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Intraday Market Thought: Fed Brushes Off Q1

by Adam Button | May 3, 2017 23:15
The Fed brushed off a weak first quarter and that was seen as a signal that....The US dollar led the way while the Australian dollar lagged to a 3-month....Australian trade balance and comments from Lowe are out next...The Premium long in GBPJPY was closed with a 205-pip gain as a tactical....7 trades remain progress...The Fed didn't offer anything new in the way of guidance in Wednesday's....The same 'gradual' language remained without committing to a....But that's not how the market took it...The probability of a June hike rose to 93% from 70% after the statement...What the market latched onto was a line saying that the slowdown in Q1 growth....The assumption is that the Fed is brushing it off and still wants to hike....That may turn out to be true but not if data continues to miss...At 93%, it doesn't leave much room for error...On the data front – at least on the soft data front – the Fed got....The April ISM non-manufacturing index was at 57...5 vs 55...8 expected...In addition, the new orders component was at the best level in 11 years,....2 from 58...9...That will help convince the Fed that good growth is still right around the....The other main release was ADP employment at 177K compared to 175K....In the bigger picture, we're increasingly convinced that jobs growth....Yesterday's New Zealand jobs numbers were extremely strong with unemployment....9% from 5...2% a great jobs growth overall...The kiwi initially jumped 30 pips but was sold heavily for the remainder of....Expect the market to have the same focus on wages in Friday's non-farm....The principal question is: Can a tight labour market still producer wage growth....The kiwi fell alongside AUD/USD which wiped out three days of gains and fell....Up next is the 0130 GMT trade balance report; it's expected to show a $A3...25m surplus...The bigger potential market mover comes at 0310 GMT when Governor Lowe speaks on....That topic sounds ripe for hawkish comments but even if that's the case..
Intraday Market Thought: Uncertain Fed & Uncertain UK Politics

by Adam Button | May 31, 2017 0:08
The Fed's Brainard gave the strongest hint yet that low inflation....The New Zealand dollar led the way, while the Canadian dollar lagged...A UK election polls sent the pound plunging in early Asia-Pacific trade...The latest video for Premium subscribers is found below...The April PCE report had something for everyone...The dollar initially rallied on the headlines because core PCE rose 0...2% m/m, slightly more than the +0...1% consensus...USD/JPY ticked 25 pips higher to 111...20 but that was the high for US trading...Weighing on the dollar was a decline in year-over-year core inflation to 1...5% from 1...6%....It was expected but it extends the trend of slipping core inflation...Downward revisions to personal income also weighed but were balanced by rosy....The change of a June hike rose to 88% from 84% according to the CME's....A big reason is because of eroding faith in longer term rate hikes...Later in the day, the Fed's Brainard warned the FOMC may need to reassess....For the moment, she said it was premature to make that call and that'....But along with that hike, the statement is now more likely to include language....The bond market is now beginning to question whether those hikes will come....The 10-year yield fell 3...7 bps to 2...21% and is closing in on the post-election low of 2...16%....The US dollar is following yields lower...Meanwhile, the pound took a sharp spill briefly below 1...28 in early Asia-Pacific trading...The trigger was a poll from YouGov that modeled the distribution of votes across....It showed Theresa May's Conservatives winning but falling 16....That would seriously jeopardize Brexit negotiations and cripple the government...From here, the focus will shift to China where the official PMIs are due at 0100....The manufacturing measure is forecast to slip to 51...0 from 51...2...the prior non-manufacturing reading was 54...0...Note that it's also the final trading day of the month so flows could..
Intraday Market Thought: Fine Fed Lines To Be Drawn

