Ben Robson – The week of 2nd-6th September 2019

The price action in Sterling suggests to me that “no-deal Brexit” is priced into the GBPUSD currency pair and that whether or not the UK leaves the European Union with a Brexit deal or not, that GBPUSD is set for a recovery.

UK Prime minister Boris Johnson’s suspension of parliament until 14th October is a calculated gamble of “dare” or “chicken” aimed at blocking debate or the possibility of parliament voting to move the 31st October Brexit ultimatum and is focused on pushing the EU to negotiate on the backstop element of the deal. If the EU gives way, then the chances for a deal are high. If they don’t, then it’s likely to be “no-deal.”

A high stakes manoeuvre with a binary outcome. Public displeasure displayed in protest marches or attempts to overturn the suspension of parliament through the courts will, in my opinion, prove futile. Brexit is finally reaching its endgame. And I think the market senses it.

This week, aside from Brexit drama, the usual US/China squabbles, and US President Trump’s tweets, is a big week for data, notably in the US, Australia and Canada.  The central banks of Australia and Canada announce their latest interest rate decisions, Australian and Swiss GDP figures will be released. Canada and the US issue their latest jobs reports, and two reports from the US Institute of Supply Management will be released as well as the Canadian Purchasing Managers Index.

On Monday, US and Canadian markets are closed for Labour Day.

On Tuesday the Reserve Bank of Australia, after cutting interest rates twice recently, is expected to keep Australian interest rates on hold at 1%. In the afternoon US ISM manufacturing PMI is set to print 51 for August versus 51.2 for July. Canadian manufacturing PMI will also be released. Last month’s reading was 50.2.

On Wednesday morning, the Australian 2nd quarter GDP is expected to read 1.4% Y/Y. The afternoon sees a Bank of Canada Interest rate decision with Canadian rates expected to hold steady at 1.75%.

Thursday and the Swiss will release 2nd quarter GDP expected to read 0.9% Y/Y, followed by US ADP employment figures in the afternoon looking for a number of around 140,000 new jobs created. ISM services, a bit later in the afternoon is expected to print 54 for August versus 53.7 for last month.

We round off the week with US non-farm payrolls and Canadian employment figures. Payrolls is expected to read +162,000 new jobs created with the unemployment rate remaining at 3.7%. In Canada, 15,000 new jobs should be reported with the unemployment rate constant at 5.7%.

There has been a lot of news focusing on the price of Gold in recent weeks, certainly in terms of the cost of gold in both dollars and some emerging market currencies. XAUUSD receded to 1520 oz last Friday. I also referenced long EURGBP last week as a trade that might be running out of steam. EURGBP traded down to 0.9037 by Friday’s close. These are two examples of what I consider “crowded trades.” A note of caution on both these trades which I feel could see some possible retracement.

Last Good luck and good trading! Ben Robson

Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.

 

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