European Open - 30.11.2015

Slow start to a big week. Remember it's month-end so we may see some EurGbp strength (Buba purchases), alongside relative equity rebalancing which would see some Euro selling and Jpy selling since Dax and Nikkei were the outperformers in November. 

Asian equities and commodities were all lower overnight. Looking forward,  today’s German November ‘flash’ HICP will be watched as a preview of Wednesday’s data for the EU as a whole. Both are expected to print slightly better than previous, but not good enough to stop the ECB from announcing further easing measures on Thursday.

Charts for today: see the Game Plan issued yesterday.

Weekly Game Plan - 29.11.2015

1. Themes for the Week

- Policy Divergence: the ECB meeting and the NFP report will most likely cause large moves this week. Draghi is expected to ease policy further, and NFP is expected to reinforce the FOMC's rate hike scenario. For the US, we also have ISM PMIs (Tue & Thu) and some Fedspeakers. We will also have German unemployment and EU PMIs to take note of.

- Macroprudential policy action could buy the BoE time before raising rates. Gbp might have some volatility with the PMIs out this week, but is definitely not the protagonist this week.

- RBA and BoC also in focus, but no change expected from either.

- OPEC meeting on Friday will be worth watching, since there have been signs of increased cooperation from Saudi officials.

2. Charts in line with these themes

European Open - 27.11.2015

Asian bourses were dull, as the US was on holiday and thus there was no sentiment to carry over to Asia. The Shanghai Composite was hit hard after the CSRC started investigating Citic and Guosen securities. Don't expect much today either, being Black Friday and with no macro data to push sentiment around. Maybe just keep an eye on month end flows. Based on relative equity performance, I'd expect some selling of Jpy and Euro, above and beyond the usual EurGbp demand by the Buba.

Happy Thanksgiving!

European Open - 25.11.2015

Asian equities were choppy and weak overnight, with participants still wondering whether there will be an escalation between Turkey and Russia. There were light risk-off flows yesterday, but they still took the back seat to more evident position closing/book squaring pre-Thanksgiving.

In FX, the Aussie is the leader of the profit-taking pack, being the strongest currency out there vs. USD at the moment. It also got a lift after Stevens showed just how relaxed he is, saying "We've got Christmas. We should just chill out, come back and see what the data says." RBA's Debelle speaks this morning in London so there might be some more action to be seen in the Aud.

Looking forward: we have some important releases in the US today ahead of Thanksgiving and Black Friday. Main focus will be on core PCE inflation (the inflation measure FOMC targets) which is expected to rise 0.1% m/m  (1.3% y/y).

No charts today. I'm not looking for any fresh entries this morning.

European Open - 24.11.2015

 Asian markets were broadly lower overnight, following a lackluster NY close. Nikkei was back online after Monday's public holiday. In Australian markets, miners were lagging the ASX 200 amid commodity volatility. Greater Chinese markets also lower. 

Crude: Saudi Arabia issued a statement yesterday stressing its desire to cooperate with both OPEC and non-OPEC oil producers in stabilizing prices. Oil saw a modest bounce and UsdCad has traded lower.

Coming into today's speech by RBA Governor Stevens at the Australian Business Economists’ Annual Dinner, AUD continues to demonstrate resilience. The base case is that Stevens will support the view that the RBA is on hold. So any verbal intervention to talk down the Aussie will hurt.

Looking forward: German IFO (expected to rise), Bank of England MPC testimonies (Carney & Haldane expected to restate the weakness in CPI) and the second estimate of US Q3 GDP (expected to be revised upwards) are the key events. 

Charts for today:

European Open - 23.11.2015

Dull start to the Asian/Pacific trading week with Japan off for Thanksgiving Holiday. Asian equities were mixed in lateral trading.  The energy sector and metals opened the week with another drop which, along with continued USD strength,  is hurting comm-dolls the most.

Looking forward: today’s  focus is likely to be on the ‘flash’ estimates of Eurozone PMIs for November. The data will provide a further read of activity trends in Q4 against a backdrop of comments from ECB officials on whether and what form of further policy easing may come on December 3rd. In the US session, we have Manuf. PMI and Existing Home Sales to watch also.

