Core macro themes traders need to roll with:
• China reopening plans – after Friday’s incredible moves will the market buy the expected early weakness? Consider copper had a 4 standard deviation move on Friday (+7.6%) and the HShares closed its best week since 2015.
• Central bank divergence is even more pronounced – several central banks have underwhelmed on...
Time – 3 Nov 5am AEDT / 6PM GMT (Jay Powell speaks at 05:30 AEDT)
Central bank meetings are just so important to sentiment and market structure – when we’re trading a major market theme, such as inflation and rising interest rates, this is the market’s chance to mark-to-market policy changes and how the collective in the bank guide our expectations for future...
As we look ahead to the US midterms on 9 November, the question traders ask is whether it has the potential to be a risk event and promote increased cross-market volatility – as part of the risks assessment, the election has implications on whether to reduce trading exposures over the event.
Anecdotally it feels like traders aren’t giving the elections too much...
Key event risk summary:
• FOMC meeting (3 Nov 5 am AEDT) and chair Jay Powell press conference – the Fed hike 75bp, but it’s all about the guidance
• RBA meeting (1 Nov 14:30 AEDT) – A 25bp hike is expected, watch for the optionality of a bigger hike in the December meeting
• BoE meeting (3 Nov 23:00 AEDT) – a 75bp expected – Comments from members Mann and Pill...
It's quite the sell-down in the USD today with the USD lower by 1% and down against all major currencies. While the SEK has worked best on a percentage basis, it’s the GBPUSD that has been the star performer for me, gaining 1.7% - while most will put this down as the “Rishi rally”, it feels its feeding off the relief from lower gilts yields as well as the broad...
Key event risks traders need to navigate in the week ahead:
• A huge week of US corporate earnings – we see 47% of S&P500 market cap reporting – Apple, Microsoft, Amazon, and Google among others
• The Tory Leadership battle – the bulk of recent betting capital is for a Sunak win
• ECB meeting (Thurs 23:15 AEDT) – a 75bp hike is fully expected – with Eurozone...
After much anticipation, Liz Truss leaves Downing Street after 44 days in the job and the process of finding a new PM kicks in – 100 Tory MP nominations are needed (out of a possible 357) , and that means we should see 2 or 3 candidate in the running early next week – Rishi Sunak is the clear front-runner but Boris Johnson is making a play and the flow of betting...
One of the more watched interest rate settings in markets is the so-called ‘terminal’ interest rate – the point in the interest rate futures curve that reflects the highest point of future rate expectations – said differently, where the market feels a central bank could take its key policy rate by a specific date.
For those who really want to understand fed funds...
UK politics commands the international spotlight from time to time and that time is now. Yet, while we fraternise over Fed policy and how high the Fed could take the fed funds rate into 2023, UK politics and the impact on the UK gilt (bond) market and the GBP is firmly front and centre – the connection between British politics and the capital markets will almost...
We saw CADJPY finally reverse around 111.00 after an extended run to the upside. This was then followed by a monthly shooting star candle on the monthly chart, signaling a potential reversal. Sellers stepped in and we saw a drop to 104.50.
We've since then seen a pullback into 107.00 resistance, whilst market consolidated in a potential bear flag.
Could we see...
We saw EURCAD massively rally from the 1.3000 monthly support level to 1.3600 and close extremely bullish on the monthly chart, showing a clear candlestick reversal pattern after a significant drop in recent months.
We've since seen a pullback to retest the broken resistance, now support, around 1.3400 with the potential to head lower towards the liquidity pool...
The market opened last week on an optimistic tone, positioning on the belief that we could see something resembling even a minor pivot in the various dialogues. With the benefit of hindsight, this exposure couldn’t have been more incorrect, and central bankers pushed back hard. Fed members Mester, Cook, Kashkari and Evans all gave different degrees of hawkish...
In US trade, EURUSD moved to whisker from parity and found supply into the big figure – its hard to pinpoint an exact reason, but without being on an investment bank flow desk, we can believe this has been driven by a reduction in USD longs as equity markets rage higher – we also know US real rates have cratered in the past two days and terminal interest rates...
Given the moves in the USD and US real rates - Its probably no surprise that XAUUSD is also testing the top of its channel and its 50-day MA – this is similar to EURUSD, but price has progressed a little further. This has been gold’s time to shine as we’ve seen market-based measures of inflation expectation ('breakeven' rates) moving higher, while real rates have...
UK politics is always interesting viewing, especially when you have the luxury of watching from the other side of the world and where the policy choices don’t directly affect you. Clearly, the disconnect between the Truss govt and the capital markets has been brutally exposed, resulting in an exodus of UK assets and requiring some heavy lifting from the BoE in...
After a brutal week/month for risky assets, we turn the page and look to trade all the grenades that are thrown at us in the new week – the dynamic remains one of further fundamental downside risk, amid technically oversold conditions, which suggests any resemblance of good/less bad news should see pronounced upside moves. That said, much will need to go right for...
It's clearly not dull trading the GBP at the moment and the GBP is the wild child of G10 FX – the news flow has some incredible twists and turns, and pricing risk in this backdrop is almost impossible.
When any central bank makes up policy on the fly to appease market functionality you typically get massive moves, and that is what we’re seeing front and centre in...
After a defining week in financial markets we look forward to a noise fest from individual central bankers – on first blush, I count 22 Fed speakers, 30 ECB speakers and 6 BoE speakers all out on the wires this coming week. Strategically, it's hard to see them diverting too much from the central bank statements that inflation must be put to bed, and there will be...
