Last week, the markets flat-lined an 11-0 Supreme Court roasting for the UK government and an impeachment inquiry into US President Trump’s alleged abuse of power.
If I were to define the market however, I would guess that more than 50% of it is happy, sanguine, whimsical speculators, at least 30% high frequency traders giving the market a sense of order and calm whilst shaving fractions off the speculators, and 20% (maybe less) who look at it all with a sense of incredulity and ever increasing bewilderment. Not that I’m particularly anxious, as I trade currencies. I just feel that equities are going to crash hard, and there’s dot-com Déjà vu all over again about to usurp the current market equilibrium.
Just look at “WeWork” the office space IPO which might never happen. 3 weeks ago, and the market was talking about a $40 billion company. Last week I read that the company may not have enough cash to see out next summer of 2020!
Despite the UK Supreme Court ruling that the prorogation of parliament never happened and the following blaming and shaming, I feel that momentum is in favor of a Brexit outcome on 31st October. And that an extension is not one of the outcomes. I’m also medium/ long term bullish on the British pound. I re-read the Bank of England doomsday scenario of “disorderly Brexit” and I think it’s nonsense.
If their scenario plays out then I think fixing a 10-15 year loan at near current interest rate levels of less than 1% (once UK property has dived by up to 30%) to invest in prime London property and then watching that rebound whilst UK interest rates ramp up to 4% and then investing in UK gilts and holding them to term is going to have overseas investors flocking to the UK. A great friend of mine says “life is more creative than you are!” The UK is ok. And it will be ok!
To this week’s data and we look forward to an Australian interest rate announcement, Canadian GDP, Eurozone inflation numbers, two US employment reports, and surveys from the US Institute of Supply Management on manufacturing and services.
Analysts are expecting the Reserve Bank of Australia to cut interest rates by a quarter of 1% to 0.75%. The announcement is out on Tuesday. My feeling is that the RBA will stay pat at 1.0%. Governor Philip Lowe will explain his reasoning later that morning in Melbourne. Shortly afterwards, Eurozone inflation is expected to print 1.0%. Canadian GDP Y/Y for July is out on Tuesday afternoon expected at 1.4%. Analysts are looking for ISM Manufacturing to break back above 50 for September.
Wednesday and the main data event is the ADP employment report which is expected to deliver a positive reading of +140,000 new jobs created.
Thursday sees Eurozone retail sales expected at 2.0% Y/Y for August. ISM services in the afternoon has analyst expectations for a fall to 55 for the September Index.
Friday’s Non-farm payrolls is expected at +145,000 new jobs created, with the unemployment rate stable at 3.7%. Fed Chair Powell will make the opening remarks at a “Fed Listens” event later in the day.
Gold and Bitcoin both retraced last week with Bitcoin suffering a near 20% decline. It’s difficult for me to be enthusiastic about Bitcoin. The rally in gold, I feel had also lost its impetus.
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.