Charts for Today: see the weekly game plan.

Weekly Game Plan - 22.11.2015

1. Themes for the Week

- It will be a holiday-shortened week for the US, with Thanksgiving on Thursday. Q3 GDP figures should reassure FOMC about the US economy's momentum. In addition, we have  consumer confidence (Tue) and home sales (Mon & Wed).  The Fed will most likely be staging a dovish hike in December - and there might even be some attempt to talk down the USD. It makes sense to play USD longs up to the first week of December but after that, it might be a while before the greenback comes back into focus. Buy rumour (of a hike), sell the fact (of a dovish hike).

- UK Autumn Statement set to tackle fiscal slippage, especially after last week's public finances numbers. Gbp likely to stay under pressure in the near term.

- ECB still on track to loosen policy at December meeting and this week's data (preliminary EU PMIs) is expected to reaffirm soft Q4 activity.

-  CNY might lose some ground now that  it's in the IMF's SDR basket. Beyond this, as a longer term theme, the overdue rebalancing of the Chinese economy (from investment- to consumption-driven growth) will be a major drag on the global economy in the coming years. Even China must get accustomed to single-digit growth numbers.

2. Charts in line with these themes

European Open - 20.11.2015

TGI-F!

Asian equities were still supportive overnight, and continue to buck the trend. Risk is still bought and the Vix remains subdued. In FX, the ECB Minutes appeared to be quite dovish. This supports the view that aggressive easing is coming in December. However one cannot simply short the Euro...the Eur short/Usd long bandwagon is quite full and it will take ongoing negative news to keep it down. 

Looking Forward:  markets will continue to scour comments from ECB officials on to what extent the QE programme will be expanded. Today sees scheduled speeches by ECB President Draghi and other Executive Board members, including Coeure, Praet and Constancio.  There are no major US data releases today, but Fed speakers include Bullard, Dudley and Williams. 

Charts for Today:

European Open - 19.11.2015

Asian equities took  cues from Wall Street and continued to rally into EU trading. Actually the risk-on flows are the reason UsdJpy is still holding up despite a more lackluster performance of the USD. 

BoJ noted some weakening in domestic inflation expectations but nothing really market moving. Comm-dolls experienced something of a position squeeze, but the underlying dynamics have not changed. Illiquid markets make for challenging trading sometimes.

The minutes of the 27-28 October FOMC meeting were more or less as expected and thus the market reaction was limited.  Due to the very strong jobs report for October, a December hike is more or less a done deal and thus the FOMC minutes were in fact already old news.

Looking ahead: we have a very busy day today. ECB and Fed speakers on tap, and the markets will listen carefully for any comments on monetary policy. UK retail sales in October are due. The September number was very strong (some say it was due to the hosting of the Rugby World Cup) so we may see a downward correction. Initial jobless claims in the US are estimated to have stayed more or less unchanged around 275K.

No charts for today - nothing inspiring to my eyes today.

European Open - 18.11.2015

Asian equities modestly higher while geopolitical tensions still linger. We're still positive on the week in Nikkei, Dow, S&P and today's FOMC minutes will most likely dictate the next move. The market is now pricing in a 75% chance of a rate hike in December and is evidently long USD. We will need continuous support from data/speakers to keep this ball rolling. As the bandwagon fills, it gets easier to disappoint the crowd.

Beyond the USD, Kiwi was in the spotlight after Fronterra saw a steep decline in whole milk powder prices, which dropped 11%. This fits with earlier declines in milk futures and suggests ongoing drag on the economy which should add to risk for RBNZ easing early next year.  Why is Kiwi not weaker? Partially because the USD is pulling back ahead of FOMC minutes; partially because the bad news was expected. 

Looking ahead: it is quiet data-wise today (just US housing starts and South African CPI and retail sales) but the Oct FOMC Minutes are due and we also have a wealth of central bank jawboning: the ECB’s Mersch, Lautenschlaeger and Coene, the BoE’s Broadbent, the Riksbank’s Floden and the Fed’s Dudley, Mester, Lockhart and Kaplan – though of those Fed speakers, only Kaplan is speaking on monetary policy. 

