Intraday Market Thoughts ArchivesDisplaying results for week of Oct 14, 2018
رغم الإرتفاع بأسعار مؤشر الدولار تمكن الذهب من المحافظة على مكاسبه هذا الاسبوع. الفيديو التالي يلقي نظرة على الاسباب والمستويات الحاسمة
USD is on the downside alongside JPY as global indices rally on willingness from the EU to diffuse Italy's budget excesses. This followed Thursday's drubbing as Italian 10-year yields blew out again on Thursday as the EU and Italian leaders dig in for an extended battle. The saga adds to the cynicism in broad markets that sparked a sharp risk-off tone that boosted JPY and weighed on GBP. Disappointed figures from US existing home saless, Canada CPI and retail sales kept USDCAD in check.The CAD trade was stopped out and a new CAD Premium trade has just been issued ahead of Canada's data. A new intraday index trade will also be issued.
The spread between borrowing costs for 10 years in Italy and Germany widened to the most since 2013 on Thursday as Italian yields rose 14 basis points. The move came after the EU delivered a letter to Italian officials that draw a line in the sand on the budget. It said the budget had a 'significant deviation' from the rules and was 'unprecedented', calling it serious non-compliance. They said planned spending next year increased 2.7% while the max allowed under EU rules is 0.1%. The ball now is in Rome's court as it an explanation is expected from Brussels. But first, Italy's 2 coalition parties have to resolve an internal spat with regards to tax sweeteners to the wealthy initiated by the Northern League.
The risks are high no matter which side backs down. If the EU chooses to dig in and wins the battle, it may further alienate and inspire voters outside the mainstream and lead to significant anti-EU sentiment at a sensitive time.
If Italy's government wins, which is what most expect, then it will further undermine EU rules. Next Friday ratings agencies are also scheduled for an update on Italy. That will be a major risk event. Conte touched on it Thursday saying he thinks a downgrade can be avoided. The market increasingly thinks it's inevitable, with the risk of two-notch downgrade to junk.
The middle ground is narrow. The government may opt to tighten up slightly in a compromise but that's unlikely to be enough for the ratings agencies. That leaves a narrow path for any kind of success in Italy and that will be a steady headwind for the euro.
Friday will be a battle for EURUSD bulls attempting to save the 1.15 barrier.
The turmoil gave a lift to the yen in a classic risk-off trade. GBP/JPY was particularly hard hit despite upbeat words from both sides of the Brexit negotiating table. While a deal between May and EU appears to be making progress, a deal between May and her own government looks increasingly difficult.
|0.1%||-0.1%||Oct 19 12:30|
|Existing Home Sales|
|5.29M||5.34M||Oct 19 14:00|
USD and gold resume gains on a combination of the hawkish tilt in yesterday's release of the FOMC minutes and today's set of data beats in jobless claims and Philly Fed index. Gold, Aussie and Kiwi are the main outperformers vs USD with the yellow metal favoured by an upward tilt in inflation assessment from the Fed. That is also propping gold during equity sellloffs, which was not the case in Jan-Feb. UK retail sales fell by more than expected but GBP continues to hold alongside the 1.3080 support on emerging talks of an extended transition period post-Brexit. Both metals' Premium trades are in progress.
The Fed minutes added to the debate about where US rates are headed. A number of Fed officials saw the need to hike above the long-run level, which is pegged at the 3.4% median in the dot plot. There was also increasing talk of financial risks from leveraged loans, loosening of standards and non-bank loans.
On inflation risks, three members now see them tilted to the upside compared to one previously. None see them tiled to the downside.
USD/JPY rose to 112.73 but has pulled towards 112.40s as stocks fell on Thursday.
We cautioned that moves on the Minutes tend to fade but this time they may have put bond yields back into focus as 10s rose 4 bps to 3.20% with all the move coming after the Minutes. The market undoubtedly remains sensitive to bonds and the past few days of calm could easily be upended by another similar-sized move. So far, yields face interim resistance at 3.21%. Note that the 200-month moving average is being tested for the 1st time since March 1989.
Late in the day, the Treasury released its semi-annual FX report and once again refrained from naming anyone a currency manipulator. They warned that recent yuan weakness will likely increase the bilateral trade deficit but also said PBOC direct intervention has been limited this year.
However there was some significant escalation in rhetoric including warnings not to allow further yuan weakness, which the Treasury said it will be watching closely. That tone could weigh on Chinese markets in the day ahead.
Aussie remains on a high note despite falling equities after Aussie unemployment fell to 5.0% from 5.3% and the bulk of the pullback in job creation was from part-time jobs.
|Retail Sales (m/m)|
|-0.8%||-0.4%||0.4%||Oct 18 8:30|
|5.6K||15.2K||44.6K||Oct 18 0:30|
Reporters barely had the time to write about Tuesday's 2% stocks surge, before indices in and out of the US slip back in the red on Wednesday. Tuesday saw the best gain for stocks since March 26. UK CPI slipped back to 2.4% from 2.7%, while US housing starts and building permits contracted in September. The Fed minutes of last month's rate hike are due at 2 pm ET, 5 pm BST may shed more light on whether the "accomodative" description to monetary policy was dropped to pave the way for rates pushing above the neutral level, or whether to signal the beginning of the end of the tightening. Powell took the opportunity to signal the former in a subsequent speech. The DAX premium short was stopped out by 40 pts. A new trade has been issued today following Tuesday's 2nd metals trade.
