June 13, 2017 - (Trade Idea) Short GBPUSD - medium/long term, targeting new low

Hi,

 Right after UK CPI I mentioned on Twitter I took small, short position ( risking 0,15% ).

 What is my thinking ( come on great UK CPI number , why the heck you are short ? ):
 1. Highest UK CPI Since June 2013 would be great for GBP with „normal” economic growth. The thing is that we have high inflation based on weak pound and not because of the economic growth.

 2. There wont be „soft” Brexit In my opinion .

 3. Daily chart/ one of the strategy could support that view:

 4. FOMC and Yellen - dovish hike is priced in, looking for stronger dollar in a months ahead

 I gone short @1,2707 with stop 30pips above pre UK election high targeting…. Well something around 1,15/1,13 ( risking 0,15% for now ). Im ready to reopen that short ( under current mkt conditions In case of stop put risking 0,3% )

The another way could be GBPUSD PUT option expiry In late November with strike price In half way of target , for ex ample:

Please don't hesitate to contact Us should you have additional questions.
We are here to help you, just contact us at: landoftradingATgmailDOTcom.

Happy Trading

Mr Price Action

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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Jan 13, 2017 - Central Banks Calendar for 2017 (FED, ECB, BOC, BOE, BOJ, RBNZ, RBA)

It's important to know when big news can hit the market. One set of these news are the regular Monetary Committee Meetings of different central banks. Below you can find a quick overview of some important Central bank meetings for 2017. Please feel free to use it for your trading preparation.

Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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Oct-31, 2016 Weekly Macro W44

This is going to be a hard core central bank week, we have altogether 4 rate decisions from major central banks RBA, BoJ, FED, BoE. We will however start the week with some inflation figures from the Eurozone (Flash CPI), Canada (RMPI) and the USA (monthly PCEPI). Also don’t forget about Chinese PMIs on Tuesday and the NFP as part of the US employment report on Friday.

After the last weeks bombshell announcement of the FBI director about his bureau’s review of emails potentially related to Hillary Clinton one may wonder what else could come before the election. Last Friday FBI head, James Comey has broken the longstanding DoJ and FBI practice not to comment publicly about politically sensitive investigation within 60 days of an election. Is this a signal that we should not rely on the history that Fed never hiked rates in the year of election? Well, Wall Street is definitely in a better relationship with the Clintons than the FBI, but one could never be sure…

Below you find few comments on each day macro figures but please look at the attached Event risk calendar too as I couldn’t mention everything, eventually feel free to print it out for a quick overview during the day. You can also check out our Live Trading Room register here

This weeks Live Tradin Room schedule is here:

Tuesday: GMT 12:00 AM

Wednesday: GMT 09:00 AM

Monday:

The first day of the week will be mainly about inflation but we start the morning with German retail sales at GMT 7:00 which was mostly below expectations this year. The Eurozone Core CPI could reach 1% since March but we could see a bounce in headline CPI the last few months. Market is expecting a rise in CPI to 0.5% which we haven’t seen since June 2014. In the afternoon we will be watching overseas data, the same time is released the raw material inflation from Canada and the monthly measurement of US PCE price index (the quarterly data came out on Friday with Advance GDP showing a decline in consumption price levels in Q3). We end the day Chicago PMI.

Tuesday:

Data heavy day for almost full 24 hours, so just the most important ones... After midnight we start with the Official Chinese PMI followed by the Markit’s PMI. The expectations are rather sober with no big improvement on the radar of most of the analyst. There is no rate hike expected from RBA Rate decision as GDP is probably above the nations potential still growing at 3.3%, the house prices as increasing strongly in the last quarter especially in the Sydney, Melbourne and Canberra, the inflation picked up recently (core inflation unchanged) and Unemployment rate declined to 5.6%. The BoJ Rate decision will follow but as the last meeting showed us a change in the CBs focus to the yield curve rather than the benchmark interest, the statement and the press conference may bring some volatility if additional measures will or won’t be announced by Kuroda. Later the morning the UK Manufacturing PMI may give some support for the week GBP as the uncertainty around the Brexit amounts.  In the afternoon after Canadian GDP the US ISM manufacturing PMI will be worth to watch after surprise bounced from the sub 50 levels. In the evening the API Crude inventory report may move oil market and the oil currencies ahead of the November OPEC meeting and later kiwi traders should follow the employment figures and GDT price index from New Zealand.

