Weekly Game Plan 22.10.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

GBP may come under a bit of pressure as the week opens after a Tory rising star issued a call to arms for MPs to oust Theresa May, saying Britain cannot be led by someone guilty of an “abject failure to govern” at such a defining moment in our history. Indeed, Theresa May's position is weakening. The EU is trying some last-minute concessions and can-kicking exercizes given the importance of Germany car exports to the UK. Now there's also talk of a second Brexit Referendum which would be folly. More political chaos coming fourth.
Themes for the Week:

• The CNH has been weakening and getting dangerously close to the psychologically important 7-mark. This would erode faith in China’s stability and possibly provoke more U.S. ire, adding another layer of worry to world markets — the last thing investors want to see.
• In Europe the storm is brewing with stock market turmoil, conflict over a contentious Italian budget, high oil prices, sputtering economic growth — which will evidently call for a cautious ECB meeting this week. We also have key earnings this week in Europe in the Automotive sector and Financial Sector...the most troubled sectors. Finally, Moody’s and S&P Global are likely to cut Italy’s credit rating next week to within a notch of ‘junk’ — the sub-investment grade category below BBB-/Baa1 which is usually populated by the weaker emerging economies.
• The Bank of Canada has a solid case to make for hiking rates in October. Core inflation is on target, but labour markets are tight. Q3 growth is still tracking above the central bank’s estimate for the economy’s non-inflationary potential, albeit by less than a half percent. The market is also expecting a hawkish tone from the BOC but we shall see.

Data in the Week Ahead:

• Bank of Canada Decision
• ECB Decision
• US GDP

On the Radar:
The Canadian Dollar took a hit on Friday and may remain weak ahead of the BOC. UsdCad, NzdCad are the better vehicles. Nzd looks strong against AUD as well. Out of all the US indices, given the volatile conditions, Nasdaq seems to be clearly heading lower again. The next 2 weeks will surely be challenging on US equities so keep positions small. Eur and Dax will be on the radar after ECB I suspect.

Weekly Game Plan 15.10.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

As we venture further into Q4 2018, expect the markets to be driven more by politics than else. The US elections will be the main focus, but don't dismiss the outcome of the Bavarian election (which is showing the usual anti-establishment trend), the Italian budget issues, the EU/UK Brexit negotiations and the US-China trade debate. These are all political developments that are creating uncertainty and as such, expect volatility and perhaps adopt a shorter-term stance for the time being.

Themes for the Week:

Tomorrow the Italian government must submit its budget to the EU, which will give a negative opinion and ask for a revision of the budget before the end of October. The Italian authorities will then have three weeks to comply with the request and the EU will give its final judgement at the latest by end-November. If Italy does not comply, the EU could launch an Excessive Deficit Procedure (EDP) against Italy, maybe as soon as the beginning of 2019. All this should produce a new leg of volatility in Italian debt as it raises the risk of an anti-EU backlash from League leader Salvini and Five Star leader Di Maio.

The markets will have to price in more political uncertainty in Germany after exit polls project a broad humilaition for Angela Merkel's allies. Just how bad this will be depends on whether anyone from Merkel's coalition steps down (Seehofer?). Remember that Germany has always been the leading country in Europe. To see political fragmentation there is a big warning sign for investors. Expect pressure on the Euro and on the Dax.

The expectations are that EU leaders will yield a deal on Brexit for PM May on the 18th. If the outcome is positive, investors could unwind more of their short sterling bets, setting the currency firmly on the road to recovery. But with less than six months to go before Britain leaves the bloc, fears about the Irish border issue will still hound the pound.

US Earnings: Fifty -five S&P500 firms release earnings including names like Netflix, eBay and twenty-six financials including BofA, BlackRock, Morgan Stanley, Goldman Sachs, US Bancorp, BoNYM, Amex and State Street. While it’s very early, the Q3 earnings season is shaping up rather nicely with about 90% of a small sample to date beating analysts’ earnings expectations including the early read on key financials.

FInally, the equity market sell-off. Is it over? Perhaps. However, the main issue is another: that we are nowhere near a bear market. Ups and downs like this may even become the norm as we head into the US Elections. But more on this in this months' webinar, which will cover the US elections and will be held next week.

Data in the week ahead:

• US Retail Sales
• Bank of Canada's Business Outlook Survey: influential for BOC watchers.
• NZD CPI
• RBA Minutes
• UK Employment Change
• UK CPI
• FOMC Minutes
• AU Employment Change
• UK Retail Sales
• CNY GDP
• CAD CPI & Retail Sales: also influential ahead of the BOC's decision next week.

On the Radar:

There aren't many signs from the currency market going into the week, and the only sign (Jpy strength) may dissipate depending on what global equities do. So it's quite difficult going into the week. GbpJpy (short below 147.00) or EurJpy (short if the Bavarian elections cause havoc) may be two ideas. But for now the game is elsewhere: equities will be the main focus.

A short-terms stance will be more adequate this week, especially with all the headline risk and event risk due.

Weekly Game Plan 8.10.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

Q4 is opening up with a flurry of themes. The Pound is back in favour after some kind of of progress on Brexit talks. China will come back from holidays this week and the market will be watching their reaction to the USD strength and US trade offensive. On top of that, we have higher US yields which will be influenced by Fedspeak this week and US CPI. "Quitaly" is back in the press and  the US earnings season starts on Friday.
Remember that the US and Canada are away tomorrow (Monday).

Themes for the week:

• Brexit is in focus with news on Friday that a deal is close. This Wednesday Barnier is due to present to the EU’s executive European Commission a first draft of the bloc’s proposal for close trade ties with Britain after Brexit. Over the weekend EU President Juncker told an Austrian newspaper that a Brexit deal was close and if it doesn’t get agreed to this month, it will be done so in November. This should enhance the mood on the Pound.
• China cut its RRR by another 100 BPs as it seeks to spark growth and help sentiment that has been damaged by the US/China trade war. Traders will be focused on the USD/CNY fixing, and watch for any move above 7.00 which is the psychological line in the sand which would put even morel pressure on emerging market currencies and create more EM stress generally. This, in turn, could put pressure on AUD which is a proxy for EM sentiment.
• Fedspeak will be watched closely and will possibly influence US yields and USD.
• US earnings season kicks off this week with the main focus on JP Morgan, Citigroup and Wells Fargo – all reporting on Friday. Expectations for the current reporting season are high so it's easy to disappoint.
• Italy is back in focus with ongoing revisions to it's 2019 budget. 2.4% deficit just wasn't acceptable by Brussels but Italy must present a budget to Brussels on Oct. 15  so the pressure is on. Concerns over Italy’s spending plans and what they mean for its position within the EU should dominate bond markets this week since Deputy PM Salvini continues his aggressive posture vs. EU.

Data in the week ahead:

• UK GDP
• US CPI

On the Radar:

GBP is a natural candidate (long) vs. Aud, Nzd & Euro. Aud & Nzd weakness might also be influential in the event of risk-off (if China reacts negatively to the latest developments). Thre may also be further weakness in EU stocks.