Intraday Market Thoughts

France 24 اشرف العايدي على قناة

Jun 24, 2016 17:29 | by Ashraf Laidi

France 24 اشرف العايدي على قناة ماذا بعد خروج في المملكة المتحدة؟

Britain Leaves, Pound Drops, Cameron Quits

Jun 24, 2016 9:34 | by Ashraf Laidi

The UK voted to exit the European Union by 52%-28% or a difference of 1,269,501 persons at a 72% turnout. PM Cameron announced his resignation, which will likely materialize in October, possibly leaving the way for former mayor and staunch pro-exit Boris Johnson, who will handle the negotiations of the Brexit process.  Sterling fell 10% to its lowest level since September 1985, the FTSE lost as much as 7%, Dax fell 10% or 1015 points and S&P500 futures by as much as 5.5%. S&P was the first credit agency to warn of a possible downgrade of the UK's sovereign credit rating.

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Britain Leaves, Pound Drops, Cameron Quits - Gold Vs Gbp June 24 (Chart 1)

Gold finally broke out of its 5-year trendline resistance to hit a new 2-year high of $1358, while the yellow metal soared to the £1000 mark against the British pound, the highest in 3 years.

Now that the UK's trade agreements with the rest of the world under the EU will be void, UK trade lawyers attempting to renegotiate trade agreements with +50 nations are in for a rude awakening at the bargaining table, facing EU negotiators, who will not be making extra efforts to accommodate the UK's trade demands shortly after it has exited the club.

With regards to the myth that Britain could easily strike deals by World Trade Organisation (WTO) rules (which entails import tariffs), EU members will demonstrade resistance so as to discourage other nations from emulating Britain's exit, especially given the fact that protectionist feelings are likely to arise when dealing with a large economy such as the UK.

And to address that common misconceptio; Europe does not need Britain more than Britain needs Europe. 45% of British exports go to the EU while only 6% of EU goods go to Britain. Guess who needs whom? 

Finally, do you think non-EU nations such as China, Korea or Brazil would find the British market of 65 million consumers more valuable than the EU's 500 million? 

Carry on with the wrong facts at your own risk.

Brexit Polltergeist

Jun 23, 2016 0:41 | by Adam Button

Four Brexit polls released on the eve of the vote sent the pound swiftly lower and then to the highest levels of 2016. On the day, the Australian dollar was the top performer while the yen lagged. We breakdown the timeline of Brexit events Thursday.

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Brexit Polltergeist - Brexit Leave Stay Charts June 22 (Chart 1)

Two early polls showed the Leave side ahead on Wednesday and two released later showed Remain firmly in control.

GBP/USD fell to 1.4640 after Opinium showed Leave ahead 45-44%, a slight improvement for the Brexit side compared to the firm's previous poll at 44-44%. TNS later showed Leave ahead 43-41% and GBP remained under pressure while risk appetite sagged.

At the Asian open, however, a YouGov poll put Remain ahead 51-49% and a phone poll from ComRes had the Remain side up a healthy 48%-42%. Interestingly, every phone poll puts Remain ahead while online polls generally put Leave ahead.

Those late polls sent cable to 1.4844, which is the best level of 2016 and more than 800 pips in the past six days.

Trading the polls and going with the flow of the news is critical in the day ahead so here is the timeline. Polling opens at 0600 GMT (0700 BST) but at least two final polls are expected to be released before that deadline. The voting booths don't close until 2100 GMT, which will leave the market vulnerable to illiquidity and rumours throughout the day.

At the close of voting, two more polls are due from Sky and YouGov. These are not exit polls but were taken on Wednesday. However, they may be presented as exit polls and that could create some confusion. In any case, similar polls released after the Scottish referendum were highly accurate so they're likely to be market movers.

The first actual results often from Sunderland and Newcastle– will be released sometime between 0100 GMT to 0200 GMT and it will be a steady stream from there. A model from a UK academic estimated that the Leave side should be ahead by 6 points in Sunderland. Other early results from Swindon and Oldham should put Leave ahead around 15 and 10 points, respectively. The market may misinterpret those numbers and mistakenly think Leave is going to win. However, the results will need to be even more lopsided than that to point to a national Leave win.

It will all happen relatively quickly and if one side has a clear lead, it will be essentially 'done' by 0300 GMT and a final declaration will be made around 0600 GMT, assuming there are no recounts.

Yellen Dovish, Cold Feet Coming

Jun 22, 2016 0:37 | by Adam Button

Janet Yellen maintained an uncertain tone in her Congressional testimony Tuesday. The New Zealand dollar was the top performer while the yen lagged. We also look at the shape of GBP in the final countdown to the Brexit vote. As per this week's Premium video, 1 set of trades will be issued ahead of the UK refrendum.

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Yellen Dovish, Cold Feet Coming - Gbp Gold Ftse June 21 (Chart 1)

We learned a few things from Yellen's Humphrey Hawkins testimony Tuesday. The overall tone was dovish but the shift compared to the FOMC press conference was small enough to be ignored by a market that's fixated on the Brexit vote.

The market continues to price in a 10% chance of a July hike and 30% in September. Even if we assume the 'remain' side wins the Brexit vote, those numbers seem too high.

Yellen was extremely cautious and repeatedly emphasized the uncertainty surrounding Fed forecasts. Even a series of strong economic numbers through July won't be enough to shift that view and it's highly unlikely to change before September.

After listening to Yellen, it's clear that the case for a rate hike relies on consumer spending. Jobs, business investment, inflation and growth have all disappointed but the latest indications are that the consumer is healthy. Even if that continues, the Fed will need more evidence from those other categories before moving. If the consumer begins to falter, the market will begin to ask if the next move will be a cut.

Of course, the entire financial world could be turned on its head in Thursday's Brexit vote. ORB is out with its final poll and predicts Remain will win 54-46%. That's in line with what markets and betting sites have been flashing this week.

However, there seems to be a small shift back to leave unfolding. Boris Johnson had a strong performance in the final debate and flash polls showed most viewers thought the Leave side was more convincing.

In the past three trading days the market has piled into the remain camp and there is now scope for a 'cold feet' trade before the results. ORB, for instance, is assuming that 3 of every 4 undecided voters will opt for remain. We agree but the risks of being wrong are now massive compared with the rewards of being right. Given that imbalance, the cable risks are to the downside but, like we said in our Brexit playbook, the trade is to go with the short-term momentum in an illiquid market.

The Asia-Pacific calendar is light except for Australian skilled vacancies at 0100 GMT but it will be overshadowed by Brexit flows.


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