Intraday Market Thoughts

400-pip Election & Unconfirmed Deals

by Adam Button
Dec 13, 2019 14:16

UK Conservatives won a resounding electoral majority to ensure a Brexit deal. Less than 20 hours after Trump lifted markets with his trademark tweet on reaching a tariffs deal with China doubts are resufacing ... again (more below). The pound soared by more than 4 cents to 1.3514--the highest in 19 months straight after exit polls showed Conservatives had the biggest parliamentary majority since 1987. US Nov retail sales disappointed with a 0.1% rise (control group) vs expectations of 0.3%.  Days like Thursday remind us why we love the FX market. The news and market moves were non-stop in a sea of opportunity. The DAX Premium trade was stopped out and a new GBP trade issued ahead of the polls is +300 pips in the green.

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400-pip Election & Unconfirmed Deals - Cable 10 2 Dec 13 2019 (Chart 1)

What's a Friday without a Trump Trade Tweet

US indices are off 0.8% after Trump disputed a WSJ article stating that he agreed to roll back existing tariffs. The details are still murky but we have yet to hear from China's state council information office at its press conference due shortly. It will undoubtedly ratchet down tensions and promises a period of stability. Like the UK vote, traders were also reluctant to price in a deal because of Trump's unpredictability.

The deal is good news for global growth in H12020 and underscores that the global easing cycle is over, at least for now. There are many breakouts but a standout is AUD/USD. We highlighted the break of the major downtrend yesterday. The was followed by breaks of the 200-day moving average and the October high on Thursday. A weekly close above those levels would be a further positive signal.

The UK election was the crescendo. The market has been leaning towards a solid Conservative majority since the vote was called but no one could forget the failure of pollsters in the Brexit and 2017 UK votes. So even though the result was 'expected', we had a massive market move. Part of that also speaks to the strength of the Conservative majority. It looks to be at the extreme limit of what polls were indicating.

UK Conservatives crushed expectations with 364 seat-victory, fuelling sterling's rally on the basis of a strong, stable, business-friendly government in the UK, something it hasn't had in a decade. Wit the rise above 1.35 the pound broke the March 2019 high. In the bigger picture it's only back to where it was on the night of the Brexit vote. In the days ahead real-money and structural shorts will be unwound and further upside could come from any less-austere hints from Johnson.

Act Exp Prev GMT
FOMC's Williams Speaks
Dec 13 16:00
Core Retail Sales (m/m)
0.4% 0.2% Dec 13 13:30

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