SideNote: It appears more-and-more likely that Jim Rogers was correct with his prediction/call on the direction for Gold and the dollar. He basically said, the dollar would gain strength against all other currencies one more time before collapsing; and Gold would go down to retest the $960.00 support level before moving higher to reach new heights. Which means all the longs in PM will have to wait awhile longer. The plus side, there will be one more PM buying opportunity to fill your treasure chests.

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Dollar Surges Above 200 Day Moving Average

The highlight of the overnight session was again the dollar, as the DXY index notched its ninth gain in 11 days, and broke above its 200-DMA for first time since May 2017, leading to a USD-driven move across G-10 and EMFX markets, while weighing on most commodities and US futures.

The Bloomberg Dollar Spot Index (BBDX) extended its advance Tuesday to the highest level since January as Treasuries halted three days of gains ahead of the Federal Reserve’s policy meeting.

Elsewhere, the pound extended losses after weaker-than-forecast April manufacturing PMI data; and the lack of liquidity saw the Swedish krona drop nearly 1% against the dollar and to a fresh eight-year low against the euro.

Top European News

• Large Upside Buying in Short Sterling Bets on No BOE Rate Hike
• Italian President Rules Out New Elections in June: Messaggero
• Qatar’s Wealth Fund Is Said to Weigh Selling European Hotels
• Swedish Krona Declines an Eighth Day to Lowest Level Since 2009

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Dollar Is Soaring As Markets Capitulate To "Synchronized Global Growth" Narrative

The "synchronized global growth" narrative is now being capitulated against, and as such, the Dollar has recoupled with rates differentials because the US is again viewed as the world’s leading growth-story.

DOLLAR BREAKS-OUT, AS RECOUPLING WITH RATE DIFFS BLEEDING LEGACY MACRO POSITIONING

• Heard this one before?  DXY through 200DMA overnight is escalating the “performance bleed” from consensual macro positioning with implicit “short USD” components
• With the “synchronized global growth” narrative now being capitulated against, the Dollar has recoupled with rates differentials, as US is again viewed as the world’s leading growth-story
• In conjunction with R.O.W.’s “slower growth” trend, we have seen the “hawkish central bank pivot” thesis break-down as well—BoC, BoE, BoJ are collectively “regressing” with increasingly “dovish” rhetoric, while PBoC takes outright “easing”- / stimulus- actions
• Nomura Quant Strategies CTA model showing the “Dollar reversal” phenomenon in “real-time,” as WoW we see “short USD” positioning expressions beginning to reverse / pivot in not just FX but Equities and Commodities as well
• EM equities longs then in a dangerous position, as TFF data shows the Asset Manager “net long” position @ +2.5 z-scores, while Leveraged funds too remain high @ +0.8 z-scores
• Despite Dollar’s move, “long Crude” trade continues to hold via geopol w/ Iran decertification looking certain…yet is largely “priced-in” as a “known unknown”
• Crude holding higher is critical for the larger “bearish rates” / “re-inflation” themes
• On top of Crude “fatiguing” here, fixed-income “bears” seeing additional near-term / tactical “reversal” risks as well:
  • US Treasury’s quarterly refunding statement out last night showed a monster reduction in financing needs to “just” $75B from the original Jan est of $176B (!) as cash balances came in much higher than expected post taxes
  • The return of overseas demand for USTs, not just from ‘unhedged’ buyers (Japanese lifers recent investment plan releases) but also the future potential to see ‘hedged’ buyers return IF USD were to further rally going-forward (not just yet though), as the ‘punitive’ cost of xccy decreases, allowing attractive relative yields to dictate purchases
• Reiterating best “USD upside break-out” hedges: EEM / MESA PS, Nikkei CS (note: the EURUSD PS has already ‘realized’)
• Despite lower SPX yesterday, many were surprised by the outperformance of “1Y Momentum” factor (+0.7%) and broad HF L/S (-0.1%) vs SPX -0.8% / NDX -0.8% / RTY -0.9% / RIY -0.8%
• Not just the +++ forward seasonality I’ve been noting recently for “Momentum”- and “Buyback”- LONGS coming down the pipe in the months ahead—because yesterday was driven by the underperformance of “Momentum Shorts”
• “Momentum” SHORTS were pressed hard yesterday and contributed a massive +1.2% from a market-neutral perspective (vs “1Y Momentum Longs” -0.5%)
• As a reminder, the month of May can continue to “chop,” but the massive (negative) seasonal for “Momentum Shorts” that begins in earnest starting in June and running through September sees an average -3.7% drawdown (“positive” contribution from short book) since 1984 / -4.9% average return since ’00 / -3.8% median return since ‘00