Wednesday

The markets will be in digesting mode during the early trading hours as still waiting for the main course the FOMC rate decision. The Australian Building approvals and later the German Employment change may bring minor pick up in volatility. The UK Construction sector is doing better than expected after the Brexit vote, and in the morning the Purchasing managers (PMI) of the sector will give their opinion on the housing market. The expectation are lower than the previous reading but given the current momentum it could be easily much better which would support the cable. Even the focus in the afternoon is on the FOMC, the ADP employment data could increase trading activity as investors will adjust their positions. The EIA Crude inventories are the last data ahead of FOMC. And finally we will see the results of the 2 day meeting of the Federal Open Market Committee – rate decision. The likelihood of a November rate hike is only around 5% but it’s still there, don’t forget this. If you are a fan of conspiracy theories you probably noted the surprise Clinton investigation announcement from FBI. A rate hike at current fragile market sentiment could cause the perfect storm ahead of the US elections to give maximum support to Trump.

Thursday:

The Bank of England rate decision is supposed to be a non-event with practically no chance to hike the rates as Carney was already criticized by the MPs the BoE acted too early. However the assessment of the economy in the BoE inflation report will be more interesting 4 month after the Brexit vote. In the afternoon first part of US employment figures will be released with the jobless claims. It’s not likely we will see a positive surprise close to full employment. On the other hand q/q productivity is expected to increase after 3 negative quarters and as this is the first release it may have bigger impact. According to Fisher despite this part of the equation is uncontrollable by the Fed, it is one of the key indicators to monetary policy. We will finish the day with ISM Non/Manufacturing PMI which surprised traders last month with much better than expected figure.

Friday:

The RBA Monetary policy statement will be released after the rate decision at the end of the week together with Australian Retail Sales. The European session will be almost data free and the first notable figures will be released in the afternoon from Canada (Employment and Trade balance) at the same time as the US Employment report. While the NFP are expected to marginally increase and the Unemployment Rate to get below 5% the Labor Force Participation Rate is at 4 decade lows. The key question is if the negative trend in participation rate bottomed out this year or the downtrend will continue. The Feds broader Labor Market Condition Index released next Monday will give us a complete picture about the US Labor Market trends.

 DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed as an investment advice and the creator of this material shouldn´t be held liable for any loss resulting from action where despite this disclaimer someone would consider this  material  as an investment advice.

All rights reserved ©2016 www.landoftrading.com, contact: landoftradingATgmail.com

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Sept 18, 2016 - Weekly Macro Outlook W38

Markets opened in rather negative mood after the sell-off in US equities at the end of the previous week but cautious optimism returned after dovish comments of Fed’s Brainard. The main event was US CPI with a big positive surprise the BoE and SNB rate decisions were non-events. We continue this week with the Central banks.  Wednesday BoJ, Fed and also RBNZ… 

Previous MONDAY we saw a moderate reversal in equities after the Rosenberg caused sell-off as another Fed speaker, Brainard this time, had some very dovish comments… No change in EURUSD. The only thing we should take from these two is the fact that also inside the Fed there are different opinions. Also the DOA WASDE report was due and the expected revision of the Corn yields was less significant as expected, the Wheat global stocks however fell due to weak European harvest. Hedge funds are shorting Wheat heavily, so a short covering could cause rally in the near term. TUESDAY the Chinese Industrial production, Fixed assets and Retails Sales all came out better than expected. If this is the sign of stabilising Chinese economy then the PBOC may start even think about a rate cut… however the real estate bubble will be a significant hurdle. Later that day the UK inflation put some pressure on the pound, worth to note home prices still grew at a pace of 8.3% y/y but the growth is slowing significantly. The EZ and German ZEW sentiment came worse than expected but little changed compared to the previous readings. The New Zealand Current Account went into deficit more than expected and put pressure on the kiwi. WEDNESDAY Average earnings figures in UK were better than estimated but still declined vs previous, however Jobless claims went up while revised down the fall of claim number from last months. We couldn’t see the expected rebound in oil stocks as crude inventories fell further.  Late night the New Zealand GDP q/q came worse than expected but the country economy is growing at incredible pace 3.6% year on year. THURSDAY we started with mixed Aussie employment data, while employment change went into negative as a big surprise, the unemployment rate declined to 5.7%. The AUDUSD didn’t reacted too much. In the morning the SNB rate decision and statement didn’t bring anything notable and the same we can say about the BoE. In the afternoon the US data flow came out worse than expected but after the EURUSD spiked up to 1.1280 the traders probably realised that it wasn’t actually that bad as most of the indicators were actually improving compared to last release (Core Retail Sales, PPI, Core PPI, Current account and Philly Fed and Empire State Manuf. Index…). What should cause concern was the Capacity utilisation, which declined… and as Fisher said this is a kind of key data which on the other hand the Fed can’t influence, this could be the next excuse why not to hike in September. FRIDAY supposed to be a quiet day even the US inflation figures had to be released. However the 0.2% increase CPI and 0.3% in Core CPI was a big surprise and the dollar started a steady appreciation with EURUSD down 100 pips EOD. The outcome from EU summit added weight on the EUR. Renzi rejected to hold a joint press conference with Merkel and Holland. As he explained from his point of view there was no progress in the migrant and austerity questions and if anything else is presented, its just “a flight of fantasy”…

