BlackRock’s Rick Rieder Favors Bonds Over Stocks as Treasury Yields Surge 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
Circle Stock Falls 4% as Crypto Selloff Overshadows SAP Pay Expansion 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
Zcash Mining Profits Surge as Liquidity Risks Grow 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
Zcash Privacy Demand Rises as AI Exposes Bitcoin Transactions 
Litecoin Marks 15 Years as Grayscale Backs LTC ETF Push 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
Kalshi Withdraws PEPE Perpetual Futures Filing 
BofA Raises Coinbase Stock Target to $203 on Stablecoin Growth 
2025 Market Outlook: Key January Events to Watch 
Ethereum Price Drops Below $2,600 as Long Liquidations Hit 4-Month High 
Evernorth XRPN Nasdaq Listing Delayed to October 12 
China's Refining Industry Faces Major Shakeup Amid Challenges 
Add as a preferred source on Google
The currency market has been acting as the adjustment factor between countries positioned at different parts of the economic cycle clock. It has been one of the few assets on which carrying long volatility positions has not been a constant pain. It has also led to a dramatic reversal in the correlation regime, leading to some significant discounts on equity options contingent to currency levels.
Adding longs in EUR rates vol with positive vol roll-down: Equities are demonstrating late-cycle behavior, and a sharp drop in risky asset prices combined with a flight to high-quality sovereign bonds would amount to a double hit on insurers and pension funds’ balance sheets. Positive vol roll down finances a significant part of the theta on this hedge.
We believe there is an elephant in the room that market participants are struggling to see, despite it having huge implications for equity markets. It is the EURUSD impact on US and Eurozone equities. Traditionally, a stronger euro is said to be a drag for Eurozone equities, and in particular core country indexes (e.g. DAX and CAC), and symmetrically a stronger dollar is said to be a drag for US exporters and hence US equities.
But the US and Eurozone equities are also strongly positively correlated. How can this correlation matrix work? In fact, it is the relative performance between US and Eurozone equities that is generally driven by the EURUSD rather than the outright equity performance. Hence a higher euro, despite being negatively correlated with US equity (in a log return correlation), can still coincide with higher US equities.
In the US: The Federal Reserve is no longer expected to pause the rate hike cycle early next year for two main reasons. First, the nomination of Governor Powell as the next Fed chair, in our view, represents a vote for continuity of policy. Second, the unemployment rate is falling again. At 4.1 percent, the risk of a substantial undershoot is rising, as a result, the dollar remains cheap to rates, and this gap could close on the passage of tax reform or the Fed’s insertion of another dot next week.
