Weekly Game Plan 30 Sep 19 By Justin Paolini

There wasn’t any market moving news on the weekend, so it will likely be a quiet start on Monday morning. Many analysts are talking about the news that the White House was looking at delisting Chinese firms in US markets, but the FX market isn’t moved by this speculation – traders aren’t buying it, as AudJpy managed to end the day higher.  GBP was the worst performing currency  after BOE’s Saunders said the central bank may need to cut rates if Brexit uncertainty persists.

Themes for the Week Ahead:

  • The US-China trade war remains one of the (most frustrating) key drivers of market sentiment: one day Trump will  tweet or say something hopeful, only to shift gears and talk down the potential of a positive outcome the next. The speculation over the October talks will likely continue in the week ahead.
  • Impeachment:  there is likely to be increased volatility from the flow of news out of Washington, as Trump’s impeachment process will likely drag on and could get pretty ugly as the gloves come off. It took around 60 days to go through the process with Bill Clinton, so this process could be with us for some time still.
  • Brexit: the UK political situation remains fluid and time is running out for the UK and EU to reach a deal to avoid a hard Brexit. However, business is likely to support Johnson since his adversary Corbyn is now proposing that businesses give 10% of their shares to workers. He also wishes to renationalize rail, water, energy and Royal Mail, increase corporation tax and the minimum wage, and extend workers’ rights…so while Brexit is ugly, Corbyn seems even worse.
  • The RBA meets on Tuesday and the market is pricing in over a 75% chance they will ease 25 BPs to 0.75%. There is a chance that the RBA will remain on hold and disappoint doves.
  • NFP: as usual, the final highlight of the week is Non-Farm Payrolls and Average Hourly Earnings.
  • REPOs: the Feds’ efforts to relieve funding market pressures will continue at the recently more aggressive pace of repurchase lending operations with overnight to ten business day intervals that inject liquidity into counterparties in
    exchange for collateral such as Treasuries, agency mortgage backed securities or agency debt. We are now past the month-end/corporate flows issues so this is definitely something more profound and the FED might need to step up their efforts.

Data in the Week Ahead:

  • CNY PMIs
  • GER CPI (Expected worse)
  • RBA Decision (Potential for a hawkish reaction to no change)
  • CAD GDP (expected worse)
  • US ISMs (expected worse)
  • AU Retail Sales
  • US NFP

On the Radar:

Headlines will continue to play a role in proceedings. In the meantime, it seems that GBP shorts are in favour vs. USD and CHF. Less convincing, but still palatable, are Eur shorts vs USD and CHF. Silver shorts are also interesting, and are a concurrent bet on USD strength. Aud will be interesting after the RBA meeting.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

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