Goldman just did it again.
In fact, the bank whose FX recommendations have become so notoriously terrible they are on par with those of Dennis Gartman, has absolutely outdone itself this time because less than 24 hours after Goldman said to sell the Yuan, the Chinese currency just had its biggest one day move in over 5 years!
Recall that it was just last night when we presented not only Goldman’s (largely accurate) RMB-FOMC Monetary Policy Loop, which merely showed the reflexive relationship between the Fed, the dollar, the PBOC and the Yuan (and everything else inbetween)…
… but also Goldman’s latest FX forecast. To wit: “we shift to an outright negative view on the RMB, in line with this week’s Asia Views and our bearish RMB forecast.”
Said otherwise, as of last night, Goldman was telling its clients to go short the Yuan.
We concluded that this “begs the question: is Goldman then quietly selling the USD and buying the Yuan, as it is has an alleged tendency of doing by frontrunning its clients… or is its reco genuine this time.“
What happened next?
Well, today’s payrolls happened, and the result was an absolute slaughter for Goldman’s favorite US Dollar, as suddenly rate hike this summer is off the table, but a rate hike any time may be a pipe dream. And since a collapse in the USD means a surge in all other currencies, most notably the Yuan, here is what happened to the Chinese currency after today’s payrolls report.
For those who prefer a verbal explanation, here it is: anyone who shorted the offshore Yuan as per the Goldman reco, is now crushed under a mountain of margin calls as the offshore Yuan or CNH just had a historic surge, its biggest one day spike since January 2011th, a move which has wiped out 2 straight weeks of losses.
Anyone who listened to Goldman is now being carted out feet first.
via http://ift.tt/1Um1ayr Tyler Durden