by Adam Button | Jun 13, 2017 23:25
A rate hike is virtually certain in the day ahead but the communication that....The pound was the top performer while the yen lagged...Chinese and Japanese industrial production data is up next...The English video ahead of the Fed for Premium subscribers was posted yesterday...الإسترليني، الذهب و المؤشر المجهول (فيديو للمشتركين فقط)....A hike Wednesday is 95% priced in but beyond that is a mystery...Earlier this year, the debate was about three or four hikes but given the soft....For September a 28% chance of another hike is priced in and for December it&....The market will search for clarity in the statement, forecasts, dot plots and....Most believe Yellen will signal some kind of wait-and-see stance that makes....Alternatively, the Fed could continue to insist that better numbers are right....That would be consistent with their previous stance but it would go against....Ultimately, how the market reacts will depend on how any shift is communicated...In the March dot plot, 5 members saw a total of four hikes in 2017, 9 saw three,....It would require six members to shift from three hikes to two in order to move....But the dot plot may not be the sole medium...The statement is also a complex means to signal a shift towards a more....A slight change in the line saying “The Committee expects that....If there are no clear changes, expect the US dollar to rally on the headlines,....The chances of confusion and choppy trading are high, be sure to follow....Before the Fed, the focus is on China with May retail sales and industrial....Consumers continue to spending with sale forecast to rise 10...7% y/y while industrial production is forecast to rise 6...4%....Impressively, Japan was almost able to keep pace with the industrial growth in....April production rose 5...7% in the preliminary report and final data is expected to show similar growth...Don't expect significant market moves on the Chinese or Japanese data..
Intraday Market Thought: None Wants a Strong Currency

by Adam Button | Aug 1, 2017 23:36
The RBA statement on Tuesday highlighted the conundrum at central banks –....Lowe did his best to salt in some jawboning and AUD/USD fell in the....NZD is falling fast in early Wednesday Asia...after NZ Q2 employment contracted 0...2% q/q vs expectations of +0...8%....The chart belows shows all currencies are up vs the USD so far this year, with....US data were neutral to negative...June core PCE price index held at 1...5%....July manufacturing ISM slipped to 56...3 from 57...8, with prices paid up to 62 from 55...0 and employment off to 55...2 from 57...2...June construction fell 1...3% vs expectations for a rise with net downward revisions, which means a....The RBA statement said a stronger Australian dollar would restrain growth....It's not as strong as previous comments that explicitly warned of the....It means that if AUD/USD rises further, rate hikes will be pushed out further,....The other standout in the RBA statement is downcast commentary on wage inflation...Lowe made several references to low wage growth and said it will continue for a....A widening gulf between central banks may be growing -- Some have grown tepid....That's a reflection of a change in global dynamics, offshoring and....Other central banks believe it's only a matter of time until wages pick....Since the same factors are in play everywhere, both sides can't be....What strikes us is that forecasting low wage growth may be more effective in....The risk is that if you're wrong about wages, you might have an inflation....That's a risk worth taking or at the very least, it may mean more central....Such a collective shift to the sidelines could have the greatest impact on FX,....That said, we don't see signs of strong or shifting rhetoric on the wage..
Intraday Market Thought: Cable Has a Catalyst

by Adam Button | Nov 28, 2017 22:55
Separate reports suggested UK PM Theresa May's government is close to a....Cable jumped on the headlines and was the top performer on the day while the....Japanese retail sales are due up next...2nd EURUSD trade has been issued...Tomorrow marks Janet Yellen's final testimony to Congress' joint....The video for Premium subscribers is posted below, highlighting the existing....nbsp;....It was a lively day of trading that included heavy newsflow...The pound suffered early and cable was down more than a cent when a Telegraph....Cable jumped more than 120 pips then fell back down when a government....A second report, this time from the FT, added more detail, indicating the deal....That sent cable near 1...3400 from as low as 1...3220 on the day...More importantly, it's a fresh catalyst for cable...If confirmed, it's a sign that negotiations are bearing fruit and....At this point, nearly any kind of resolution or progress is good for....Across the Atlantic, the US dollar was buoyed by economic data as consumer....New home sales also beat expectations, but trade and inventory reports led to....The tax plan also made progress but once again that buoyed stock markets while....The S&P 500 surged 26 points to a record 2627...In geopolitical news, North Korea tested a missile but the dip was merely a....Amidst all that, Fed chair nominee Powell was grilled in his confirmation....On monetary policy, he did his best Yellen impression and said gradual rate....At the same time, he struck a few dovish notes by warning on low wage inflation....Looking ahead, we will continue to monitor the North Korea fallout but also....The consensus is for a +0...2% m/m rise after a 0...8% m/m jump in Sept...Comments from the BOJ's Nakaso are also due at 0700 GMT.
Intraday Market Thought: Crucial Trading Week Ahead

