The Trembling and the Trend
What's changed? That's the question traders are asking themselves in the post-Brexit world and answers are proving tough in some cases and clear in others. That's left some markets trending and others bouncing around; we celebrate the signal from the noise. One Premium trade is +300 pips and another in +210 pips in the green, both of which remain open. There are 7 trades currently in progress.
3 more UK property funds suspend tradingThree more UK property funds froze withdrawals by investors, namely, Henderson, Columbia and Canada Life, following the decision yesterday by Aviva, Standard Life and M&G to freeze a 1/3 of the £21 bn market. On Wednesday the Australian dollar was the top performer despite a slump in Asia-Pacific trading. The pound lagged again but stabilized and climbed higher after a sharp selloff early in the day.
The main theme in US trading was a turnaround in stocks, oil, and most US dollar trades. What's increasingly clear is that the market is struggling to identify a playbook for the post-Brexit trade.
The strongest signal is in the pound, inarguably. It tumbled on the vote and has continued to slide because the UK-centric risks. The other somewhat-definitive signal is in bonds as global yields press to ever-lower lows on the idea that more QE is likely everywhere before any meaningful rate hikes.
Elsewhere, the picture is muddied. Commodity currencies were damaged by the fresh global risks from Brexit but have rebounded on dovish central banks and the potential for higher government spending. Stock markets are struggling with the same debate.
The bias in yen crosses has been lower but the BOJ is always in the back of the mind of traders. The last round of BOJ easing failed to boost yen crosses but they've proven to a relentless adversary declines that's always prepared to surprise.
So where does that leave us? The sentiment swings in outside of bonds and sterling make for challenging trades. Fundamental newsflow is largely noise as the market struggles with the bigger questions.
Ultimately, new themes and trends will develop but in the meantime uncertainty will remain high and it will be dangerous to fall in love with any trade.
In the short term, the Asia-Pacific calendar is light but we will tune into comments from the BOJ's Kuroda at 0030 GMT for any hints on what's coming next.
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