It may be option expiration day (always leading to abnormal market activity) but it remains all about the weak dollar, which after crashing in the two days after the Fed's surprisingly dovish statement has put both the ECB and the BOJ in the very awkward position that shortly after both banks have drastically eased, the Euro and the Yen are now trading stronger relative to the dollar versus prior.
We’ve written quite a bit over the past two years about the likelihood of social upheaval in China.
Since assuming office, Xi has presided over the country's emergence as a force to be reckoned with both militarily and financially on the world stage. Indeed, there’s an argument to be made that Beijing has returned the globe to a bipolarity not seen since the height of the Cold War.
Yesterday when summarizing the Fed's action we said that in its latest dovish announcement which has sent the USD to a five month low, the Fed clearly sided with China which desperately want a stronger dollar to which it is pegged (reflected promptly in the Yuan's stronger fixing overnight) at the expense of Europe and Japan, both of which want the USD weaker.
ECB, BOJ don't want a weak dollar; China does not want a strong dollarFed sides with China for now
— zerohedge (@zerohedge) March 16, 2016
One of the biggest false narratives pitched by the mainstream to mitigate concerns about a global recession, is that even as China's massively overlevered manufacturing sector is careening into a hard landing, China's "strong" consumer base will keep the country's economy afloat (a narrative shared with the U.S.), even though as reported over the past weekend retail sales soundly disappointed expectations, while the latest proxy of China's consumer strenth, namely "record" box office receipts, was recently uncovered to have been - like everything else in China - mostly fabricated.
Today Janet Yellen and the FOMC will go back to square one and try to reset global expectations unleashed by the ill-fated December rate "policy mistake" hike, when at 2pm the Fed will announce assessment of the economy (even if not rate hike is expected today) followed by Yellen press conference half an hour later.