Weak Q1 GDP: GDP in this duration was quite weaker despite the transitory factors at play and the Q2 bounce is looking quite timid. Q1 annualized GDP was expected to be weak. Heading into the number, our-own and the market's expectation was for growth of 1.0%, although with clear downside risks around investment and net exports, thanks to the weak oil price and strong US dollar. Q1 annualized GDP came in well below that expectation at 0.2%.
Export volumes: Inventories surprised to the upside in Q1, with a 0.7% contribution to growth. Shifting to external demand, this Q1 has been the second quarter that experienced a substantial decline in net export volumes - this Q1's 1.2% subtraction following last Q4's 1.0% result.
Housing outlook: While the housing construction outlook is reasonably good, the energy sector slowdown is a drag on both growth and employment, while the strong US dollar is hindering the external sector and crimping multinational earnings.
Improved ADP data: Non Farm Payrolls in the United States increased by 223 Thousand in April of 2015 compared to downwardly revised gain of 85 Thousand in March of 2015. Total nonfarm payroll employment increased by 223,000 in April, bouncing back after an unexpectedly weak report in March and matching market expectations. The unemployment rate dropped to 5.4 percent, the lowest since May 2008.
Hedging Insights through FX options:
Deploy hedging technique through Shorting a Strangle for non directional scenarios.
Sell an OTM Call option and an OTM Put option. Consider this strategy if you look ahead to the markets to move sideways and be between the short strikes at expiration.
Use this as short time as possible for expiration to take advantage of time decay on both short options and not give the underlying exchange rate much time to make a large move away from short strike.
A wider profit zone compare to Short Straddle due to larger difference between Short strikes but smaller premium received.
Margin requirement is lesser than Short Straddle.
Have this in mind that this can be extremely risky position due to presence of two naked OTM options.