by Ashraf Laidi | Jun 11, 2018 21:04
Here is why this week will be the most important for financial markets so far....Aside from the Fed rate hike and ECB press conference on Wednesday and....nbsp; The video for Premium susbcribers is found below...Kicking off all these events on Tuesday will be the much anticipated Trump- Kim....Aside from the historical element to the meeting, no breakthrough is expected....It's in the interest of both sides to get a deal, yet more so for Trump...Tuesday will also see the UK jobs and earnings data, followed by the US CPI....GBP traders shall await important developments in the lower House of....The votes will take place on Tuesday and Wednesday...Wednesday's release of the UK May CPI will shed light on whether inflation....0% level, which will help determined odds of an August rate hike, which....nbsp;....The 2nd Fed hike of the year is expected on Wednesday alongside the dot plot....Fed chair Powell's press conference will be thoroughly monitored and....Thursday's ECB press conference should reveal whether the ECB will....Is the recent rise in inflation and weakness in the euro sufficient to....Thursday's Aussie employment data will be vital for AUD traders, fixated....Will any increase in net employment above 10K will be mostly from full-time....6%....The FIFA World Cup kicks off on Thursday with the opening game between Russia....Friday's Bank of Japan decision is the least important of all central banks....nbsp;....Don't forget my Tuesday webinar previewing my trades ahead of the week...Click here to register.
Intraday Market Thought: Political Calculus and Calamity

by Adam Button | Nov 19, 2018 15:00
Theresa May's government hangs by a thread and a leadership challenge could....The reports of plots and discord put the pound at risk in the new week...Early moves put AUD lower on renewed US-China tensions...The new GBP trade is on...We often wonder whether the UK Conservatives are a political party or a....The party splintered once again this week after May unveiled an exit deal...The most-damaging blow came from Dominick Raab who quit after she....Raab then immediately pivoted to serenading the UK press with interviews....He clearly believes a leadership challenge is coming...May likely believes that she can survive or avoid a challenge...All sides are counting votes with all outcomes dependent on roughly a dozen....The first question to answer is whether 48 Conservatives will write letters....If so, that would set off an automatic leadership challenge...So far, 26 letters have been made public...Raab has said he shall not write such a letter, and that may be a hint that he&....If it is, the UK press reports that Tuesday could be the day and that would....If the deadline passes, look for GBP shorts to cover...The next question is if the 48 letters are produced, would Theresa May survive....At least a half-dozen Conservatives would have a chance to win, but do they....And this fact is increasingly known...What might motivate May to battle on is that if she survives a challenge she....Whether she wins or someone else takes her place, parliament will soon have a....A loss would raise a separate set of questions including an election, another....All those options add to the uncertainty discount in GBP but that final....Ultimately, that's still a remote possibility because it's such a....In other weekend news, the APEC summit ended without a statement for the first....Pence ramped up tension with China saying the US was prepared to more than....Risk trades aren't like to respond positively to that with the Trump-Xi..
Intraday Market Thought: Ceasefire & Surge

by Adam Button | Dec 3, 2018 15:08
An agreement by the US to hold off on any additional tariffs on China for 90....AUD and CAD were the top performers over the last 12 hours, while the pound....Gold and silver are posting their 4th biggest daily gain of the year...nbsp; CFTC positioning showed more euro shorts...Before we get to Friday's US and Canada jobs figures, note that Fed chair....Thursday's evening's Premium long on the Dow hit the final entry at....nbsp; A new trade has just been issued moments ago before this post...The US said it will hold off from any additional and planned tariffs on China....Heading into the weekend, there was a risk of a blowup after the Xi-Trump....For China, the strategy continues to try to minimize the damage and run out the....This is a small step towards that and a sign that they are open to more-....The US-China story buried a surprise in the G20 statement...Leaders pledged to reform the WTO in a nod indicating emerging markets are less....Negotiations will undoubtedly be contentious and WTO changes always take....Early market moves were hefty with NZD/USD climbing 1% and AUD/USD up 0...6% in a broad jump in risk trades...nbsp; Metals pushed higher, led by copper attempting a break of the....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 -55K vs -47K prior...GBP -39K vs -43K prior...JPY -104K vs -100K prior...CHF -21K vs -20K prior...CAD -9K vs -6K prior...AUD -54K vs -59K prior...NZD -21K vs -19K prior....Euro shorts have increased by more than 40% in the past two weeks as the market....The risk is that the ECB once again uses the 'delay and pray' strategy....General Trade Ideas....Here's a video that Ashraf shared with a group of traders at a dinner on....Some of the trade ideas may be new for some, not so for others...Full video.
Intraday Market Thought: Euro Bucks Bad Data, BOC Next

