely to run his predictable “Ask for ten dollars and eventually accept ten cents” strategy.

July 1, 2026 is the start of the formal review process for USMCA, so expect headlines in the weeks leading up to that. Finally, CPI comes out next week, but the market will probably look through it.

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Final Thoughts

I think one of the most important sources of edge from here will be determining the moment when macro starts to matter again. Event vol is incredibly cheap, for example, because nobody cares about economic events. If you can sus out the regime change, there will be some big recalibration opportunities.

Finally, if anyone cared about macro, this would be an interesting chart.

Have a fertile weekend.

For the first time, the U.S. birth rate for women 40+ is now higher than the birth rate for teens.

https://ifstudies.org/blog/the-us-fertility-decline-is-not-due-to-the-drop-in-teen-pregnancies

good luck ⇅ be nimble