1. Themes for the Week
- Chinese data (industrial production, fixed asset investment, retail sales, Q4 GDP on Tuesday), will provide further clarity on the pace of things. However, even if we get good data prints, I’d be cautious of buying dips. It might take a few days for the market to shake off the negative vibes.
- Crude Oil weakness still sending negative vibes through the market. Will OPEC have an extraordinary meeting? Nothing seems likely yet. The monthly oil market assessments from OPEC (Mon) and IEA (Tue) will be pored over for updates on demand/supply imbalances.
- Positive effects of low oil prices to underpin small rises in UK (Tue) and US (Weds) inflation up to
0.2% and 0.7% respectively. - Unemployment and wage growth both expected to decline in the UK (Wed). Speeches by BoE’s Carney (Tue) and external MPC member Vlieghe (Mon) may elaborate on the risks of any premature tightening.
- ECB and BoC to maintain policy stances. Watch out for the policy statement on Thursday where Draghi will be closely watched for hints of further easing.
2. Best looking opportunities
I still prefer to be on the short side of: Crude, Dax, GbpUsd, GbpJpy, CadJpy, AudUsd, AudJpy. Most of these trades are correlated to risk-appetite/China so it’s best to either reduce positions and diversify or rank the strongest pair of losers and stick to them.
On the long side, I still like UsdCad and I’m wondering if Draghi will push the Euro back on the radar (vs. Cad or Gbp maybe) on Thursday?
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