On Tuesday, US August JOLTS job openings jumped to a record 7136K compared to 6900K expected. The NAHB home builder sentiment report rose to 68 vs 66 expected. Industrial production also beat the consensus at +0.3% vs +0.2% forecast.
All eyes on Theresa May's Backstop
British PM Theresa May will aim at closing the gap over the issue of the Irish Border when she meets European Council president Donald Tusk today. The idea is to pave the way for a final agreement on Brexit in mid-November between the EU and the UK before the UK leaves in March of next year. The question of the "Backstop" on the Irish border remains the most difficult issue in the Brexit negotiations.
Sterling posted a solid day as Brexit negotiations go into a holding pattern. Barnier shifted the deadline to a deal to December and there were reports of an EU offer to stay in the customs union beyond 2020 or to stretch the Article 50 deadline another year. Cable remains supported at 1.3100, with preliminary upside objective at 1.3400.
|2.4%||2.6%||2.7%||Oct 17 8:30|
US retail sales were soft on the headline but the details were solid. US stocks displayed a deadcat bounce, suggesting that false rebounds are ere to stay into next month's US mid-term election.The New Zealand dollar was the top performer Monday while the US dollar lagged. Chinese CPI is due up next tonight, followed by UK jobs where the earnings figure is closely watched. The Premium video focusing on metals and FX is posted below.
US retail sales rose just 0.1% in September in the second consecutive month of lackluster gains but there were signs that Hurricane Florence might have curbed spending. In addition, the closely-watched control group rose 0.5% compared to 0.4% expected.
The market took the report in stride with little reaction in the FX market. USD/JPY had earlier slid to 111.65 to start the week on a soft note.
The bigger market move came on the Bank of Canada's business outlook survey. It showed stronger sales forecasts, a tighter jobs market and a jump in investment intentions – and the survey was done before the new NAFTA deal. As a result, USD/CAD fell to 1.2955 from 1.3050 earlier in the day.
The BOC meets next week and the report made a hike a near-certainty and also raised the odds of another hike in December or January. Separately, Canadian exports to China are up 23% in the first half of the year in a sign that Chinese are canceling US orders and redirecting them elsewhere.
Looking ahead, Chinese CPI is the next item on the calendar at 0130 GMT. The consensus is for a slight acceleration to 2.5% y/y from 2.3%. We also continue to await the US Treasury FX manipulation report.
|Core Retail Sales (m/m)|
|-0.1%||0.4%||0.2%||Oct 15 12:30|
|0.7%||0.4%||Oct 15 21:45|
|Consumer Prce Index (y/y)|
|2.5%||2.3%||Oct 16 1:30|
While the focus is on the broad USD weakness, we shed light on GBP weakness amid fading hopes for a Brexit deal this as negotiations broke down with no plans to meet again before Wednesday's 'deadline'. Sterling is broadly weaker. Reports that Saudi Arabia started an internal probe into Khashoggi disappearance is also helping to stabilise oil. US retail sales are due next. Gold hit 1233 and tests the 100-DMA against USD, EUR, JPY and CHF. New charts & reasons were added to the Premium index and metals trades.
Hopes were high for a deal on the key Brexit issues on the weekend with an announcement ahead of the EU leaders summit but the thorny issue of the Irish border, along with other issues have left both sides at an impasse. Raab took a last-second flight to Brussels Sunday to try to break the deadlock but it failed and there are no further plans to talk.
Perhaps cable close at the daily lows on Friday was a sign of things to come. It fell as low as 1.3083 from 1.3150 at Friday's close. The drop left a 50 pip gap on the chart. EURGBP recovers off the 100-DMA. No new talks are scheduled but that could change quickly. As we saw in NAFTA and in years of EU crisis negotiations, 'deadlines' are rarely final.
Other weekend news included a drop by as much as 7% in Saudi Arabia's market after Trump threatened “very powerful” measures due to the Jamal Khashoggi disappearance drama. In turn, Saudi Arabia threatened a response with the local press hinting at moves to drive up the price of oil. Crude was up more than 1% in early trade.
Focus turns today's US September retail sales at 1230 GMT. The consensus is for a 0.4% in the control group, following a disappointing 0.1% rise in the August data. A strong reading could shore up sentiment in markets if it's a reminder that consumers are strong. However a weak reading could be interpreted as a sign that higher interest rates are hitting harder than anticipated.
Towards the end of the US session we may also get the semi-annual FX report from the US Treasury and on whether China will be labeled as an FX manipulator. The last time Beijing was designated as such was in 1994. There is no scheduled day for the release but a Politico report says it's coming Monday (others say Tuesday). Early leaks suggest it will maintain the status quo but any escalation in the commentary could spook markets.
|Core Retail Sales (m/m)|
|0.4%||0.3%||Oct 15 12:30|