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Displaying results for week of Nov 25, 2018G20 Countdown & Fed Optionality
The Fed Minutes had something for everyone on Thursday while the euro shrugged off German CPI and dovish ECB comments and was the top performer. But all changed today amid month-end flows and a decline in Eurozone CPI to 2.0%, sending the US dollar higher against all currencies. The G20 begins on Friday in what could be a turning point for markets. A new Premium index trade was posted on Thursday evening, whose rationale is supported by 2 charts and key bullet points. When I asked Ashraf if it's a risk to leave the trade open into the weekend-G20, he said that's the point. The question posed in the chart below has crucial implications for next year. Stay tuned.
Fed gets into Optionality
The FOMC Minutes usually have a little something for everyone and Thursday's edition was no different. The hawks will note that almost all officials saw gradual hikes as consistent with Fed goals while the doves will highlight that many said it would soon be appropriate to put a greater emphasis on incoming data. More importantly, the minutes revealed members are working on optionality -- Altering the statement in a way that would facilitate them opting for a new course. Said differently, they are discussing whether to change language in the policy statement about the need for “further gradual” rate hikes.The US dollar didn't react to the Minutes but slipped earlier on Thursday as US PCE inflation missed targets and initial jobless claims rose to the highest since November 2017. Oil rebounded 2% on the day on a report that Russian oil companies are willing to cut output.
G20 or G2?
It's called the G20 but all eyes are on the G2 (US and CHina). Most markets were little moved on the day as we brace for the G20 meeting and month-end. Trump left for Buenos Aires with a mixed message. He said he was close to doing something on trade with China but that “frankly, I like the deal we have right now.” He also touted the revenue from the tariffs.The meeting with Xi is on Saturday so the risk of gaps into next week is substantial.
The question is: What's priced in? There is no reasonable expectation of a deal. China's goal is likely to run out the clock on Trump by making the minimum concession possible while avoiding an escalation in tariffs. That's a good baseline for what markets are looking for as well. The problem is that Trump's team has sniffed out that strategy. The WSJ reported that there's a deal on the table to lift some Chinese sanctions in exchange for no tariffs until May but it was highly uncertain if the US would accept it.
Elsewhere, German CPI was slightly below estimates. ECB Governing Council member Hernandez also said the eurozone economy was slowing more than expected. Impressively, the euro added to gains after Wednesday bullish reversal.
Act | Exp | Prev | GMT |
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Eurozone CPI Flash Estimate (y/y) | |||
2.0% | 2.1% | 2.2% | Nov 30 10:00 |
هل حان وقت الخروج من الداو جونز؟
هل حان وقت الخروج من الداو جونز؟ ولماذا تحركت الأسواق وسقط الدولار بعد خطاب جيروم باول ؟ تعرف على الإجابة في الفيديو التالي
Powell Corrects Neutral
Metals and FX were all spurred sharply higher against the US dollar after Fed Chairman Jerome Powell delivered a surprise correction on Wednesday, with a dovish turn. Powell said Fed funds rates rates were “just below the vicinity of neutral”, one month after he described them to have been a "long way" from neutral. Powell also emphasized that there was no preset policy path and said officials were paying “very close attention” to economic data. A new USD trade was issued yesterday evening and is already half a cent in the green. US core PCE is up next, expected at 1.9%. Moments earlier, German prelim Nov CPI slipped to 2.3% from 2.5%.
تداول بعد باول فيديو المشتركين يدخل في صفقة امس
In a more-subtle shift Powell also made fewer mentions of the gradual path of policy hikes and generally used the past tense when mentioning it. The market's take was unmistakable. The S&P 500 rallied 2.3% in the biggest climb in eight months and the US dollar fell 40-100 pips across the board. The market continues to price in an 80% chance of a hike in December but now only sees a 75% chance of another hike through 2019.
Technically, cable showed signs of a double bottom at 1.2730 and may also benefit from polls showing the public warming to Theresa May's Brexit deal. The New Zealand dollar rose above the 200-day moving average for the first time since April.
Perhaps most notably, the euro traced an outside day in a rally to 1.1370 from 1.1270. The tone in Italy is moving towards a painful compromise and it's been badly beaten down. That said, it's been beaten down for a reason and that's poor economic data.
If there is going to be a sustained rally in the euro, it will need to come on better numbers. German inflation fell to 2.3% from 2.5% vs exp 2.4%. The US also reports on PCE figures later in the day but you would have to imagine Powell would have had an inkling that it wouldn't be strong.
Act | Exp | Prev | GMT |
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Eurozone CPI Flash Estimate (y/y) | |||
2.1% | 2.2% | Nov 30 10:00 |
خطاب باول و المخطط المجهول
هل بدأنا برؤية بوادر شك من أعضاء مجلس الاحتياطي الفيدرالي فيما يتعلق بالنظرة الاقتصادية الأمريكية ودورة أسعار الفائدة المستقبلية؟ سيكون خطاب رئيس بنك الاحتياطي الفدرالي "باول" هذا المساء (الثامنة مساء بتوقيت مكة) حاسماً ، لكن بعض الأعضاء بدأوا يهدئون من حماسهم للاقتصاد الأمريكي. ولا تنسى ندوتي الالكترونية التي سأطرحها بعد ساعتين من خطاب "باول" هذا المساء. للتحليل الكامل
Powell Put?