The coming week will be everything about the BoJ and Fed but some events may cause tradable moves. One of them is the series of housing data from US. Be prepared however for a light liquidity and hence a little more short term moves. It will be hard to trade these so be careful…

MONDAY

The National Association of Home Builders will release the results of their survey with the index of current and future single-home sales. They survey almost thousand homebuilders in the US monthly and therefore it makes a leading housing market indicator. Above 50 means good conditions in the sector. During 2009 it fell as low as 9 and during the previous boom high was at 72 index points.

TUESDAY

The RBA Monetary meeting minutes and Home price index (last Q unexpectedly fell into negative) will be AUD movers. At the first half of European session some light weight data from Europe are not expected to move the market. Building permits and Housing starts will take most of the spotlight in the afternoon. The first one is in a downtrend and far away from the levels of the last boom, here we need a positive surprise to give some additional boost to the USD. Again this is a leading indicator of the sector and gives a hint about the future building activity. The Housing starts is rather a medium term leading indicator of the economy due to activation of wide variety of jobs. In the evening the GDT price index will be watched by NZD traders and the API Crude stocks can prepare for CAD traders some excitement.

WEDNESDAY

We have three rate decisions this day, starting with BoJ. Before BoJ however the Australian Treasury will release its Mid-year Economic and Fiscal outlook. And even the BoJ will give the main tone in the Asian session, especially for Asian and Australian Currencies, this broad analyses will give us the idea, how the aussie government assess the economy and its own policy. The long awaited BoJ rate decision will take place before the Fed and this caused some speculations about the coordination of these two central banks. However if the BoJ wants to weaken the yen, they need to use Big Guns. We prepared a separate story on this with more details – link here. The following hours will be rather sleepy as everybody will be waiting for the Fed, but don’t forget that the EIA will release Crude oil inventories in the afternoon. As there was a huge decline 2 weeks ago, the question if there will be a significant correction is still alive. The speculations whether the FED will hike or not are skewed towards the no camp. From our point of view however, even the US economy is not in a perfect shape, there are no economic obstacles to hike the rate if we look at the targets of the Fed, Employment is close to its maximum and Core Inflation is well above 2 percent at 2.3% (although Core PCE is Fed inflation indicator). We have to keep in mind that it is also a political decision and the Fed up to now never hiked in the election year. Please check our detailed piece on FOMC – link here. The RBNZ will release his statement and rate decision later in the evening. Well, they have a huge problem over there. The economy is growing 3.6% y/y, capacity utilization at 92%, Household debt to income ratio at all time high but core inflation at only 0.5% and housing market in bubble which is the key obstacle to cut. Anyway the central bank alone can’t solve such a problem and the politicians need to do their job finally by creating longer-term sustainable housing market rules.

THURSDAY

We can call it “The Day After…” with most probably a hangover kind of mood. The afternoon could be important with Draghi speaking at European Systematic Risk Board. We have also Jobless claims and Existing home sales from the US in the afternoon but after the FOMC likely the reaction will be muted.

FRIDAY

It will be a PMI day starting with Flash manufacturing PMI from Japan and Chinese MNI Business sentiment which could be a good leading indicator prior the official PMIs. At the beginning of the European session there will be released the French, German and Eurozone PMIs. We will end the week with Canadian inflation and Retail sales, both sets of data are expected to increase.

