#SaxoStrats Morning call, your go-to briefing each morning: https://saxobank.adobeconnect.com/morning-call/ Later, recorded Morning Call ("from the floor") available on tradingfloor.com:
Today's Main Topics & Trends
G-20: Key is reference to FX manipulation – G-20 already agreed to avoid trade talks (Very responsible politicians!! – what a joke!) Germany's Schaeuble expects a rejection of fx manipulation will remain in communique but it's also expected that G-20 no longer will explicitly protectionism (Reuters link)
Bank of England: Big move in GBPUSD yesterday after 8-1 vote to maintain rates. I wrote short piece on GBP long-term potential: Macro Digest: "Under-owned and priced for imperfection" arguing that too much negative is priced in: Scottish Election, no access to internal market, fine of 65 bln. EUR……….
2 YR rate difference UK vs. US (Bloomberg)
Long term GBPUSD chart (Bloomberg)
Note how little time GBPUSD has done under 1.4000 – I expect a 18 month target of 1.35/1.4000 GBPUSD.
Turkey: Turkey remains the biggest geo-political risk – the economy is now starting to show signs of crisis which will make Erdogan's resolve stronger
– EU-Turkey immigrant deal is key for French election – IF – Erdogan negate on deal we could see Le Pen's chance improve markedly as shown by this chart from Deutsche Bank:
Steen's Short Macro Comment:
Political risk in Europe priced to imperfection - I am just back from Paris and to my mind only an extremely low turnout can stop Macron (and Turkey negating on refugee deal)
I am very bullish European growth - I think European growth could exceed the US for most of Trump Presidency.
1. Europe has done internal devaluation - and Europe ex Germany is now the most competitive it has been since ECB was introduced.
2. Europe is better place and better equipped to deal with rising China and India than US. Trump policy (foreign)is inconsistent with long term growth ....
3. YoY Eurocoin is rising 3.5% presently vs. US Q1 growth somewhere btw 0.9% (Atlanta Fed) and 3.0% NY FED
EURUSD would be 1.10 bid if not for elections.. Post September I see 1.13&15
GBP / been long since end of December based on fundamental value and a replay of ERM crisis in 1992 - The EU vs. Brexit rhetoric is topping now as we enter...deal time....GBP will benefit from first priority from Trump administration and too much priced in... note also how BOE effectively today went from ASYNCHRONIC monetary policy to synchronic w the FED.
FED - who cares?....Fact remains both inflation and credit cycle is peaking ... Our economic model believes in nine month lead lag from credit and major economic data points..Energy will go from -80% YoY to ZERO base effect next four month / reducing headline inflation and headline from media.
Credit cycle was massively expanded in China and Europe post Q1 2016 / stock market sell off... that stoped in Q3 and Q4/ Fast forward nine month to that and March to May is peak of PMI, inflation, and credit impulse and finally incoming monetary policy in major countries are on standby or towards hiking... hence... enjoy the "spring" .... or rather the false spring..
The Breakout Model
Close to exit short position in EURUSD (1.0829)
Close to exit BMW (@82.47)
Close to exit Volkswagen (@137.20)
Close to entry Hang Seng (long @ 24.375)
Close to entry Sugar(Short 17.84)
News links:
Trump's Currency Conundrum Risks Fueling G-20 Trade Tensions
Tokyo has more than two job openings for every applicant
May rejects Scottish government plan for independence vote
Lessons from the low country: Fear is good
Asset class rundown:
Comments:
· Little action in equity markets as complacency is back post Dutch election and FOMC. S&P 500 and Nikkei are both trapped in tight ranges while momentum persists in DAX and Hang Seng. Risk is disproportionately too low and we have expressed this concern through puts on S&P 500 (link to trade idea)
· We remain negative on energy, but else positive on cyclicals as long as this momentum continues.
· Another concern is the decline in credit growth in the US. This could be warning of this expansion being later into the cycles than what other indicators are suggesting
Central bankers speaking
| 03/17/2017 03/18 | EC | 1) | ECB's Coeure takes part in G-20 meeting in Baden-Baden | |
| 03/20/2017 02:40 | AU | 2) | RBA's Ellis Speech in Canberra | |
| 03/20/2017 17:45 | EC | 3) | Bundesbank President Weidmann speaks in Loerrach, Germany | |
| 03/20/2017 18:10 | US | 4) | Fed's Evans Speaks on Economy and Policy in New York | |
| 03/21/2017 01:30 | AU | 5) | RBA March Rate Meeting Minutes | |
| 03/21/2017 11:00 | US | 6) | Fed's Dudley Speaks at BoE Event on Bank Ethics in London | |
| 03/21/2017 17:00 | US | 7) | Fed's George Speaks in Washington on U.S. Economy and the Fed | |
| 03/21/2017 23:00 | US | 8) | Fed's Mester Speaks at University of Richmond | |
| 03/21/2017 | AR | 9) | 7-Day Repo Reference Rate | |
| 03/22/2017 00:50 | JN | 10) | BOJ Minutes of Jan. 30-31 Meeting | |
| 03/22/2017 02:30 | JN | 11) | BOJ Funo speaks in Shizuoka | |
| 03/22/2017 02:40 | AU | 12) | RBA's Debelle Speech in Singapore | |
| 03/22/2017 16:00 | CA | 13) | Bank of Canada Deputy Governor Lawrence Schembri Speech | |
| 03/23/2017 10:00 | EC | 14) | ECB Publishes Economic Bulletin | |
| 03/23/2017 13:00 | US | 15) | Fed's Yellen Speaks at Community Development Conference | |
| 03/23/2017 15:45 | EC | 16) | ECB's Lautenschlaeger Speaks at Vienna Conference | |
| 03/23/2017 17:30 | US | 17) | Fed's Kashkari Speaks on U.S. Education Outcomes in D.C. | |
| 03/24/2017 00:00 | US | 18) | Dallas Fed's Kaplan Speaks on Economy in Chicago | |
| 03/24/2017 11:30 | RU | 19) | Key Rate | |
| 03/24/2017 13:00 | US | 20) | Fed's Evans Speaks at Community Development Event | |
| 03/24/2017 13:00 | RU | 21) | Bank of Russia Governor Nabiullina holds news conference |
Last five days #SaxoStrats:
Med venlig hilsen | Best regards
Steen Jakobsen | Chief Investment Officer
Saxo Bank A/S | Philip Heymans Allé 15 | DK-2900 Hellerup
Phone: +45 39 77 40 00 | Direct: +45 39 77 62 23 | Mobile: +45 51 54 50 00
Research: http://www.tradingfloor.com/traders/steen-jakobsen
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