More players in the market are looking for a dovish shift from Powell on Wednesday but comments from his counterparts suggests it's not likely. The US dollar strengthened Tuesday and there was talk of month-end flows. But today, GBP is the strongest of the lot. A growing sense that the Fed isn't ready to pause rate hikes. Powell speaks later (17:00 London time) in a highly-anticipated speech but those looking for something dovish will likely be disappointed. Powell will likely prove to be less hawkish than more dovish. And will he choose to stick to the script so as not to publicly show he is toeing Trump's line on interest rates? The Premium long in the DOW30 was closed at 24750 for a 390-pt gain. Revised US Q3 GDP data is due next. A new Premium trade in JPY will follow shortly.
Vice Chair Clarida spoke Tuesday and offered only scraps for the doves. Headlines picked up on a line saying the Fed was 'much closer' to neutral but the full line was that they're now 'much closer to the vicinity' of neutral than they were in 2015. After 200 basis points of hikes, that's hardly groundbreaking. Meanwhile his speech touted the strength of the 'robust' economy and talked about accelerating wage grains and with fewer downside risks. But he also stated the need to remain data dependent at more than occasion.
It would be highly unusual for Powell's comments Wednesday to diverge from his deputy, especially since both are early in their terms. The financial media is fixated on the dovish scraps at the moment so there's some headline risk to the US dollar but the meat of the speech will drive the lasting move.
In politics Tuesday, a German report said Trump could put 25% tariffs on all auto imports to the US aside from Canada and Mexico. The move could come after the G20.
One take is that it would be a new phase of aggressive tariffs from Trump, including China after the G20. Another idea is that he likes to focus on one battle at a time and he will pivot away from stubborn China after the G20 and try to squeeze Europe.
Act | Exp | Prev | GMT |
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Fed Chair Powell Speaks | |||
Nov 28 17:00 | |||
Eurozone ECB President Draghi Speaks | |||
Nov 29 8:00 | |||
Prelim GDP (q/q) [P] | |||
3.6% | 3.5% | Nov 28 13:30 |
Trump Postures ahead of Xi Meeting
Risk trades rallied Monday but the tone may quickly shift with Trump talking once again about aggressive China tariffs. The US dollar led the way while the yen lagged. CFTC positioning data showed fresh bets against the euro. Draghi stuck to the script, Trump & Xi will be watched next, followed by Powell's NY speech and US core PCE later in the week. US auto giant GM announced the shutdown of 4 factories and layoff of 14K workers in a move leaving us to wonder what would the Midterm elections outcome have been had the announcement emerged before the midterms. The Premium LONG in the DAX was closed for 300 pts gain, with notes highlighting how high the current rally could go and why the other Index long remains open. More details found in today's Premium video.
USD/JPY rose by more than half a yen and the Nasdaq climbed 2% Monday in an upbeat start to the week. Futures, however, slipped after the close when Trump said he expected to hit China with higher tariffs in January. He said it was highly unlikely the rise to 25% tariffs on Jan 1 would be delayed and that all Chinese goods could soon be hit with tariffs.
The commodity currencies slid after the comments were published. The question is whether the comments were posturing or reality. Trump meets with Xi on Friday in Buenos Aires and he undoubtedly wants the Chinese leader to believe that he's not bluffing. At the same time, does it make sense to believe Trump would hit businesses and consumers with tariffs that will undoubtedly slow growth in 2019? The tempered market reaction reflects that skepticism. At the same time, the market didn't believe Trump would ever implement tariffs.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. This week's report was delayed because of the US holiday.EUR -47K vs -37K prior GBP -43K vs -47K prior JPY -100K vs -102K prior CHF -20K vs -19K prior CAD -6K vs -3K prior AUD -59K vs -58K prior NZD -19K vs -22K prior
The moves were small but there is fresh interest in selling the euro as the economic data deteriorates. On Monday, Draghi conceded the numbers have been disappointing since September but there was no commitment to alter forward guidance.
Act | Exp | Prev | GMT |
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FOMC's Clarida Speaks | |||
Nov 27 13:30 | |||
FOMC's Bostic Speaks | |||
Nov 27 19:30 | |||
RBNZ Gov Orr Speaks | |||
Nov 27 22:00 |
Consolidation Phase
A busy week lies ahead for central bank watchers and trade war enthusiasts as Fed officials pile on their views ahead of the 2-week blackout period and Trump-Xi meeting gets under way later this week. All currencies are up against the US dollar with the exception of the Japanese yen as global indices push higher across the board. EUR retests the 1.1380s after Armando Siri (econ adviser to Salvini) said to Il Messaggero that “a little fine-tuning of the budget” remains possible. The Italy-German 10-year spread falls to a 7-week low of 2.87%. ECB president Draghi is due to speak today to the EU Parliament at 14:00 London time and again on Thursday. On Wednesday, Fed Chair Powell speaks at the always interesting Economic Club of NY. The Fed minutes of the Nov 8 meeting will be issued on Thursday. Four other Fed officials are expected to appear later this week, so watch out for any signs of reduced Fed hawkishness. On Friday, an additional Premium long was issued on a major equity index, based on favourable seasonality patterns.
ندوة مساء الأربعاء
شاهدت مؤشرات البورصات الاميركية إرتفاع خلال شهر ١٢ ديسمبر في ١٠ من آخر ١٥ سنة. هل تتكرر هذه الظاهرة الموسمية في ديسمبر القادم و كيف يمكنك إستغلالها؟ للتسجيل في من خارج السعودية . للتسجيل من السعودية فقط