  

 DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice.

All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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Aug 23, 2016 - September 2016 Event Calendar

September 2016 Event Calendar

As the Olympics are over, the impeachment trial against suspended Brazilian president Rousseff can start. But this one is not that important in Sep when looking at the below:

Aug 26 – Yellen speaking in Jackson Hole (Symposium Sep 25-27)

Aug 31/Sep 1 – G20 FinMin and Central bankers meeting

Sep 2 – US NFPs

Sep 4-5 – G20 meeting in China (first ever)

Sep 7 – BoC meeting

Sep 8 – ECB meeting

Sep 9-10 – informal EU Economic and FinMin meeting

Sep 15 – BoE meeting

Sep 16 – EU Summit in Bratislava to discuss Brexit + other topics

Sep 20-21 – BoJ (a complete assessment of monetary policy and further stimulus measures are expected)

Sep 20-21 – FOMC meeting + Economic projections + press conference

Sep 26-28 – OPEC meeting to discuss potential production freeze

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmail.com

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Weekly Tech Overview - GBPAUD - No man's land

GBPAUD weekly chart: No Man's Land:

Possible demand on weekly chart: twds 1,67/1,63 and then twds 2012 low around 1,47/4350

Possible supply on weekly chart: twds 2,05

GBPAUD:  Patience will pay out if you are long term chart trader

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice.

All rights reserved ©2016 www.landoftrading.com Contact: landoftradingATgmail.com

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Weekly Macro Overview - Week 29

Previous Week Summary

The whole week we saw risk on flows on the back of few positive news as Theresa May becoming UK’s PM, BoE and BoJ getting ready for more stimulus, Fed officials expressing patience about rate hikes, pretty good start of earnings season…all of that pushing stocks strongly higher. For stocks to keep the momentum we would need to have decent earnings coming in. Meanwhile, bond yields moved higher and USD got some strength on the back of better US macro data that renewed Fed rate high thinking.

Monday – BoE looking at curbing the cash withdrawals from real-estate funds, UK to strengthen ties with North America invest in infrastructure. Spain & Portugal may not eventually face the fines in EU budget procedure.

Tuesday – Japan to end deflation, stimulus by month end, no seize/sources of financing. BoE – will do all what is needed to secure financial stability after Brexit. Spain & Portugal under official deficit procedure. EU pushing on UK to trigger Article 50. Philippines-China court ruling on South China Sea – no historic title to it, would likely negotiate before G20 meeting in Philippines. Bullard (Fed) – one rate hike in a foreseeable future possible, economy stuck with low growth, inflation and unemployment, sees 2% inflation and unemployment rate at 4.7% in 2.5 years, monetary policy can’t change productivity, housing market to improve. US JOLTS job openings at 5.5 mln in June vs 5.85 prior, slight correction of preferred measure of Fed’s Yellen. UK Parliament may debate as early as on Sep 5 the possibility of holding a 2^nd Brexit referendum because of 4.1 mln petition.

Wednesday – EZ May Industrial production worse, previous revised higher. Japan should expand fiscal/monetary stimulus, should buy bonds not go for negative rates. Scotland reiterated its intentions to stay in EU. US Mortgage applications lower than expected, BoC – no change in rates, Q2 GDP – negatives: volatile trade flows, uneven consumer spending, wildfires. Financial conditions remain accommodative, lower CAD helps exporters but may not drive growth. Theresa May officially becoming a new UK PM, Boris Johnson new Foreign Affairs Secretary what may be joke towards EU but he will not lead the Brexit talks with EU.

Thursday – Japan discussed perpetual bonds with Bernanke that would be bought by BoJ, thus underwriting government debt (illegal according to Japanese constitution), JPY weakened, rumoured JPY 10/20/35 trillion fiscal/monetary stimulus by month end. Japan Rating Agency JCR cut outlook to negative from stable & affirmed AAA rating. Schauble-Lew expressed mutual support on Brexit, G20 meeting; Weidmann (ECB) – EU must have solid foundation. BoE - surprising no change in rates, getting ready for August. Job offerings lower after Brexit, businesses cutting investments. US June Final PPI better, Initial Jobless Claims better, previous revised lower.

