Intraday Market Thoughts Archives

We were once again reminded that this is the era of political-driven trading after a surprise coalition formed in New Zealand. The euro and Swiss franc led the way while the kiwi lagged badly. On the Fed, the latest report is that Trump is leaning towards Powell. The long EURUSD Premium trade was closed for 110 pips, while the other EUR trade remains in progress, currently 110 pips in the green.

The anniversary of Black Monday had a fitting end for 2017 with the S&P 500 finishing higher after earlier worries were wiped away. The early tone was risk aversion on China concerns and a 2% fall in Hong Kong stocks.

NZDUSD had its bigggest 1-day drop in over 2 years after the Labour Party was able to throw together a coalition with the help of the Greens and First Party. That means Bill English will and his National Party – which got 44.4% of the vote – will be in opposition. The kiwi fell more than 150 pips on the surprise turn. More broadly, it's a reminder of the discontent in the air and the sudden willingness almost everywhere to try new things.

We contrast that with China where Communist Party leadership and Xi in particular are strengthening their leadership. In the long-term, it's a signal about the rise of China and emerging markets and the frustration in the developed world.

Meanwhile in the US, hopes for many voters for a radical change in monetary policy may be dashed. A Politico report said Fed Governor Jerome Powell is the favourite to replace Yellen. He's done little to publicly separate himself in more than 5 years at the Fed with most of his focus on regulation. The thinking is that he will be a continuation of the Bernanke-Yellen era, sticking with the same policies and prescriptions. The stock market responded with a small flurry at the end of the day and the US dollar dipped.

Looking ahead, news from the Party Congress is likely to be the main driver but Kuroda also speaks at 0635 GMT and later in North American trade, Canadian retail sales and CPI numbers are due.

هل سيقدم المركزي الأوربي على إعلان تقليص اضافي هذا الشهر؟ و ما مدى تأثير مثل هذه القرار في ظل الصراع بين توقعات رفع الفائدة الأميركية و تقليص التيسير الكمي الاوروبي سنسلط الاضواء في ندوتنا القادمة بتاريخ 24 أكتوبر مع الاستاذ أشرف العايدي على قرار المركزي الأوروبي المقرر يوم الخميس 26 أكتوبر شارك في الندوة

Click To Enlarge

Signals from China are usually subtle and actions are often dramatic, we look at Xi's landmark speech to start the Party Congress. The Canadian dollar was the top performer and the yen lagged. The Australian jobs report and a sensitive Chinese GDP reading are up next. The latest Premium video is posted below.

Click To Enlarge

Xi spoke for nearly three-and-a-half hours to start the Congress in what is his longest-ever speech by far. That timeline gave him an opportunity to touch on just about everything, but one thing he didn't mention is an oft-repeated pledge to double growth between 2010 and 2020.

Along with a further emphasis on corruption, stability and a year-2035 horizon for becoming a 'modern' nation, make us wary that any tough choices that need to be made will come soon. The Congress – where new top leaders are installed – takes place every five years and like with all politicians, it's best to take the bad medicine early.

The Congress continues until Tuesday so we will be looking for more signs of deleveraging.  The health of the economy will determine the extent of the  crackdown. On that front, some key numbers are due at 0200 GMT with GDP, retail sales and industrial production. Growth is expected at 1.7% q/q and 6.8% y/y. We're skeptical of Chinese numbers at the best of times but the data during the Congress is especially dubious. Still, it will be a talking point.

The other big number to watch is the 0030 GMT Australian jobs report. The consensus is for a +15.0K reading following a +54.2K surprise last month. Another strong report and a drop in the 5.6% unemployment rate could help to ease housing worries and jar the RBA out of neutral.

كيف يمكن للمتداولين الاستفادة من ما يعرف بتداول النطاقات ؟ الإجابة في فيديو الأسبوع

Click To Enlarge

The Fed and NAFTA negotiations have stolen headlines for the past two days. We listen to what the market is saying. The US dollar was the top performer while the pound lagged. The China Party Congress starts Wednesday. UK earnings rose 2.2% but well below inflation, while employment increased by less than expected. The pound extended its losses as prospects of a Brexit resolution between the UK and EU over the divorce bill remain dim.

فيديو المشتركين تداول داخل نطاق اليورو

Click To Enlarge

Speculating on the next Federal Reserve Chairman is a fun exercise but a dangerous trade. US dollar bulls got a boost on Monday about John Taylor but much of that faded later because the President gushing about a candidate is no reason to bet on rate hikes.

Four years ago, markets were playing the same schizophrenic game between Yellen and Larry Summers. At the time, it was assumed Yellen was the dove and he was the hawk. In hindsight, they might have been the opposite.

The lesson is that all the candidates are smart people and the Fed is a massive operation with thousands of employees who contribute to policy. It's doubtful the White House or any of the candidates have a genuine desire to partake in experiments when stability is the surefire way to economic progress.

The only surefire trade is to buy stocks if Yellen is reappointed.

Then there is NAFTA, which was billed as an involuntary Brexit for Canada and Mexico. Talks were extended past the year-end deadline Tuesday. That was taken as a positive sign that no one is yet-ready to walk away from the table, a sign that progress is possible.