No charts for today - want to see more evidence of further USD strength or temporary weakness before taking another swing. 

European Open - 17.11.2015

Asian equities consolidated overnight, after a swift recovery yesterday despite the man-hunt after the Paris events.  The rise was also facilitated by a rebound in the energy sector. Metals remain soft instead.

Elsewhere, RBA Minutes did nothing for AUD except reinforce the "wait & see" stance. The lack of dovish rhetoric might actually be good for AudNzd ahead of the milk auction this evening.  Milk prices have retreated and the expectations for today are for a bad number. This would evidently weigh on Kiwi.

Looking forward:  UK CPI and retail sales are the highlights for the EU session, along with ZEW. The market  is expecting a slightly stronger print on both UK & EU data, so if we get a disappointment, look out below.  During the US session, we have CPI, Industrial Production & Manufacturing Production which are all expected to rise. 

The USD is still king in FX, and in accordance with the game plan I will continue to look for shorts in Euro & Kiwi, and longs in UsdCad with opportunistic forays into UsdJpy also.

Charts for today:

European Open - 16.11.2015

Asian equities discounted the Paris attacks on the open, as risk-off sentiment hit and drove Gold higher, Euro lower and Jpy pairs lower. However, this is not 9/11 and markets are already stabilizing. So I'm not going to change the watchlist just yet. Some opportunities to short EU equities might open up but on FX I'm sticking to yesterday's watchlist.

Looking ahead, ECB’s Constancio (9.30 CET), Draghi (11.15 CET) and Coeure (17.00 CET) will speak during the day and the market will keep an eye out for signals on monetary policy ahead of the next ECB meeting in December. We also have EU CPI so focusing on the Euro pairs should prove to be beneficial today.

Weekly Game Plan - 15.11.2015

1. Themes for the Week

- Attacks on Paris & the Euro: we already know the market is heavily short EUR and it doesn't take much to trigger a short squeeze.  Of course, any short squeeze will be an opportunity to short at better levels, but the attacks in Paris do not reduce the possibility of further ECB action. The attacks might actually stimulate further need for accomodation and hence be a Euro negative.

-  US data to support December "liftoff". Beyond the all important CPI, we have industrial production (Tue), the Empire survey (Mon) and the Philly Fed survey (Thu), which are expected to show some improvement. We also have speeches by several Fed members, which will be worth some attention.

- Commodity prices continue to remain weak, however the Paris episode can trigger risk-off flows on the open and send gold, silver, Jpys and Chf higher.

- UK CPI inflation still negative and slow to return to target. This will inevitably keep the BoE on hold. 

- RBA minutes (Tue). The recent strength in the Australian labour market figures give less excuses to cut rates this year. The only excuses left are the weak global commodity prices. 

- The Bank of Japan (Thu) is expected to keep policy unchanged. Focus will be on Governor

Kuroda’s press conference for clues about the possibility of additional stimulus. 

2. Charts in line with these themes

European Open - 13.11.2015

TGI-F!

Asian equities were weak, generally following NY's negative close. Only the Nikkei tried to retrace some of the losses. 

Draghi did all he could to weaken the Euro yesterday saying:

“….downside risks stemming from global growth and trade are clearly visible.”

“Signs of a sustained turnaround in core inflation have somewhat weakened.”

“From today’s perspective, this suggests that a sustained normalisation of inflation could take longer than we anticipated in March when we first appraised the overall impact of our measures.”

However as we've been saying recently, FX these days is much more about positioning and yesterday we did experience a short squeeze despite Fedspeakers holding their ground also. Even Fed Vice Chairman Fischer reiterated his hawkish stance, downplaying the impact that the strong USD will have. Still, the comments did little to support USD.  It seems we will need a further suriprize in US data to get USD-bulls back in their seats. 

Looking ahead:  this morning’s focus is on UK construction data and  the market is looking for a bit of a bounceback, retracing some of August’s weakness . Then this afternoon, US retail sales, PPI, and the preliminary University of Michigan consumer confidence figures are the highlights for the USD.

