Intraday Market Thoughts Archives

The ECB on Thursday demonstrated just how tough it will be for central banks to match the appetite of markets for easing (more below). The euro was the top performer while the New Zealand dollar lagged. The first look at Q2 US GDP is up next. Thursday's pre-ECB Premium trade in the euro (not EURUSD or EURGBP) is already 90 pips in the green. Ashraf laid out the fundamental and technical rationale for taking the trade before the ECB announcement.

فيديو للمشتركين ما وراء صفقة اليوم و ماذا عن الداو؟

The ECB essentially pre-committed to cutting rates and buying more bonds in September, but that left markets disappointed as details were lacking and nothing essentially was said from June. Ashraf tells me he went long EUR minutes before the ECB as he expected nothing to be done at the meeting, but more more importantly, not much new could be done in September. The euro touched a two-year low then reversed 85 pips higher on Draghi. He sent mixed messages, saying the outlook is “getting worse and worse” but also that “it's difficult to be gloomy today.”

Ultimately, it wasn't the clear dovish message that markets wanted. That sparked fears about more of the same from the FOMC next week, and potentially the BOJ. The broad market theme was worry about less easing and that sent USD/JPY higher, yields higher and stock markets lower.

Economic data contributed to the sentiment as core US durable goods orders rose at the fastest pace since 2017.

Friday features a key input for the Fed with the first estimate of Q2 GDP. The consensus is 1.8% but the market is probably a tad lower after soft trade data Thursday. Still, there's wide variance in the advance release and the market tends to overreact. That will be especially true so close to the FOMC.

The market is now pricing in just a 17% chance of a 50 bps cut from the Fed, in part because the US and China are talking on trade once again. However the risk is that Powell cuts but then essentially repeats current language and gives himself an option to cut in the future without precommitting or delivering a strong hint. If so, the market reaction will look much like it did Thursday.

Euro drops sharply on the ECB's announcement that it will consider a tiered system for reserves, which means that further rate cuts and new round of QE are imminent. We will get more details in Draghi's press conference coming up in 15 mins from now. More on UK PM Boris Johnson below. A new Premium EUR trade issued with 2 supporting charts.

Although there were no surprises from an ECB rate action today, all eyes turn to September once the new forecasts are out. Until then, odds will be clearer by the end of today's press conference. We now await to what extent will Draghi offer extra dovish signals and whether the euro will come up in the discussion.

Boris Johnson Goes on all in

Boris Johnson took his first actions as Prime Minister on Wednesday, saying he will take the UK out of the EU, “no ifs, ands or buts”. He named Raab as his foreign secretary, Gove as Chancellor of the Duchy (essentially the cabinet boss) and Javid as Chancellor of the Exchequer.

May tried to build a compromise cabinet but Johnson is surrounding himself with like-minded thinkers. It also highlights that his main priority is Brexit. The thinking may be that only the hardliners will be able to push through a compromise because Johnson has given them plum jobs and the opportunity to govern. At the same time, it may be hard for them to credibly vote for tweaks to the declaration on the new relationship while leaving the withdrawal agreement unchanged.

Ashraf tells me he sees the likelihood for a new UK General Election before year-end at 60%, especially if the Conservatives lose a seat in the upcoming by-election in brecon and radnorshire.

ماذا نتوقع للمملكة المتحدة و للإسترليني بعد فوز "بوريس جونسون"؟ الإجابة في فيديوأشرف العايدي مع أوربكس

Members of Britain's Conservatives Party have named Boris Johnson as the new Prime Minister with a comfortable win of 92,153 votes over Jeremy Hunt's 46,656 votes. Sterling resumed its pre-announcement gains following remarks from EU Brexit negotiator Barnier stating: "We are ready also to rework the agreed Declaration on a new partnership in line with EUCOguidelines". Cable pushed up half a pence off its session lows to 1.2480 before dropping back near 1.2440s amid broadening USD strength. The GBP implied volatility chart may indicate a receding fear factor in sterling, which explains the lack of any sharp declines in the currency. In other news, the IMF downgraded its forecast for 2019 and 2020 global growth by 0.1% to 3.2% and 3.5% respectively. Q1 global trade volumes were revised down to their lowest in 7 years.