 

Friday – Italian banking crisis – solution to be found, US funds looking at some buying opportunities in Italian banks. Japanese banks don’t like idea of borrowing from BoJ at negative rates. ECB – non-performing loans in Italian banks a problem but manageable. Weaker JPY an obstacle for helicopter money, UK May Construction output worse, EZ June CPI in line M/Y, BoE to make a 40 bps cut in Aug, launch GBP 50 bln QE in Nov (according to Morgan Stanley), US June CPI lower M/Y, Core CPI higher, June Advanced Retail sales higher, July Empire Manufacturing better but new orders bad, June Industrial Production better, July Preliminary Univ of Michigan Consumer Confidence lower than expected, May Business inventories better. German government to safeguard small investors in Italian banks, creditors to take losses.

Nintendo shares are up 70% on new application high interest. These levels are very difficult to justify versus its peers like King Digital or Zynga. Patience needed before shorting.

Upcoming Week Outlook

Monday – BoE MPC member Weale is out, may provide additional insights on potential rate cut or QE in August. German Bundesbank to release Monthly report, a nice piece providing hints on what risks they see.

Tuesday – RBA releasing Minutes that may shed additional light on what RBA thinks about current situation and possible further easing. UK CPI/PPI – will be watched by markets as BoE is readying for QE; GE ZEW Economic Sentiment for July will show us what temperature German economy has. From overseas we will get Building permits, Housing starts showing us what is the situation in housing market. Expecting June Housing starts at around 1.17 mln vs 1.16 in May. June permits show move to approx. 1.16 mln, higher than in May. Also expecting Home sales to decline to 5.48 mln in June.

​Wednesday – CN Leading index (m/m), UK labor market data will be out, where Claimant count should rise to 4.1k from -0.4k previously, Unemployment rate should stay unchanged at 5.0% and Earnings should rise. We should also learn what how consumers are confident in Europe (Brexit).

Thursday – JP – Industry activity, UK Retail Sales for June (expecting decline), ECB Meeting (live) but no rates change or additional QE expected. The rates should stay at -0.40% (Deposit), 0.00% (Main refinancing) and +0.25% (Marginal lending facility). Definitely closely watched by the market to get the clue on after Brexit vote actions from ECB, situation in EZ economy, QE bond buying and what’s next for Italian banks. Later will have Philly Fed Manufacturing index (expecting rise) and US Jobless claims to rise to 271k from previous week 254k. Later will have CB Leading Index (to return to positive territory).

Friday – will be about July Flash PMI data from all around the world, JP (to rise), FR & GE (both Manufacturing & Services slightly worse), EZ (both slightly worse), UK Manufacturing PMI (worse), US Flash Manufacturing PMI (better). Will also have CPI/Core CPI data and Retail sales from CA (both lower), making the BoC decision makers think whether the last week inaction was right.

The earnings will be monitored by market participants as equity markets are making new historic highs and if they are solid, we may have another shift higher. All those investors sitting on sidelines and hoarding cash before/after Brexit referendum are now moving to stocks. The bond yields started to rise again (risk on outflows) but the likelihood of Fed rate hike, especially due to stronger US data, may inevitable shake the confidence of stock investors. On the other hand, what other options than stocks (dividends) do you have in your hunt for yield?

Event Risk Calendar - Week 29

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice.

All rights reserved ©2016 www.landoftrading.com Contact: landoftradingATgmail.com

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Bank of England on Hold - Carney just hurt risk on... ( UPDATED )

Risk on - the bears just got a good reason to try to stop risk on rally, the question is whether it's going to be enough. Now, we have to keep in mind the Tier-A US data tomorrow and if they are strong that could bring FED hike discussion om the table again. Well, it could be another good opportunity for bears and we may see at least a pullback.

Waiting for US open today for any sign that bulls may be in trouble:
SP 500 FUT, AUD, JPY, CHF and CAD on the list.

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading       teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed   as an investment advice and the creator of this material shouldn´t been hold liable for any loss resulting from       action where despite this disclaimer someone would consider this  material  as an investment advice. 

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Live Market Coverage - Trade idea - Selling GBPUSD at market ( UPDATE 3 )

UPDATE 3:
23:10 GMT - market reached our final target at 1,3108, in total we booked +0,833 %


UPDATE 2:
15:31 GMT - close 50% here at 1,3188 and lower the target for remaining 50% 1,3108

UPDATE:
14:14 GMT - bulls are trying to keep 1,3220 alive, stop has been moved lower to entry


GBPUSD selling in market ( 1,3298 ), stop bid 1,3343, target 1,3165, risk 0,25% ( intraday trade, based on idea and chart from ydy Live Market Coverage ) GL

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading       teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed   as an investment advice and the creator of this material shouldn´t been hold liable for any loss resulting from       action where despite this disclaimer someone would consider this  material  as an investment advice. 

