Intraday Market Thoughts Archives
Displaying results for week of Feb 26, 2017أشرف العايدي على قناة العربية
ما هي اثار إرتفاع احتمالات رفع الفائدة الأميركي لازواج الين و اليورو و الإسترليني ؟
Stocks on Fire, BOC Holds, Brainard Next
A hawkish Fed and soaring stocks are destined for a showdown but it wasn't Wednesday as the S&P 500 had its best day of the year, yields jumped and yen crosses climbed. The Bank of Canada held rates as expected in a truncated statement. The Fed's Brainard is up next. The 3rd USD pair Premium trade has been filled and in progress. The video for Premium subscribers is found below "Time to Exit?".
A March 15 Fed is priced above 80% as Trump's talk on tax cuts and infrastructure spending ignites animal spirits. The S&P 500 rose 32 points to a record 2395. The next test is a speech from Brainard at Harvard at 2300 GMT. It was scheduled late and if she makes a hawkish comment then a March hike will be close to a sure thing. Brainard is the most dovish core Fed member and a hint from her about a hike is the next best thing to an explicit endorsement from the Chair.
What the stock market and Fed may be ignoring are signs of a sluggish start to the year. Construction spending was soft and spending was up 0.2% in the PCE report compared to +0.3% expected. The divergence between survey data and hard data remains unresolved.
The US dollar was strong Wednesday but flattened late. The currency is still reluctant to chase Trump and buy into the rate differential story but the BOC today underscored the economic differences. The statement held rates, remained neutral, didn't concede any good news and highlighted the large amount of slack in the economy.
USD/CAD rose to 1.3350 which is the highest since Jan 19. A break above the January high of 1.3388 would target last year's highs near 1.36. The Australian dollar remains locked in its recent range. Today's trading features January Aussie trade balance and building approvals, both at 0030
Act | Exp | Prev | GMT |
---|---|---|---|
FOMC's Brainard Speaks | |||
Mar 01 23:00 | |||
Gov Council Member Lane Speaks | |||
Mar 02 18:00 | |||
Building Approvals (m/m) | |||
-0.1% | -1.2% | Mar 02 0:30 |
Trump's Optimism Boosts USD
Trump's speech faced a high bar in the way of the US dollar rally preceding the address as a result of several Fed comments and, indeed, Trump managed to lift the USD back towards those levels as the speech confirmed the $1 trillion in infrastructure spending, while staying away from attacking US trading partners and the media. It was the most optimistic speech since the start of the Trump presidency. Odds of March Fed hike rose to 52%. Gold is set to post its 3rd straight daily decline, which would be for the 2nd time this year. There are currenty 2 USD longs in the Premium trades.
The Fed went on what looked like a coordinated offensive campaign to boost the odds of a March 15 rate hike Tuesday. The Fed's Dudley inserted himself into a jam-packed FOMC schedule this week by making an appearance on CNN. He used it to say the case for hiking now has become a lot more compelling. The market reaction was instantaneous bond market selling and USD/JPY buying.
What made it seemed coordinated was a comment from the Fed's Williams shortly before. He said a hike deserved 'serious consideration' at the meeting in two weeks. That's an escalation from his stance at the start of the month where he said it needed consideration.
Even before the comments, the odds of a hike were on the rise. From 37% on Thursday, to above 47% at the start of the day and above 50% by the end of the day. There is far more Fedspeak scheduled this week but Dudley is a major player and it's tough to imagine Yellen will walk back his comments unless non-farm payrolls miss badly.
In terms of economic data, Tuesday was mixed. US Q4 GDP was revised down to 1.9% from 2.1% but consumer confidence beat expectations and hit the best levels since 2001. The Fed is increasingly of the belief that the economy is recovered and that rates should be closer to a more-normal level.
In other news, Aussie regained its luster after Q4 GDP rose 1.1% q/q vs expectations of 0.8% q/q. Chinese manufacturing PMI rose to 51.6 vs the expected 51.2.
