Weekly Game Plan 3.9.18

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Here is this week's Game Plan:

It should be a relatively benign start to the week, and mild pressure might be seen in CAD. Also, during the Asian session we will also have AU Retail Sales. However, the US and Canada are away on holiday tomorrow and as such, there shouldn’t be all that much movement. The rest of the week will be busy.

Themes for the Week:

Has the Trade War impacted US Employment? NFP shall tell. The market expects 187k  in August. NAFTA may have a future yet, after the US sealed a deal with Mexico. However, tensions are still high with Canada as Ottawa “won’t just sign any deal”. Saturday Trump maintained his harsh stance with Canada, which may put some pressure on the Loonie this week.

More Tariffs on China. Chinese stocks may come under more pressure this week as Trump prepares to impose tariffs on another $200 billion of Chinese imports, on top of the $50 bln already taxed in the trade row.

Emerging Markets will still be an attention grabber. The Turkish lira has lost more than 30 percent in August. But Argentina’s peso plunged around 20% last week – more than 10%  in one day – dragging other currencies like the Brazilian real down with it. With the Fed on a hiking path, there may be more pressure to come for EM. We have already seen the market’s reaction: USD bid, CHF bid, Jpy bid in a typical risk-off move. Beware of this.

GBP is an interesting candidate as  parliament returns from summer recess and raises the prospect of more divisive noise over Brexit. EU’s Barnier has become more accomodative recently, helping the Pound gain traction. But the game is far from over. Also coming up on the horizon is the Conservative Party conference at the end of September, where PM May could potentially face a leadership challenge.

RBA and BOC meet this week. While neither central bank is expected to surprise, participants feel the RBA might be a bit more dovish in their statement after West Pac raised their mortgage lending rate and there are “concerns over household debt”. Instead, the market is expecting more of a hawkish stance from BOC but in light of NAFTA issues and worse GDP data recently, will the Bank stick to script?

Data in the week ahead:

• AUD Retail Sales
• RBA decision
• AU GDP
• Bank of Canada Decision
• Cad Unemployment
• US NFP
• UK PMIs.

On the Radar:

Going into the week, I have a bearish bias on Aud & Cad vs. GBP, USD and (with less convinction) Jpy. I’ve got a short bias on FTSE and I remain with a long bias on US equities.