EUR 9.38 For Business Accounts Only

The Morning Track winners-and-losers

- The Morning Track – Winners and Losers by Bob Savage
http://track.com/articles/the-morning-track-winners-and-losers/

Perhaps we should learn something from Sports today – the defeat of the Dallas Cowboys by the New York Giants last night is a good foil for understanding the present market state. The Giants ended an 11-game winning streak for Cowboys, the best-ranked Football team in the country. The Giants were the only team to beat them twice. This leaves the Giants at 9-4 and in the hunt for the playoffs while the Cowboys are 11-2 and assured a spot. All of which means little except for the spirit of the game and the ability to take on the odds and fight back. The first lesson about today is that the news still doesn’t matter compared to the politics – witness the new PMs in Italy and New Zealand, the Trump comments and China rebuttals over the weekend, and terrorism in Turkey. The winning and losing lessons were clearly learned by OPEC and others last night -
• Oil at 17-month highs after OPEC/non-OPEC deal and Saudi talk of cutting output below 10mbd.
• China shares drop 2.5% after regulators curb investments by insurers, CNY at 2-week lows tracking USD gains globally.
• Turkey sees TRY off 1.5% to 3.53 after 3Q GDP -1.8% y/y – worse than +0.3% y/y expected and Kurdish militants explode twin bombs in Istanbul – killing 38 people.
These headlines highlight that there is a political backdrop to the market in this week of frantic trading with a multitude of central bank decisions and a packed economic data calendar. The risk and reward of trading remains dubious – unless there are stacked odds – and that is why focus today in FX might be best on GBP, rather than the EUR which has held 1.05 easily thanks to oil and banks, or JPY which cut over 115 and seems ready for 120 by year end if the BOJ gets its way. GBP is the one underdog that seems to be least in the focus with the BOE meeting, the CPI and the ongoing Brexit debate sidelined to bigger stories elsewhere. GBP volatility has collapsed since the Brexit vote and that doesn’t jive with the chart which suggests we may see 1.2470 break downs if the FOMC or other economic data drive USD higher during the week. Two charts to consider – GBP and GBP volatility – show this all about winners and losers in the week ahead.