We were once again reminded that this is the era of political-driven trading after a surprise coalition formed in New Zealand. The euro and Swiss franc led the way while the kiwi lagged badly. On the Fed, the latest report is that Trump is leaning towards Powell. The long EURUSD Premium trade was closed for 110 pips, while the other EUR trade remains in progress, currently 110 pips in the green.
The anniversary of Black Monday had a fitting end for 2017 with the S&P 500 finishing higher after earlier worries were wiped away. The early tone was risk aversion on China concerns and a 2% fall in Hong Kong stocks.
NZDUSD had its bigggest 1-day drop in over 2 years after the Labour Party was able to throw together a coalition with the help of the Greens and First Party. That means Bill English will and his National Party – which got 44.4% of the vote – will be in opposition. The kiwi fell more than 150 pips on the surprise turn. More broadly, it's a reminder of the discontent in the air and the sudden willingness almost everywhere to try new things.
We contrast that with China where Communist Party leadership and Xi in particular are strengthening their leadership. In the long-term, it's a signal about the rise of China and emerging markets and the frustration in the developed world.
Meanwhile in the US, hopes for many voters for a radical change in monetary policy may be dashed. A Politico report said Fed Governor Jerome Powell is the favourite to replace Yellen. He's done little to publicly separate himself in more than 5 years at the Fed with most of his focus on regulation. The thinking is that he will be a continuation of the Bernanke-Yellen era, sticking with the same policies and prescriptions. The stock market responded with a small flurry at the end of the day and the US dollar dipped.
Looking ahead, news from the Party Congress is likely to be the main driver but Kuroda also speaks at 0635 GMT and later in North American trade, Canadian retail sales and CPI numbers are due.
|0.3%||0.1%||Oct 20 12:30|
هل سيقدم المركزي الأوربي على إعلان تقليص اضافي هذا الشهر؟ و ما مدى تأثير مثل هذه القرار في ظل الصراع بين توقعات رفع الفائدة الأميركية و تقليص التيسير الكمي الاوروبي سنسلط الاضواء في ندوتنا القادمة بتاريخ 24 أكتوبر مع الاستاذ أشرف العايدي على قرار المركزي الأوروبي المقرر يوم الخميس 26 أكتوبر شارك في الندوة
Signals from China are usually subtle and actions are often dramatic, we look at Xi's landmark speech to start the Party Congress. The Canadian dollar was the top performer and the yen lagged. The Australian jobs report and a sensitive Chinese GDP reading are up next. The latest Premium video is posted below.
Xi spoke for nearly three-and-a-half hours to start the Congress in what is his longest-ever speech by far. That timeline gave him an opportunity to touch on just about everything, but one thing he didn't mention is an oft-repeated pledge to double growth between 2010 and 2020.
Along with a further emphasis on corruption, stability and a year-2035 horizon for becoming a 'modern' nation, make us wary that any tough choices that need to be made will come soon. The Congress – where new top leaders are installed – takes place every five years and like with all politicians, it's best to take the bad medicine early.
The Congress continues until Tuesday so we will be looking for more signs of deleveraging. The health of the economy will determine the extent of the crackdown. On that front, some key numbers are due at 0200 GMT with GDP, retail sales and industrial production. Growth is expected at 1.7% q/q and 6.8% y/y. We're skeptical of Chinese numbers at the best of times but the data during the Congress is especially dubious. Still, it will be a talking point.
The other big number to watch is the 0030 GMT Australian jobs report. The consensus is for a +15.0K reading following a +54.2K surprise last month. Another strong report and a drop in the 5.6% unemployment rate could help to ease housing worries and jar the RBA out of neutral.
|RBA Assist Gov Bullock Speaks|
|Oct 19 1:10|
|Gross Domestic Product|
|6.8%||6.9%||Oct 19 2:00|
|14.1K||54.2K||Oct 19 0:30|
The Fed and NAFTA negotiations have stolen headlines for the past two days. We listen to what the market is saying. The US dollar was the top performer while the pound lagged. The China Party Congress starts Wednesday. UK earnings rose 2.2% but well below inflation, while employment increased by less than expected. The pound extended its losses as prospects of a Brexit resolution between the UK and EU over the divorce bill remain dim.
فيديو المشتركين تداول داخل نطاق اليورو
Speculating on the next Federal Reserve Chairman is a fun exercise but a dangerous trade. US dollar bulls got a boost on Monday about John Taylor but much of that faded later because the President gushing about a candidate is no reason to bet on rate hikes.
Four years ago, markets were playing the same schizophrenic game between Yellen and Larry Summers. At the time, it was assumed Yellen was the dove and he was the hawk. In hindsight, they might have been the opposite.
The lesson is that all the candidates are smart people and the Fed is a massive operation with thousands of employees who contribute to policy. It's doubtful the White House or any of the candidates have a genuine desire to partake in experiments when stability is the surefire way to economic progress.
The only surefire trade is to buy stocks if Yellen is reappointed.
Then there is NAFTA, which was billed as an involuntary Brexit for Canada and Mexico. Talks were extended past the year-end deadline Tuesday. That was taken as a positive sign that no one is yet-ready to walk away from the table, a sign that progress is possible.
The Mexican peso rebounded after weeks of declines but the scope of the move was still modest. The Canadian dollar hardly reacted.
If talks break down, then the trade will probably be to fade the kneejerk. The first reason for that is because there is uncertainty on whether the White House can unilaterally end NAFTA without Congressional approval – something that's unlikely. Second is that falling back on WTO rules wouldn't be a disaster for Mexico and Canada would fall back on the old FTA. In that case, the trade may be to sell all three against a broader basket.
Looking ahead, the China Party Congress has the potential to steal the agenda away from Fedtalk, Brexit-talk, Carney-talk and anything else. Expect a headline-heavy finish to the week.