Intraday Market Thoughts

400-pip Election & Unconfirmed Deals

Dec 13, 2019 14:16 | by Adam Button

UK Conservatives won a resounding electoral majority to ensure a Brexit deal. Less than 20 hours after Trump lifted markets with his trademark tweet on reaching a tariffs deal with China doubts are resufacing ... again (more below). The pound soared by more than 4 cents to 1.3514--the highest in 19 months straight after exit polls showed Conservatives had the biggest parliamentary majority since 1987. US Nov retail sales disappointed with a 0.1% rise (control group) vs expectations of 0.3%.  Days like Thursday remind us why we love the FX market. The news and market moves were non-stop in a sea of opportunity. The DAX Premium trade was stopped out and a new GBP trade issued ahead of the polls is +300 pips in the green.

Click To Enlarge
400-pip Election & Unconfirmed Deals - Cable 10 2 Dec 13 2019 (Chart 1)

What's a Friday without a Trump Trade Tweet

US indices are off 0.8% after Trump disputed a WSJ article stating that he agreed to roll back existing tariffs. The details are still murky but we have yet to hear from China's state council information office at its press conference due shortly. It will undoubtedly ratchet down tensions and promises a period of stability. Like the UK vote, traders were also reluctant to price in a deal because of Trump's unpredictability.

The deal is good news for global growth in H12020 and underscores that the global easing cycle is over, at least for now. There are many breakouts but a standout is AUD/USD. We highlighted the break of the major downtrend yesterday. The was followed by breaks of the 200-day moving average and the October high on Thursday. A weekly close above those levels would be a further positive signal.

The UK election was the crescendo. The market has been leaning towards a solid Conservative majority since the vote was called but no one could forget the failure of pollsters in the Brexit and 2017 UK votes. So even though the result was 'expected', we had a massive market move. Part of that also speaks to the strength of the Conservative majority. It looks to be at the extreme limit of what polls were indicating.

UK Conservatives crushed expectations with 364 seat-victory, fuelling sterling's rally on the basis of a strong, stable, business-friendly government in the UK, something it hasn't had in a decade. Wit the rise above 1.35 the pound broke the March 2019 high. In the bigger picture it's only back to where it was on the night of the Brexit vote. In the days ahead real-money and structural shorts will be unwound and further upside could come from any less-austere hints from Johnson.

Act Exp Prev GMT
FOMC's Williams Speaks
Dec 13 16:00
Core Retail Sales (m/m)
0.4% 0.2% Dec 13 13:30

Powell, Lagarde, Elections & Trump

Dec 12, 2019 12:00 | by Adam Button

Powell kicked off another round of US dollar weakness ahead of what should be a wild finish to the week in the FX market. Risks include the ECB decision, UK election and US-China tariffs (more on each below). The Australian dollar broke a year-long trendline Wednesday, but keep an eye on AUDUSD's 200 DMA. After having closed GBP trades at a gain 2 days ago, a new round of Premium Insights trades will be released later this evening ahead of the UK elections.

فيديو المشتركين إدارة مخاطر الإسترليني حول الانتخابات

The most-notable change in the FOMC statement was the addition of a line saying “the current stance of monetary policy is appropriate” which is the Fed's way of saying they're in neutral mode. To emphasize the point, the Fed removed a dovish nod to 'uncertainties'.

Click To Enlarge
Powell, Lagarde, Elections & Trump - Fomc Statement Dec 12 2019 (Chart 2)

But it was a comment from Powell in the press conference that sparked a slump in the US dollar along with a rally in bonds and gold. He repeated a line we highlighted after the October FOMC – that it would take a 'significant' and 'persistent' overshoot of 2% to trigger rate hikes. He emphasized that was his personal opinion and not the FOMC's but for the market that didn't matter.

The initial thinking in October was that it could have been a slip of the tongue but his choice of the exact same words means that it's a message and the implication is clear – that Powell doesn't plan to hike rates for a long time.

The commodity currencies made the largest moves on the comments in part because they're best positioned  (along with EM) for global growth and reflation. Notably, AUD/USD rose above a downtrend that began almost exactly a year ago at 0.7400 and was previously tested (and held) four times. A break of the 200-dma at 0.6911 and the October high of 0.6933 would confirm the end of the long slide.