by Adam Button | Jan 8, 2019 23:01
The euro has shown some impressive resilience in recent weeks but the....Meanwhile, German-US 10 year yield spread is at it 8-month highs, raising....More on this below...nbsp; The Canadian dollar was the top performer Tuesday while the pound lagged...The Bank of Canada decision is due up next...Today's Premium video covers the paramaters of the current long index....The plunge in German industrial production on Tuesday may have served as....It fell 1...9% compared to an expected 0...3% rise...The October number was also revised to -0...8% from -0...5% to compound the pain...The industrial sector is critical in the German economy and the sharp slowdown....The ECB has tried to remain upbeat but rate hikes in 2019 are looking....The ECB has stubbornly tried to save face but expect more emphasis on....Notably impressive was how the euro held its ground despite the poor data...Over the last 4 weeks, the euro outperformed USD, CAD, GBP, NOK, AUD and....It continues to trade above 1...14 and has been carving out higher lows since early November...This is largely a reflection of lower prospects for Fed hikes but that....Falling oil prices is a more of a net-positive for the Eurozone than the US,....For now, there's no reason to expect any significant uptrend in the euro and....Ashraf's long in EURUSD remains +90 pips in the green but he is concerned....Looking ahead, another central bank is also in the process of climbing down....The BOC meets Wednesday in what's sure to be a change of tone...Rates aren't in the focus but the statement will have to address lower....At the same time, Poloz is consistently optimistic and he could try to retain a....If so, that would keep the six-day rally in the loonie on track.
Article: ECB Action Sheds Doubts on Yield Differentials

by Adam Button | Sep 13, 2019 14:02
Can the euro gain despite the latest rate cut? Before we cover the aftermath....A month ago, Bank of Finland chief ECB member Olli Rehn said it was important....quot;When you're working with financial markets, it's often better....The euro had slumped on those headlines at the time on the expectation of a....The problem with such remarks is they remove the element of surprise later....So the ECB went on a coordinated disinformation campaign...Speaker after speaker over the past month went on the offensive...Dutch central bank chief Knot said there was no need to resume QE, Germany's....A series of leaks continued right up until the decision that suggested QE may....That set the stage for Draghi to deliver a Thursday 'surprise' of open-....Draghi opted for a 10-bp rate cut --not the 20 basis points -- that many were....The forecast for 2020 inflation was lowered to 1...0% from 1...4%, suggesting that any trouble will be met by action...Eurozone government yields fell alongside Italian yields down as much as....75%....Yet the euro hung in there, which begs the question: Do interest rate....The answer could suggest that they don't...In 2007 you could buy the New Zealand dollar and sell the yen while collecting....Today, even at the extremes, the differences in developed markets are 200....Flows vs Differentials?....Increasingly, money is chasing growth and/or value...That's always been the case, but it brings us back to the role of central....The ECB's manufactured surprise should be viewed less through the lens....In that sense, tiering for Eurozone banks (expempting banks with particular....This factor helps explains why European banks sector shot up immediately after....Asset managers looking for bargains will not resist the temptation to buy beaten....EURUSD is on its way to complete its 2-weekly gain...It has not 3 consecutive weekly gains since June 2018...Could next week prove positive in the aftermath of the Fed?....The fiscal path....Draghi is now nearly done at the ECB...He engineered policies that were unthinkable on his arrival...He fought against the panic of a Eurozone breakup, and did everything he....Throughout his tenure, he asked for governments to do more...He made that call again on Thursday...The fiscal argument has no doubt merit for it to be included Christine Lagardes....She must draw a line at some point, warning that the risks of the ECB....With that, she will hand the baton to the fiscal side...The market is already looking ahead to this but the early take is that....By that time, it will be too late.