Weekly Game Plan – 21.11.16

Rather dull week based on the event calendar. The US will also be away for Thanksgiving on Thursday, and FOMC minutes on Wednesday are “stale”. Don’t be too eager to jump in the mix this week.

Bonds will be driving cross-market flows now, as ZIRP unravels and the FOMC starts to hike. If you watch a long-term chart on bonds, you can see how we have effectively just seen a likely long term top. The bubble is bursting and capital will need to shift elsewhere.

Also, a re-hash from last-week: there seems to be once again divergence between the EU and the US. Not just on the policy front but also on the political front. We have potential fiscal stimulus and benefits for business in the US (Trump is inflationary), against political uncertainty and austerity in EU. Watch the Italian Referendum and the Austrian Elections as a primer for things to come. Then, we will also see French and German elections next spring.

USD: FOMC Minutes? Most likely “stale” as they were pre-Trump, and also pre-JEC testimony. With no major U.S. economic reports on the calendar next week and U.S. markets closed for the Thanksgiving day holiday on Thursday, we expect some profit taking after these exaggerated moves.

GBP: Nothing in particular, beyond Chancellor Hammond making his autumn statement to Parliament. Fiscal stimulus coming just in time for Christmas?

EUR: The Eurozone is the one of the few countries with significant data on the calendar with PMIs (Wed) and the German IFO (Thur) scheduled for release but politics will continue to overshadow economics (Italian Referendum, Austrian Elections, French Primary round). Also, the ECB will be openly debating the rapid rise in yields in the EU. Draghi speaks in Strasbourg on Monday.

CAD: Retail Sales on Tuesday as test for Canada’s child benefit payments but also it will include, if I understand correctly, on-line retail sales – which is a new measure that Statistics Canada is issuing.

My initial watchlist is made up of short EurUsd, short EurCad, Long UsdJpy, Long CadJpy. I like the upside in Crude, whilst I prefer the downside in Gold. US equities are evidently bullish.

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