Since Johnson is widely expected to reiterate his vow for Brexit by end of October, it should be asked to what extent will his readiness for a no-deal impact the union of the Party and endanger the coalition in power. The more cracks with the coaltion, the more we're likely to hear about the possibility of new elections, at the expense of GBP. 

On the EU side, Barnier's willingness to consider amending the Brexit Declaration will be in function of Boris Johnson's demands and compromises. The cohesiveness of the Conservatives will also be a key factor for the Europeans. 

Staunch anti-no deal exit such as Cabinet members such as Chancellor Philip Hammond, are expected to quit on Wednesday before Johnson has a chance to announce his government. Hammond will lead a group of about 30 Tory MPs aimed at blocking a no-deal exit. How deep will the fissures in the party be will be the question for the rest of summer and atumn.

Meanwhile, we have 9 days until the Bank of England releases its quarterly inflation report, with the latest revisions for growth, inflation and interest rates. BoE governor Carney has already signalled that growth will be revised lower.

FX traders cannot avoid the strengthening US dollar, but they also must be ware of the periodical bouts of FX verbal intervention (tacit and otherwise) from Trump and/or announcements regarding the US-China talks.

مقابلتي اليوم بأكماها مع العربية بعد فوز جونسون. كيف سيتصرف جونسون مع أزمة "بريكست"؟ شاهد المقابلة

All eyes are on tomorrow's announcement of the new British PM. See Ashraf's tweet below. Two headlines from late on Friday set the stage for oil market jitters and trade optimism. DOW30 and SPX continue to test and fail 27300 and 2993 respectively. CFTC positioning data continued to show a sharp turn on CAD.

Iran seized a UK-flagged tanker on Friday in an escalation of a dispute that started in May with the UK seizure of a ship carrying Iranian oil. Crude climbed nearly $1 on the report and earlier scattered reports that a second vessel was held (it was later released). The move shows some brinksmanship from Iran as it fights to get oil to market and avoid US sanctions.

At almost the same time, reports on Friday suggested that the US and China had found some common ground on the Huawei blockade and agricultural orders. Reports last week suggested both sides were reluctant to follow-through on G20 promises but this critical step now appears to have been taken.

Now that the 2-week silence period from Fed speakers is active (no speeches before the Jul 31 decision), we revert to data watch. This week begins with the Richmond Fed and existing home sales for June. The manufacturing numbers have been tough to pin down lately. Most of the regional numbers plunged in June but the already-released Philly Fed rebounded strongly this month.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -31K vs -36K prior GBP -76K vs -73K prior JPY -11K vs -4K prior CHF -12K vs -10K prior CAD +21K vs +9K prior AUD -53K vs -54K prior NZD -17K vs -22K prior

CAD longs are now the most-stretched since March 2018 in what's been a quick shift from -38K just five weeks ago. The numbers track the period before Friday's soft retail sales report. Sales ex-autos were down 0.3% compared to +0.3% expected but an unusual 2.0% decline in supermarket sales skewed the numbers lower. That's a sector that's rarely economically sensitive and that was the message from the market as CAD bottomed quickly after the numbers.

You're all aware by now the new British Prime Minister will be announced tomorrow. And if you want to meet for a chat on GBP or other topics, I will be speaking at the Macro View panel of the Great Financial Trading Conference in London at 9 am. Get your ticket here

فتحت تعليقات من عضوين رئيسيين في مجلس الاحتياطي الفيدرالي الباب لخفض أسعار الفائدة بمقدار خمسين نقطة أساس. هل سيقوم الاحتياطي الفيدرالي باستخدام تخفيض تأميني؟ و ما آخر تطورات بشأن تحركات الذهب والفضة. التحليل المفصل