The Mexican peso rebounded after weeks of declines but the scope of the move was still modest. The Canadian dollar hardly reacted.

If talks break down, then the trade will probably be to fade the kneejerk. The first reason for that is because there is uncertainty on whether the White House can unilaterally end NAFTA without Congressional approval – something that's unlikely. Second is that falling back on WTO rules wouldn't be a disaster for Mexico and Canada would fall back on the old FTA. In that case, the trade may be to sell all three against a broader basket.

Looking ahead, the China Party Congress has the potential to steal the agenda away from Fedtalk, Brexit-talk, Carney-talk and anything else. Expect a headline-heavy finish to the week.

Thursday's crucial EU summit over Brexit will determin the balance between EU's insistence that Britain pays the exit bill and reaching a comprehensive agreement over EU citizens' rights in the UK. Despite 3.0% CPI, GBP is the day's worst performer. Full analysis.

Click To Enlarge

A report that Trump 'gushed' about John Taylor as Fed chair gave the US dollar a lift on Monday. We look at the potential implication of appointing the Stanford economist. UK CPI rose 3.0% in September, the highest since April 2012, while core CPI edged remained unchanged at 2.7%. GBP remains under 1.3270 as the rising likelihood of a November rate hike is overshadowed by the threat of a no-deal in Brexit negotiations after German Chancellor Merkel warned UK PM May would have to pay well above the EUR 20 bn proposed earlier if a transition deal were negotiated. A 2nd GBP trade was opened on Monday as part of last Thursday's tactical GBP setup.

Click To Enlarge

Bloomberg reports that Trump was very impressed by Taylor after a meeting last week while Kevin Warsh's star has faded. A decision is likely to be made in the weeks ahead with Yellen scheduled for an interview on Thursday. Gary Cohn and Jarome Powell are also on the shortlist, with the later seen as a strong candidate.

Taylor is 70 and is familiar with the White House and monetary policy. He was Undersecretary of the Treasury for International Affairs from 2001 to 2005. He's famous for the Taylor Rule, an equation that could serve as a guidepost for monetary policy. It's continually argued in favor of hiking, something Taylor has endorsed.

In March, he estimated the neutral rate at 4%, compared to the 2.25%-2.50% estimate at the current Fed. On rules, he said recently said they should be akin to a strategy, not something to tie central bankers' hands.

He was seen as a long-shot until the report. If Taylor is selected, he would go against Trump's self-proclaimed preference for low rates. Of the remaining candidates, he would be seen as the most-hawkish and most-favorable for the dollar.

Given the reaction to the headlines, it's increasingly clear that this decision will be a big one for the dollar, along with other vacancies at the Fed. On Monday, the dollar climbed a half-cent against the yen, primarily on this report. It was also lifted by positive news from North Korea and the Empire Fed, which rose to the best level since 2014, at +30.2 compared to +20.5 expected.

ستحاول رئيسة الوزراء البريطانية تيريزا ماي إلى إنهاء الجمود في مسألة مفاوضات بريطانية و الاتحاد الأوروبي في عشاء الليلة مع رئيس الاتحاد الأوروبي.و سوف تتركز أنظار متداولين الجنيه الإسترليني على  مؤتمر القمة الأوروبي يوم الخميس. لكن حذاري من البيانات البريطانية التحليل الكامل

Click To Enlarge

Friday's weak US CPI was a powerful reminder that central bankers have been wrong about inflation for a decade, and not just in the US. The pound was the top performer last week while the Canadian dollar lagged. CFTC positioning showed more specs selling the yen. A big week for GBP traders lies ahead. 4 of the 5 existing trades are in the green, including Friday's GBP trade.

Click To Enlarge

On Friday, US September CPI rose 2.2% y/y compared to 2.3% expected, stripping out food and energy left prices up 1.7% compared to the 1.8% consensus. It was one of many inflation misses this year, expecially compounded by real average weekly earnings rising a paltry 0.6% compared to 1.0% expected.

IMF leaders were glowing last week about upbeat potential for global growth and central bankers everywhere believe it's only a matter of time until prices rise. If they don't, it will mean a complete re-think of how central banks operate.

The case against inflation is what many emerging markets are experiencing now. inflation is low virtually everywhere. Few emerging markets are generating runaway inflation.

China's economy continues to grow at a nearly 7% pace annually, but inflation is just 1.8% and has been below 3% for four years. Rare pockets of inflation like Russia have been due to currency shocks and have flattened shortly afterwards.

Looking ahead, the Party Congress in China is the main event in the week ahead, starting Wednesday. In an early hint of what people will be talking about, PBOC Gov Zhou warned that Chinese companies have taken on too much debt.

CFTC Commitments of Traders

EUR +91K vs +91K prior GBP +15K vs +20K prior JPY -101K vs -85K prior CHF –4.3K vs -3.2K prior CAD +76K vs +75K prior AUD +69K vs 72K prior NZD +6K vs +8K prior

The pound longs who hung in there after the beating over the past few weeks were rewarded with a big bounce last week. Overall the moves aren't large but if US 10-year yields can break above 2.40%, then expect an extreme short. A big week for GBP traders lies ahead. Further analysis on UK data and events follows after this IMT.