Here is this week's Game Plan:
It should be a quiet start to the week with Asia on holiday and no influential news out over the weekend. It will be a data-filled week, with the focus being on GBP and the US/China trade war, as well as the Italian political scene.
Themes for the Week:
- US/China Trade War: continue to monitor the wires for progress/lack of progress, Trump tweets and the CNY fixing (above/below 7.0). For the moment, there is no indication that the US wants to back down from playing hardball.
- GBP: An extremely poor UK GDP print last week heightened anxiety over the highly possible hard UK Brexit. The Pound is liable to decline further this week as the BOE might need to start planning cuts.
- Italian Issues: PM Conte and his Deputy Salvini are locked in a contest for power with Salvini demanding elections and
threatening to bring down the government. Salvini heads the xenophobic League party. An interim guarantee government is being explored before possible elections in October or November. Developments will require close monitoring. Hanging in the balance is Italy’s sizeable structural deficit and heavily front-loaded debt maturity profile. Italian assets are likely to remain under pressure. - EUR: We get a reading of EUR GDP this week and with the current focus on growth issues, it might be more market-moving than usual.
Data in the week ahead:
- UK Employment
- US CPI
- EU ZEW
- UK CPI
- AU Employment
- UK Retail Sales
- US Retail Sales
On the Radar:
The recovery in risk assets has been powerful but we’re not out of the water yet. I will actually seek two-way opportunities this week in equities. In FX, I remain bearish on GBP going into a data-filled week, and I like stacking it against Jpy and Chf. I also continue to be biased long on Gold, and I’ll be biased short on the FTSE MIB (Italy).