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BoE after Brexit

BoE after Brexit

Politics

-          As the petition of 4.1 mln people for a new referendum was rejected by UK government, we are moving to a warming up phase for exit talks and negotiating of best agreements with EU possible

-          Theresa May made it to become a new Margaret Thatcher

-          UK is working and lobbying hard during preparation phase to secure good starting position for official exit talks

-          Article 50 likely to be triggered next year, but any surprise is still guaranteed

-          Highly unlikely, the UK would use Article 50 before they feel and are ready for the talks, as they would have only 2 years to complete them. If not, they will be a third party country to EU.

Economy

-          The principal two industries the UK economy is based on are Finances and Real-estate. I believe there is no need to comment on current developments there.

-          Not only GBP suffers but recent UK data are turning sour as well. A good example was the June Construction PMI that showed first contraction in 40 months with lowest reading since June 2009. The Housing activity dropped in June as well, to lowest level since Dec 2012.

-          Due to Brexit the S&P sees:

UK GDP to decline 1.2% in 2017 and 1.0% in 2018

BoE lowering rates to 0.0% before the end of the year

They also cut the country rating by two notches to AA with negative outlook.

-          Government is looking at lowering the corporate tax to 15% from 20%, to support the business and keep the employment steady

-          EU is pushing UK to start negotiations with immediate effect to reduce uncertainty. The message from Brussels was clear, no cherry picking will happen. On the other hand, in order the UK keeps the access to free market, they would need to accept Four Freedoms of EU: Free movement of goods, capital and workers, and Right to establish and freedom to provide services.

-          Trade agreements – re-focussing on non-EU trading partners

-          Hedge funds and sovereign funds have already started to look around for possible opportunities in UK.

Bank of England (BoE)

Stability Report (released after Brexit referendum) - Brexit risks materializing, outlook challenging, BoE cut countercyclical capital buffer, expecting economic volatility, commercial real-estate risks present, investment decisions being delayed.

Carney (BoE) – BoE to provide substantial FX liquidity, to support jobs and growth, ready for Article 50 trigger and to ban banks from using extra capital on dividends. The Current account risks related to GBP moves and capital flows, weak GBP to support exporters, actions to be focussed on domestic economy.

The Current and Capital account as well as the chronic Budget deficits are huge problem for UK.

Let’s have a look at an interesting formula for UK Current account:

Sum of FDI + portfolio investments + current account = 12.8% of GDP. Portfolio investments and FDI inflows more than offset the Current account deficit of 5.1% GDP, but what if the inflows reverse? UK is still able to finance its current account with foreign money, but likely would need to decrease the consumption at certain point as the inflows reverse also on lower yields.

The market may still be underpricing the upcoming easing despite the GBPUSD printing the 85 week low below 1.2800. We may be looking at 25 bps rate cut in July, one more in August. Definitely, BoE will come up with rather decent QE (maybe additional GBP 100 bln including buying corporate bonds).

Next policy meeting is on Thursday July 14, where we will see whether Governor Carney will keep his word and BoE cuts the rates. The market is assigning the 74% probability of such a step, but other measures, comments and Minutes will be equally important.

GBP – what’s next?

Macro view – lower rates, QE with declining FDIs will be putting pressure on GBP. What about George Soros being right about BoE again and seeing cable below 1.1500 level?

Mohamed El-Erian was out last week saying the GBP can fall to parity to USD, if there is no good Brexit plan that would secure sufficient free trade deal with EU.

Good luck Champs!

Mr Hawk

landoftrading@gmail.com

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed as an investment advice and the creator of this material shouldn´t been hold liable for any loss resulting from action where despite this disclaimer someone would consider this material as an investment advice.

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Theresa May the winner of 1st round of vote to replace Cameron

Theresa May the winner of 1st round of vote to replace Cameron as a Conservative Party leader,
and ...looks like a neutral candidate who doesn't want to trigger Article 50 until next year will be in.