The first event of the day ahead is the ECB meeting. Changes in policy are almost out of the question but this is Lagarde's first press conference and it will be an opportunity to establish what kind of central banker she wants to be. Most analysts expect her to be a dove, but she may position herself as someone who will pressure governments to reform and stimulate and escaping negative rates could eventually be part of that toolkit. It could be argued Lagarde will not be in a hurry to ease as the Fed removes its foot off the accelerator.

The main event of the day comes late as UK exit polls and election results come in. The first exit polls are due at 2200 GMT and moves in the pound will be significant. Final polls show Conservatives with 5-12 point leads with the median closer to the high end. Whatever the result, expect the trend to have multi-day staying power at the very least.

Finally, there are reports that Trump plans to meet with top advisors regarding tariffs on Thursday. The decision may leak immediately, or he could announce it himself. A delay on the Dec 15 deadline is expected at the very least but nothing is ever fully priced in with Trump. If he announces that the tariffs will go into effect, it will crush risk assets.

إحصائيات ٣٢ سوق عبر ٢٥ سنة عملات، سلع و مؤشرات

Dec 12, 2019 10:56 | by Ashraf Laidi

الكل يعرف قياس أداة الأسواق (عملات، مؤشرات و سلع) عبر الترتيب الزمني، لكن ماذا عن الترتيب التصاعدي أو التنازلي من حيث الأداء بدل من الزمني؟ و لماذا يدعى الين الياباني بالعملة المتطرفة؟ و ما يعني اداة العملة الكلي؟ إستفيد من ٢٥ سنة من إحصائيات ٣٢ سوق عالمي في الفيديو المفصل

GBP Pares Poll Losses, Fed Next

Dec 11, 2019 12:31 | by Adam Button

The pound is paring its losses following a 100-pip drop caused by an update to a highly-influential election poll. US CPI is due next, followed by the FOMC decision later in the evening --widely expected to keep rates on hold. The Fed has succeeded in keeping itself out of the conversation (for now) as the countdown to US elections starts. Market emphasis shifts towards the Fed's rising purchases of repos and the onset for possible QE4 (more below).

Click To Enlarge
GBP Pares Poll Losses, Fed Next - Gold Cable Twi Dec 11 2019 (Chart 1)

The pound tumbled by more than a full cent after Tuesday's NY Close after a pair of polls showed slipping Conservative majority just ahead of Thursday's vote. The YouGov MRP model was a rare poll that showed a hung parliament ahead of the previous election so it carries extra weight. In late November it showed Conservatives with a 68-seat majority.

The polls, however, picked up on a renewed shift towards Labour in the final days and now see just a 28-seat majority. They also said a hung parliament was within the margin of error in what would be a nightmare scenario for the pound, especially with the DUP in danger of turning its back on Boris Johnson.

A separate model from Focaldata hours earlier showed a similar trend. They pegged the majority at just 24.

We are now certainly in the gut-check moment ahead of the vote. No trader has forgotten the surprises on the 2017 election night, or the Brexit referendum and these numbers are a stinging reminder of the risks. Cable fell more than 100 pips in the aftermath of the polls to 1.3108 but has rebounded to 1.3160 in Lodon trade.

Ultimately, that leaves more upside for the pound if Johnson prevails with a comfortable majority, but would-be buyers are more apt to wait until the fog clears at this point.

Compounding the uncertainty at the moment is the FOMC decision on Wednesday. Expectations for any meaningful change in policy are minimal but expect a small downgrade in commentary on consumer spending. A research report from Credit Suisse also got plenty of attention. It warned that the market is underestimating the probability of year-end liquidity stress and raises the possibility the Fed could be forced to buy bonds.

25 Yrs of Intermarket Stats

Dec 11, 2019 11:47 | by Ashraf Laidi

Updating our performance charts on 25 years of intermarket history --Currencies, commodities and global indices by chronological order, by instrument and even by ascending/descending order of performance (not by year). The last part may not be famililar but could be more valuable than what you're accustomed to. Full Video.