Act | Exp | Prev | GMT |
---|---|---|---|
FOMC's Kaplan Speaks | |||
Mar 01 18:00 | |||
FOMC's Brainard Speaks | |||
Mar 01 23:00 | |||
Chicago PMI | |||
57.4 | 53.2 | 50.3 | Feb 28 14:45 |
Final Manufacturing PMI [F] | |||
54.4 | 54.3 | Mar 01 14:45 | |
CB Consumer Confidence | |||
114.8 | 111.3 | 111.6 | Feb 28 15:00 |
Durable Disappointment, Trump Changes Agenda
Monday was another day of confused trading as the dollar was hit by soft data and a slowdown on Trump's tax plan but rallied late anyway. The euro was the top performer while the yen lagged. Japanese industrial production data is due later. A new USD trades has been issued to the Premium Insights ahead of Trump's pre-speech interview on Fox News between 6-9 am EST (11:00-13:00 BST). The charts and notes of the trade shall be posted ahead of the Tokyo Tuesday session.
The headline didn't tell the story on US January durable goods orders. They rose 1.8% in the month compared to the 1.7% consensus but that masks a revision to December to -0.8% from -0.5%. Moreover, the key component on non-defense capital goods orders ex-air was down 0.4% compared to a 0.5% rise expected. US pending home sales data also missed estimates later.
The data put a negative bias into the US dollar but was lifted by Trump. Some disappointment set in as the administration shifted the focus of Tuesday's congressional address to Obamacare and military spending from taxes. Trump said a tax plan can't come until the cost of healthcare changes are clear.
The disappointment on taxes was balanced by Trump hinting about big spending on infrastructure. What's happening in the background is that various parts of the Republican administration are angling different priorities based on what's possible to accomplish. Trump had laid out something like taxes, Obamacare, infrastructure but that created some logistical challenges and Obamacare, infrastructure and taxes now seems like the plan.
There is room for disappointment there but until negative details emerge, the market wants to remain hopeful.
With Trump largely taking himself off this week's agenda, the focus may shift to the raft of Fed speakers on the agenda, culminating with Yellen and Fischer on Friday. Fed hike odds have crept up to 40% in what increasingly looks like it will be a tough meeting to handicap.
Looking ahead, Asia-Pacific traders will focus on Japanese industrial production at 2350 GMT. The consensus is for a 0.3% m/m rise after a 0.7% climb previously. Retail sales, construction orders and housing starts are also due later. For Australia, Q4 current account data is due at 0030 GMT. As it stands, the Australian dollar is the best performer in February.
Act | Exp | Prev | GMT |
---|---|---|---|
Core Durable Goods Orders (m/m) | |||
-0.2% | 0.5% | 0.9% | Feb 27 13:30 |
Industrial Production (m/m) [P] | |||
0.4% | 0.7% | Feb 27 23:50 | |
Pending Home Sales (m/m) | |||
-2.8% | 1.1% | 0.8% | Feb 27 15:00 |
Housing Starts (y/y) | |||
3.3% | 3.9% | Feb 28 5:00 | |
Current Account | |||
-3.8B | -11.4B | Feb 28 0:30 |
Too much Complacency?
The last-minute rally in stocks on Friday led to an 11th consecutive record high in the DJIA in a market that's flashing too many warning signs to ignore. The pound is lower to start the week on talk of a fresh Scottish referendum. We look at the rising optimism on AUD and CAD in the CFTC positioning report. The chart below indicates the highest and weakest performers against the USD since the start of Monday's Asia-Pacific trade.
Dual narratives of populist optimism and political uncertainty are sending dual signals in the market. US yields are threatening to fall to the lowest since November while stocks run away higher. The enormous last-second bid in US equities Friday put the Dow on the longest winning streak singe Reagan.
Measures of stock market sentiment, volatility and insider selling are screaming that the market is overly complacent. The optimism is largely surrounding hope Trump will deliver on tax reform and there is good basis to believe corporate taxes, will be lowered but other signs show he has a tough road ahead. Given the global uncertainty and lack of anything concrete from the administration and likelihood of jitters ahead of Tuesday's address to Congress, the level of complacency is far too high.
In the UK, The Times of London reports that Theresa May is preparing Scotland to potentially announce a referendum in March. That's a cold, calculated move on independence just as the UK gets set to invoke Article 50.
The pound fell 50 pips at the open and is testing support in the 1.2400/1.2383 zone. Another vote would hang over the pound like a guillotine but in the day ahead the trade will be a denial or confirmation. A thrust of selling at the London open would test some recent support levels and could open the way for a run to the 2017 lows.