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Weekly Macro Overview - Week 27

Previous Week Summary

The whole week was about trying to figure out what will be next after Brexit referendum. Investors reassessing the impact and fleeing to safe assets, GBP hitting the low of 1.3149 (1985 levels), the 10yr/30yr yield on Gilts at 1%/1.88% respectively, gold trading above USD 1300 level. Question mark about offshore RMB trading in Europe raised in case of UK leaving EU (China picked London for RMB offshore operations).

Monday – US Lew – strong USD is in the interest of US.

Tuesday – ECB: monetary policy created destabilizing spillovers, divergent policies creating uncertainty about future direction, higher exchange rate volatility and risk premiums. Merkel – EU strong enough to handle UK exit, no informal talks before Article 50 is activated. Farage (strong Leave) - Reiterates desire to be good friends, neighbors and trading partners with the EU. What an irony…

Wednesday – Japan is likely to implement a large (2% of GDP) fiscal stimulus after July elections; verbal interventions heavy the whole week. German monthly Preliminary June CPI slightly lower; Atlanta Fed US Q2 GDP forecast raised to +2.7% from +2.6% and real Consumer spending to +4.3% from +4.1% and lowered the next exports forecast; May Core PCE was in line with forecast +0.2%/+1.6% (monthly/yearly); Consumer spending for May was up 0.4% mainly due to strong demand for autos what can make a positive footprint on Q2 GDP number; Personal income grew but slightly below expectations and Pending home sales fell on monthly basis. According to Powel Brexit has increased global risks and Fed likely not hiking rates this year.

Thursday – interesting formula for UK: Sum of FDI + portfolio investments + current account = 12.8% of GDP. Portfolio investments and FDI inflows more than offset the Current account deficit of 5.1% GDP, but what if the inflows reverse? UK is still able to finance its current account with foreign money, but likely would need to decrease the consumption at certain point as the inflows reverse also on lower yields. EZ June Advanced CPI Est. at +0.1% vs 0.0% exp. Y/Y, CPI Core +0.9% vs 0.8% exp. Y/Y, the better number was due to higher core and slower decline in energy prices. Draghi - EZ GDP will be lower by 0.5% in 2017/18 due to Brexit. Carney (BOE) – further easing in July post Brexit likely, Chicago PMI higher on production and new orders, US Initial claims higher but in line with healthy job market (below 300k).

 

Friday – ECB loosening QE buying rules helped peripheral issues and other HY bonds should benefit as well. EU PMIs better, EZ May Unemployment rate at 10.1% in line with exp, lowest since Sep 2011. Bullard (Fed) – sees US GDP still at +2% rate, no further contagion from Brexit, Fed still tools to use, productivity needs to increase, low bond yields to continue. Fisher (Fed) – wait & see data/tightening, US economy pretty doing pretty well, no plans to move into negative rates.

Stocks rallied towards the end of month (Q2 & H1), as we saw lots of short-covering, window dressing but not sure how long will it last.

  

Upcoming Week Outlook

Monday – we can expect a refocusing of markets from assessing Brexit impact/uncertainty to incoming data. The Brexit even was a huge thing, despite being expected well in advance, but now it is a time to go back to work.

Tuesday – RBA will be in focus, followed by Carney and BOE Financial Stability Report. Will Mr Carney bring up more hints on a pre-announced July easing? Isn’t having GBP down 13% a perfect stimulus tool? Dudley and Tarullo (both Fed) will be out (Tuesday/Wednesday) and in spite of their planned agenda, we may learn more about the impact of Brexit on US jobs creation. Recent economic data were solid, except for May NFPs hiccup, employers are hiring but productivity growth is missing. Actually, all of that in the light of “upcoming” rate (non) hikes from Fed (market pricing them in 2017), will be watched and thought through.

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Wednesday – US Trade Balance (going more negative) and ISM Non-Manufacturing PMI (better than previous). The highlight will be FOMC Minutes from the last before Brexit meeting. They will not be that relevant in the light of new situation after the vote, but may provide some guidance on job creation, macro data vs Fed hike likelihood.

Thursday – BoJ Kuroda speaking, well Japanese officials were pretty busy with verbal interventions last week and it would be nice to see Kuroda shedding some light on potential new QE. ECB’s even non-monetary meeting can bring some surprise comments/ideas in Brexit, aftermath as Italian banks are getting fragile. ADP Non-Farm Employment Change, Challenger Job Cuts and Initial Jobless Claims will be definitely watched ahead of Friday for some hints on US NFPs after May debacle with +38k only.

