Intraday Market Thoughts

Ashraf on Markets, Trading & Learning

Oct 20, 2016 19:59 | by Ashraf Laidi

Ashraf's interview with Sylvain Asimus of Market Tutors on trading markets and the importance of learning. Full interview.

Ashraf on Markets, Trading & Learning - Market Tutors Interview Oct 20 (Chart 1)

Draghi Firmly Neutral

Oct 20, 2016 14:26 | by Ashraf Laidi

ECB's Draghi reiterated the ECB discussed neither tapering, not extending QE. Despite repeating the usual line of considering to extend purchases beyond their planned expiry date, Draghi calmed restless reporters & traders who seem to expect that something must be done (taper or extension) at each meeting. But as we indicated long ago, Draghi's message has been: "Eyes off, ears off. Turn your expectations towards national governments as we're tapped out".  Below is the note published 1 hour before the ECB decision. A new Premium trade has been issued moments ago, partly boosted by a DragonFly Doji. A trade was also issued earlier this morning, 1 hour after the Clinton-Trump debate.

The Poloz Plan, AUD Employment & Debate

Oct 19, 2016 22:34 | by Adam Button

Central bankers walk a fine line where a surprise can often stimulate an economy but a shock might destabilize it. Reading between the lines, the Bank of Canada seems to be setting something up for the near future. The Australian dollar was the top performer Wednesday while the pound lagged. The Fed's Dudley and Australian employment are due next. A new Premium trade shall be issued ahead of tonight's Presidential Debate between Clinton & Trump.

مخاطر الصفقات حول الوظائف الأسترالية، حوار كلنتون-ترامب و لقاء المركزي الأوروبي

As we expected, the BOC didn't downgrade its forecasts as much as feared or offer an outright dovish tilt in the statement. That sent USD/CAD a cent lower to 1.3000. The surprise came later when Poloz said they “actively discussed” more stimulus. It led to a reversal in USD/CAD and eventually to a session high 1.3137 as oil climbed on another tighter inventory report.

The strategy for the BOC is to hint that a hike could be on the table without making any promises. One of the lessons of the past couple years of central bank decisions is that doing exactly what you've promised can backfire. When central bankers clearly foreshadow a hike, the market expects it then prices in even more. The result is for markets to end up unimpressed.

A surprise, on the other hand, can help to trigger the animal spirits and grab headlines. The risk is that markets are overly surprised and worry the central bank sees yet-undetected problems or that the central bank appears sloppy and loses credibility.

Poloz walked that line in the past and delivered a surprise rate cut in 2015 that helped to stimulate the economy, weaken the currency and he managed future expectations by calling the move 'insurance' against future trouble.

In all likelihood, he's setting up something similar for early 2016. The BOC is clearly not in neutral mode but it judged that market pricing of only a 14% chance of a cut in January was closer to 'shock' than 'surprise' so he offered the hint about an active discussion on cutting.

The risk is that he's shown his hand because the market has seen it before and markets will now begin to aggressively price in a hike and drive USD/CAD higher. What might make that difficult is that oil is trading at the highest since July 2015.

What could give the US dollar a tailwind is the Fed. Dudley is on the agenda at 2345 GMT and could offer hints on a December rate hike. However, the topic of the speech is NYC economic history so it's equally likely to be a dud.

One thing on the agenda that's sure to move markets is the Australian employment report for September at 0030 GMT. The consensus is for a +15K rise but watch the full/part-time breakdown. Technically, AUD/USD broke and closed above the key 0.7700 level Wednesday. That's the highest close since April although several intraday peaks in the interim were higher, with the highest at 0.7756. That's a level to watch through the data.

Act Exp Prev GMT
FOMC's Dudley Speaks
Oct 19 23:45
Employment Change
15.2K -3.9K Oct 20 0:30

Ashraf on BNN Earlier Today

Oct 19, 2016 20:00 | by Ashraf Laidi

Ashraf's interview on BNN about European earnings and the latest spin in Pre-Brexit negotiations. Interview.

Cable Corrects, China GDP Next

Oct 18, 2016 22:57 | by Adam Button

A bump higher in UK inflation led to a climb higher in the pound on Tuesday it what could be the start of a retracement. The euro was the laggard on the day as it continues to struggle to make or hold gains. The focus is on a trio of Chinese data releases later, including GDP. The latest video for Premium subscribers, focusing on the existing trades ahead of the US presidential debate, UK and Aussie jobs and ECB conferece has been posted and sent.

UK CPI ticked above expectations at 1.0% compared to the +0.9% consensus but the higher result tapped into market angst about higher inflation due to a weak pound. The larger theme that could give the pound a lift is talk and speculation about softening the Brexit and the uncertainty around legal challenges.

On the day, cable climbed 110 pips at touched 1.2300 at the high from a low of 1.2171. That's a small bite out of the fall in the past two weeks but it illustrates how any good news from here could lead to some short covering in the crowded GBP-short trade. On the upside, even a recovery to 1.26 or 1.28 would change almost nothing in the underlying trend of GBP weakness.

In economic data Tuesday, US CPI met expectations at 1.5% y/y. It remains below target and inflation is not a main factor driving the Fed.

The lesser-touted release on the day was Canadian manufacturing sales, which were up 0.9% compared to +0.3% expected. That's notable because the BOC decision is on Wednesday. The stronger data fits in with a great Canadian jobs report and upbeat GDP. The market is short CAD but with oil strong, the government spending and data beating estimates, the risk is that Poloz returns to his usual optimistic self and boosts the loonie.

Before that, the focus shifts to China where Q3 GDP data is due at 0200 GMT. The consensus is for 1.8% growth q/q and 6.7% growth y/y. Those numbers may be skewed lower by the latest trade numbers, which were far slower than expected. If that's the case, watch out for risk aversion in Asia and Europe. Along with GDP, numbers on Sept retail sales and industrial production are due. Sales are expected up 10.7% y/y and industrial production forecast to rise 6.4%.

Act Exp Prev GMT
Gross Domestic Product
6.7% 6.7% Oct 19 2:00
CPI (y/y)
1.0% 0.9% 0.6% Oct 18 8:30
Manufacturing Sales (m/m)
0.9% 0.3% 0.1% Oct 18 12:30