Charts for Today:

European Open - 12.11.2015

Asian equities were mixed, no inspiration there. USD has consolidated all week basically...from a positioning perspective, this may now open up further space for a fresh leg up.

AUD popped on the jobs data, which was surprizingly strong. There have been changes in the statistical methods used to derive the data recently, so it's tough to take the number (58.6K vs 15K expected) at face value. However, it remains true that the Aussie labour market is stabilizing.

Looking ahead: today's focus will be on regional EU inflation figures, followed by EU industrial production. Beyond data, ECB President Draghi will speak at the quarterly hearing before the European Parliament’s Economic and Monetary Affairs Committee this morning at 9.30 CET and will be closely watched for further guidance on monetary policy moves.  During the US session, initial jobless claims are expected to print lower (270k vs 276 prior). A handful of Fedspeak is also on tap:  Yellen (14.30 GMT) will be the highlight, giving welcoming remarks at a conference on monetary policy; Bullard (14.15 GMT) speaks on Monetary Policy in Washington; Fed's Lacker (14.45 GMT) participates in Monetary Policy Panel; Evans (15.15) speaks on Economy and Policy in Chicago; Dudley (17.15) speaks on Economy and Policy in New York;  Fischer (23.00 GMT) speaks on Financial Stability and Monetary Policy.

I think it pays to watch the strongest USD candidates today:

European Open - 11.11.2015

Asian equities attempted to buck the trend overnight, despite mixed Chinese data. Industrial production fell while retail sales remained strong. Risk appetite will be subdued anyhow today, as it is Remembrance Day in Canada; Veterans’ Day in USA & a holiday in some other countries. USD lost some ground overnight as money was taken off the table.

The Euro has been annoying to trade, despite more political uncertainty in the region. A coalition of left-leaning parties has forced Portuguese Prime Minister Coelho from office, so it now falls on the President to appoint the leader of the Socialist Party as PM, find an alternative candidate or keep Coelho in place until new elections can take place in the spring. The immediate problem is that the changeover could see DBRS drop Portugal s debt from investment grade which would exclude it from the ECB s asset purchase program. Moreover, investors are starting to wonder if similar political dynamics will spread to other (more meaningful) countries of the EU.

NZD showed some back&forth action on the publication of NZ s Financial Stability Report and press conference from RBNZ Governor Wheeler. The message was largely in line with what we already knew, and the RBNZ is "on hold" for the time being.  

Looking ahead: dull day with the exception of teh UK unemployment data (expected to show strength) and the Bank of England’s Open Forum, which will be attended by ECB President Mario Draghi, scheduled to speak at 13:15 GMT (comments from Governor Carney are also expected throughout the day).

Charts for Today:

European Open - 10.11.2015

Asian equities were mostly lower overnight, after a large decline in US indices during the local session yesterday. Nikkei was the only strong mover overnight, recovering from a gap down open and pushing into positive territory. Most likely this was on the back of future policy easing speculation, as Chinese CPI disappointed.  Tough battle for UsdJpy, with risk sentiment dampened but also with a strong dove (Rosengren) changing tack and saying that a rate hike is appropriate in December.

Looking ahead, we have a dull calendar but several ECB speakers amongst which Coeure will be of most interest. He is seen as having relatively dovish views on policy. In the UK, BoE's Cunliffe will speak about macro-prudential policy measures. Of key interest will be the potential impact of these on housing, particularly following last week’s Inflation Report, which suggested interest rates could stay lower for longer than previously expected.

Charts for today:

European Open - 9.11.2015

Mixed session for Asia overnight, with Shanghai higher and ASX lower (BHP Billiton weighing). Markets initially rallied on the US data dump on Friday, but now remembering that higher rates will put pressure on stocks.  Chinese data overnight was also weaker than expected, which will impact risk-appetite also, as EU gets into gear.

Aud & Nzd have been insulated from Chinese weakness recently, but if we consider the potential easing bias of RBNZ and RBA, along with USD strength and Chinese weakness, pressure can build quite easily. Just a thought.

Looking ahead, today’s interest rests with Boston Fed President Rosengren (17.00 GMT). In the wake of the strong October labour market report, his views may provide some proxy representation of the relatively dovish members on the FOMC that are voting this year. If the doves shift their views, the USD should find more support.

