Weekly Game Plan – 19.6.16

Themes for the week and potential opportunities

The latest Brexit polls will need to be factored in upon market open: BMG on Saturday put the Remain camp in a slight advantage but it’s still close: http://www.scotsman.com/news/uk/remain-campaign-pulls-ahead-of-brexit-in-eu-referendum-poll-1-4158264 while the Observer/Opinium poll has both sides at 44% and a 10% undecided http://www.theguardian.com/politics/2016/jun/18/eu-referendum-britain-voting-campaign-jo-cox.  As a final note to incorporate into tomorrow’s trading, Cameron will be on BBC TV `Question Time’ Programme at 18.45 GMT today.

You can look at it however you want: it’s going to be a close call. 

Also, with a quiet week on the data front, there is little to deflect attention away from the referendum. As we have seen in the past couple of weeks, the referndum and hence GBP are impacting all markets. So whatever you trade this week will hinge upon GBP’s temper. Trade small, don’t be a hero, survive to fight another day.

USD: with no meaningful data out, eyes will be on Yellen at the semi-annual testimony to the House (Tue) & the Senate (Wed) where she is expected too confirm the more cautious approach seen last week, and leave options open on data and global events.

EUR: busier week in the EU. German ZEW (Tue) expected higher at 10 from 6.4, current conditions at 55 from 53.1. EU equivalents also expected higher. The flash PMIs from across the Eurozone (Thur) are also expected sturdy. Finally the Ger Ifo (Fri) is expected higher.  So overall, the market is poised positively on the Euro, despite the fact that the Euro will suffer if we get a Brexit. If not, all the more reason to push higher.

JPY: the market is expecting an intervention post-Brexit/Bremain so the BoJ jawboning this week might prove to be influential. Kuroda speaks on Monday, Kiuchi on Thursday and Nakaso on Friday.

GBP: It’s all about the referendum. The vote closes at 21.00gmt on Thursday with preliminary estimates expected from 23.00 gmt. The final declaration is expected at around 07.00gmt on Friday. The only data releases are May PSNB and June CBI industrial trends (Tue) and will be quite meaningless until the market’s focus returns to fundamentals post-referendum. I personally find it hard to believe a Brexit will happen although the sole fact that the vote is this close means that we’ll be living in a different world going forward.

Comm-Dolls: for Aussie, we have RBA’s Debelle and Heath (Tue) along with the RBA minutes. We will hear from Ellis and Debelle again on Thursday.  Q1 house price index is expected to increase QoQ.  There is no major data due in New Zealand, while Canada just has April retail sales so focus will mostly be on the usual US oil inventory data. 

Going into this week, since Brexit/Bremain is the only game in town, my focus will be on sentiment towards polls and the vote. Bremain is generally positive so I would favour Crude/YM longs along with Gbp, Nzd or Aud longs vs. Jpy. Brexit is generally negative so I would favour Dax shorts along with Gbp weakness vs. USD.  

But sitting on the sidelines isn’t a bad choice either.

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