Weekly Game Plan 21 Oct 19

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Here is this week's Game Plan:

Once again, what should have been a defining moment for Brexit was instead a non-event. There was no meaningful vote on Saturday and Boris Johnson was forced to request an extension to the EU...however, he didn't sign the letter(!). Instead he sent another letter (signed) saying that an extension was against his own will. It is likely that the UK PM will declare he has been coerced, hence  blocking any further progress.

In the meantime the clock is ticking. Parliament could have avoided a No Deal by voting for Johnson's deal. Now, it's either No Deal or a delay + new elections (which Boris Johnson would win, and then he would pull a quick Brexit).

What we are witnessing is truely the end of Democracy as we knew it in the West. Political parties are no longer working towards common ground. Indeed, as Ray Dalio has been saying for some time now, there is political polarization and extremism. And since common citizens see their leaders bickering against each other, this whole polarization and extremism filters through the population and spreads hatred and violence.

Themes for the Week:

• Brexit: it is unclear what will go down this week. Surely we will see more debates, possibly another Meaning(less) vote, more bickering. GBP influenced all of FX last week with it's tremendous ascent on speculation/hopes of a Deal. That might fade or at least pause after yet another stalemate over teh weekend. The EU's response to Johnsons's 2 letters will be key.
• ECB: There are no influential measures to be released or debated at this Thursday's ECB meeting, but it will be Draghi's last.
• US Earnings: more than 130 S&P 500 companies and over one-third of the Dow industrials will be reporting results, according to IBES data from Refinitiv. Reports flow in from many corners of Corporate America, from industrial bellwethers Boeing and Caterpillar to internet retailing titan Amazon.com. Biotech leaders Biogen and Gilead Sciences and carmaker Ford are among others to post results.
• EU Earnings: Europe's Q3 season too opens in earnest next week and is likely to again elicit unfavourable comparisons with corporate America. Thursday will see some infliuential German companies report.
• Canada Elections: while much calmer and cleaner than Brexit, Canada  kicks the week off with political developments. Voters head to the polls to elect a new Federal government. Significant data risk will ensue but could get lost in the reporting of the election results. A minority Liberal government is expected. The count will start at 10PM EST tomorrow, so as London opens up on Tuesday the results should be confirmed.

Data in the Week Ahead:

• CAD Retail Sales
• CAD Business Outlook Survey
• EU & Ger PMIs
• GER IFO
• ECB Decision

On the Radar:

It's quite tough to have any convinction in the moves seen up to Friday, which were mostly GBP-inspired. We saw evident USD weakness vs. Eur, Gbp, Chf and Cad. Whether this will continue or not is yet to be seen.