For charts, refer to the Weekly Game Plan.

Weekly Game Plan - 8.11.2015

1. Themes for the Week

- No US data on tap this week, but loads of Fedspeak: most interestingly Evans (Thursday, 15.15 GMT) and Rosengren (Monday, 17.00 GMT) which have previously argued against an imminent rate rise. If they have changed their views, then the USD will likely get another shot of life. We also have Yellen, Bullard, Lacker and Fischer on Thursday, as well as Mester on Friday. 

- China:  Central Banks worldwide continue to speak about "global growth concerns" as a reason for loose monetary policy...but they are usually just talking about China. China's trade report will affect the tone of the markets early this week. The main focus will be on the export numbers. Later in the week we have  CPI inflation, credit figures, retail sales, industrial production and asset investment.Aussie & Kiwi, but also Euro will feel the negative vibes if there will be any disappointments from China.

-  EU GDP figures for Q3 are scheduled for release on Friday. The market is expecting a drop, evidently. Before that however, several members of the ECB Governing Council are set to speak, including President Mario Draghi (Wednesday, 13.15 GMT). Focus here will be on whether he maintains the very dovish tone from the ECB meeting.

- UK Unemployment report is  scheduled for release on Wednesday, and while the analysts are pointing at better conditions, I see it more as a possibility to sell a rally in Gbp given the recent dovish stance of BoE members.

2. Charts In Line with these Themes

European Open - 6.11.2015

Welcome to TGI/NFP Friday!

Asian equities were strong overnight, despite low participation and a cautious tone ahead of today's all important NFP report.  In FX space, GBP continued to suffer after the dovish data dump yesterday although many analysts believe the market's reaction is overdone. All I will say is that fighting momentum is a dangerous game.

We also saw the RBA's Statement on Monetary Policy overnight...the RBA is expressing no urgency to move in the wake of the rise in mortgage rates. The RBA actually remains very relaxed with their dovish view and a Q1 2016 cut remains the base scenario.

Looking ahead, today we have NFP. The median of forecasts updated over last 2 days is 200k so the published Bloomberg median of 185k may understate the actual market thinking. We could  see a small USD pullback if the 185k published median is hit, since the market is now discounting a 70% chance of a hike in December and the consensus of a strong number today. We would ultimately need a 220k+ number AND significant revisions to prior data, to get another leg higher in the Greenback.

We also have Canadian Unemployment data, which is expected to print a better number than last time, and maybe reduce the unemployment rate to 7% from 7.1%.

In the way of speakers, at 8:45 GMT ECB's Praet speaks, then at 10:00 ECB's Mersch speaks and finally at  14:15 St. Louis Fed President Bullard speaks.

Charts for today:

I will be refraining from trading this morning, preferring to wait for NFP. I sense the possibility of a disappointment today which, along with the large short positioning in the Euro, might give way to a squeeze.  But definitely no trades before or immediately after the number.

European Open - 5.11.2015

Asian equities were mixed overnight, after Fed Chairman Yellen (& Dudley) renewed the statement that "December is a live possibility" for a rate hike. This put a stopper in the equity rally (as higher rates mean lower present value of discounted dividends) and halted commodities as well via USD appreciation. The monetary policy divergence trade is back with a blast.

Looking ahead: it’s another Super Thursday for the GBP, with the November Inflation Report being released at the same time as the MPC decision and minutes. All this will come at 12.00 GMT, followed by Governor Carney’s press conference at 12.45pm GMT. The market is expecting no change on the 8-1 split and 0.5%. The Inflation Report is likely to show CPI overshooting the 2% target at the end of the forecast horizon so if it doesn’t, expect some decent GBP weakness. I prefer to play any Gbp strength vs. Euro still, and any new weakness vs. USD. 

Elsewhere, at 13:30 GMT we have Dudley, Lagarde &  Fischer speaking on banking culture. At 15:00  GMT we have Canadian Ivey PMI (expected 54.0 vs. 53.7 prior) and finally at 18:30 GMT Atlanta Fed President Lockhart speaks.