Friday – US Non-Farm payrolls will be highly watched event as market is trying (again) to solve the Fed rate hike puzzle. Market is expecting the number between 175k-181k for June and unemployment rate rising to 4.8% from 4.7% previously.

Earnings – Samsung (Wednesday), PepsiCo Inc (Thursday), other companies are not that relevant. Samsung – EPS expected to be down, revenue up but sales of S7 Galaxy seem to be strong. Ready for a positive surprise here when we are getting more to price than features game? PepsiCo – sales should be above analysts’ estimates giving us a good insight in EM and overall consumer demand, but investors will also listen to any comments on potential impact of Brexit on product lines. The changes in health trends affecting Coca-Cola are also the same for PepsiCo. Well, think twice…

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Theresa May ?

A candidate for new UK Prime Minister post Michael Gove announced that UK will not use the Article 50 this year. Actually, Gove was asked today to give up his candidacy to replace David Cameron, thus leaving Theresa May alone.

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Brexit ongoing…

Facts from UK:

-          Political meltdown in UK – as no one wants to take the full responsibility and act

-          Unfortunately, the leaders of Leave camp admitted in after referendum aftermath that not all what they said in the campaign was really truth

-          Lafarge from UKIP didn’t hesitate to express his desire to be good friends, neighbors and trading partners with the EU. How ironic it is…

-          Leave camp doesn’t have any B plan

-          Boris Johnson likely to be put aside

-          David Cameron is trying to buy some time as he doesn’t want to be the one who uses the Article 50 of EU Treaty and starts formally exit process

Facts from EU:

-          Very clear disappointment from UK vote

-          Strong commitment to keep EU together from all 27 leaders

-          No formal or informal talks before Article 50 is activated

-          UK must accept and honor referendum results; can not bypass results to avoid exit from EU

-          UK can not cherry pick or used the facilities of the Club without being a member of it

-          UK must accept all four pillars of EU ( for example free movement) in order to keep the access to single market

-          EU is strongly pushing for quick activation of Article 50, so all settle das quickly as possible and uncertainty removed

-          Likely it won’t happen until UK has a new leadership in Sept/Oct 2016

-          EU Summit – special relationship will be on the table but not only Germany and France will play tough

-          Lots at stake at EU side as well – likely will try not to take hostile approach towards UK.

The character and maturity of the nations as well as individuals is being tested…

Mr Hawk

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Brexit going real…

Draghi (ECB) and Carney (BoE) meeting for a Friday cup of tea? Why not, as there is really lots at stake. Don’t even forget about EUR clearing still taking place in London and not in Frankfurt or Paris what would many think.

As Brussels is putting more and more pressure on UK politicians to assume the full responsibility and start the exit talks immediately, the London’s City bankers are already firing at all cylinders in the field of lobbying. Well, losing the access to EU markets, especially for US banks would be very costly for years to come. The solution is a pass-porting but would Germans or French be even open to talk about it? 

So, where should London bankers find a refuge? Frankfurt is a first choice as there is ECB and strong pressure to bring EUR clearing there, then Dublin due to language, low taxes…etc. may be of interest, and definitely, Paris is also a place to go. What we may be a bit worried about is that the part of the business will end up in New York, in the light of a safe harbor kind of place with stable legal framework and predictability that is vital for top executives while making long term decisions.

Well, the period of uncertainty is coming as UK and EU would need to agree on divorce papers first, sign them and negotiate the new after-marriage deals, what in my believe will be very messy with unpredictable outcome.

In all of that market turmoil do no forget about lots of financial institutions still holding peripheral bonds on their books that are under pressure in “fleeing to safety” flows or Deutsche Borse – London Stock Exchange merger being questioned a lot. Maybe if Frankfurt is a HQ place for the group, the German regulator can approve it. The deal in this case will be questioned by LSE shareholders what for sure, will put an additional question marks about the deal.


What’s next for the EU ?

Monday through Wednesday – expecting busy calendar for EU leaders, Draghi…etc., that will be topped with EU Summit where Cameron would have a time to explain a lot. The second part of EU Summit will take place without his presence. Actually, there is no point at this time to speculate about the outcome as the situation is very fluid and evolving…

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