Macro Monday Week 50: From UK Elections to the Fed & ECB, to Impeachments, to Dec 15 Trade Tariffs Deadlines…

(Note that these are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations.)

2019-Dec-09

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Macro Monday WK 50: From UK Elections, Fed, Impeachments, to Trade Tariffs Deadlines…

-KVP

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Summary of Prior Week:

• Geopolitics: Trade deal still in the air, with all kinds of headlines. At one-point last wk, Trump said it all depends whether or not he wants a deal done. And he is relaxed about the timing, it can be done at the end of US 2020 elections

• Ques here is Beijing’s patience wearing thin? Worth noting their strong counter measures seemed anything but

• Protests: Cont. around the globe, in Iran, protesters exchanging gunfire with military & police

• BoC & RBA: On hold as cons. exp… Poloz to step dwn mid-2020. Likely his #2 Wilkins will take-over, not delta MP

• Econ: Both US ISMs missed! Mfg. 48.1a 49.2e 48.3p & more imp.  Non-Mfg. 53.9a 54.5e 54.7p, Yet Job Data crushed it NFP 266k a 181k e 156k r & U/R came in at 3.5%a 3.6%e/p

• EQ: ATHs cont. to be made by US equities with 3154 on Nov 27, on Fri SPX closed just 10 points shy of ATHs. Now +25.5% YTD

• FI: UST 1.8363 is highest wkly yield close since mid Nov, upper part of trading range. JGBs are 0% & Bunds -0.29%

• FX: First dwn wk in 3 for DXY -0.58%, still well within recent trading range of 97.00 – 98.50. Highflyers GBP +1.65%, NZD +2.2% & AUD +1.1%

• CMD: Good wk for energy, Copper +2.4%, Coffee +4.8%, Sugar +1.9%. Less so for Silver -2.7% & Wheat -3.2%

• Vol: c.+8% fro the wk, still low at 13.62

COT Report: [@Ole_S_Hansen]

• Touch of an increase in USD longs to $22.1bn +3%
• Stunning to KVP that the market is still net-short sterling & that’s just on the CoT report – i.e. it does not take into account the +3yrs of underinvestment, CAPEX backlog & underweighting of equities, bonds & general capital to UK assets
• On MM & the daily briefs, we’ve said many a time from c. GBPUSD 1.27-28 that we felt the skew on cable was 1.24/25 to 1.35/1.40… we closed last wk at 1.3140 +1.66% for the wk c. +3.5% from the lvls we got bullish on sterling (note all that is unlevered)
• KVP can easily see this getting to +1.5000 before the end of 2020. Caveats are of course, election results, decelerating economy & recession fears 
• Seeing continued pullbacks in AUD & NZD – note we’d flag our presence for kiwi upside from Nov 15, NZDUSD closed 0.6566 +2.24% last wk, and up c. +2.6% from the 0.6400 lvls we flagged
• Interesting to note the continued increase in JPY shorts, even as we go into yearend & its seasonal illiquidity, Dec 15 trade deadline, an equity market that has crushed it this year, low vol, etc.
• Pretty decent pullback in Commodities Net-Long Positioning by -22%
• Check out the chart from the FT showing that the value of Apple is now larger than the entire S&P 500 energy sector. Is this a bullish signal for energy as a whole? Hard to say, yet definitely energy & etfs like XLE are something to keep on the radar

Week Ahead

Key Focus:

• Fed & ECB (likely nada) | Dec 15 Trade Tariff Deadline (Mkt is acting like done deal)| UK Election (Sterling saying Boris)| Trump Impeachment (yawn, Dems. Legacy move)

Central Banks (SGT):

• Fed 1.75%e/p (12) BCB 4.50%e 5.00%p (12) BSP 4.00%e/p (12) SNB -0.75%e/p (12) CBRT 12.50%e 14.00%p (12) ECB -0.50%e/p (12) CBR 6.25%e 6.50%p (13)

FOMC Speakers (SGT):

• Williams (14)

Other (SGT):

• Lowe (10) Poloz (13)

Econ Data:

• US: Inflation 2.0%e 1.8% Core 2.3%e/p, PPI, Retail Sales
• EZ: GER TB, GER ZEW sentiment, GER CPI, Industrial Production
• CH: Trade Balance, CPI 4.5%e 3.8%p, PPI -1.5%e -1.6%p, New Loans & Money Supply
• JP: 3Q GDP 1.8%a 0.6%e 0.2%p (note Rugby World Cup), PPI, Core Machinery Orders, Tankan Indexes
• UK: Mfg. Prod., Construction Output, Good TB, Parliamentary Elections (Thu Dec 12)
• AU: House Prices, Sentiment survey NAB & Westpac, MI Inflation Expectations, RBA Bulletin
• NZ: Mfg. Sales, Visitor Arrivals, Bis. NZ Mfg. Index 52.6p
• CA: Housing Starts, Building Permits, Capacity Utilization

Chartography & Price Action

• Focus more on currency charts including sterling crosses near-term & long-term, as well as NZDUSD, NZDCAD, AUDUSD, USDCAD
• Highlight energy etf XLE, given Apple’s +1.2trn mkt cap being greater than the entire market cap of the S&P Energy Sector 
• Range-bound still on DXY & US10yrs bonds. Continuing to melt up on S&P 500 as we closed just 10 points from recent all time highs