Charts for Today:

European Open - 4.11.2015

Asian equities had a neutral session overnight, despite a strong New York session and a positive beat on Chinese Caixin PMI. There is a price/sentiment divergence here and today might see some chop or retracement.

The Euro remains weak after Draghi confirmed the ECB's easing bias, and I like EurGbp shorts as the GBP continues to remain resilient. EurAud shorts are also still interesting although caution is required here at last week's/last month's low. Aud is also looking strong vs. Nzd after the bird fell sharply on the back of lower dairy prices and weak labor market numbers.

Today we have UK services PMI, which will attract much interest after the big upside surprise in the manufacturing data on Monday. This afternoon we will also see the final clues on Friday’s US payrolls release with the ADP report and ISM non-manufacturing survey both due. 

Finally, don't forget FedSpeak today: at 10:30 GMT Fed Governor Brainard speaks, then at 13.00 GMT Philadelphia Fed President Harker speaks, at 15:00 GMT Fed Chair Yellen testifies on bank regulation and at 19:30 GMT New York Fed President Dudley speaks.

Charts for Today:

European Open - 3.11.2015

Japan was closed for Culture Day, so there wasn't much movement in FX overnight. Asian equities instead traded higher, mainly following better US data and the energy sector. Tough to argue against further strength in the near term, and I prefer US indices (Dow & ES) to play the upside.

The RBA stood pat and issued a rather balanced statement. The market was expecting somewhat of a dovish tone, and instead received neutrality. Aud is higher on this and EurAud shorts along with AudNzd longs might be interesting in the coming days. We have already moved too much on the RBA, so further gains will be limited today.

The only 2 data points today are the UK Construction PMI at 10.30 CET (expected to soften, so any beat will have the Pound soaring again) and the GDT auction (apparently the market is pricing in a better auction than last time).

ECB President Draghi speaks in Frankfurt tonight (20.00 CET) but it is the Grand Opening event of the 2015 European Cultural Days and so seems unlikely to have policy content. 

No charts for today - can't see anything compelling.

European Open - 2.11.2015

Asian equities were down overnight, as Chinese Caixin manufacturing data was slightly better than expected, but still below 50 so in contractionary territory for the 8th month in a row. Risk appetite will not be healthy going into Europe.

The Euro is trying to recover slightly, after  the Italian newspaper Il Sole 24 Ore printed and article stating ECB President Mario Draghi said "nothing is firm, too early to tell, premature to make an evaluation and lastly, further stimulus is an open question". Euro still remains a sell on rallies, but it's better played on the crosses like EurGbp & EurNzd.

Today is PMI day, so the German & EU PMIs should set the tone for the Euro in particular, and the UK PMI will enhance the odds of a EurGbp breakdown again. In the afternoon, US ISM & FOMC's Williams will be the main focus.

For charts, refer to yesterday's Game Plan. 

Weekly Game Plan - 1.11.2015

Welcome to November Trading!

1. Themes for the Week

- Will the Fed finally pull the trigger? The  Fed felt comfortable transmitting a more hawkish statement to the markets. However, for a hike we would need to see data confirming that the US economy will grow above potential and/or suggesting that inflation pressures are starting to build. In this light, observe the October NFP & Avg. Earnings, and the ISM surveys this week. We also have vice chair Stanley Fischer’s speech on Thursday and board member Lael Brainard’s comments on Friday.

- Due to monetary policy divergence, the EurUsd should remain weak(er) and the UsdJpy strong(er) after the Ecb and the BoJ maintain an easing bias compared to the hawkish stance of the Fed. As far as Euro data goes, we get German  factory orders and industrial production, along with EU retail sales and PMIs. The market is of course looking for extra excuses to short the Euro, and will be in pain if data is good.

- Chinese manufacturing is expected to bottom soon. This can also reduce uncertainty over the global economy and thus make Fed tightening more likely. Equity markets will be supported by good Chinese data.

- In the UK, the main event is the BoE’s rates decision and inflation report. No change is expected, although there is a possibility of a 7-2 split. We will also get the PMIs this week to keep things lively.

2. Charts in line with these Themes