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

Macro 3 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  So much on this wk, it is hard to know where to focus. From a host of central banks including the Fed and ECB, to UK elections on Thu, next steps on the Trump Impeachment and of course the Sun Dec 15 Trade Tariff deadline. As we have said numerous times on MM, across assets the market is trading as if we have a done deal between the US and CH. What mkts are definitely not pricing, is the potential break of a deal which could see USDJPY 109 and USDCNH 7.03, at sub 106 and above 7.15

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



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

A lot on, as we finish off our last Macro Monday – many thanks to all the folks who have made time for MM this year, both on the live calls, replays, emails, internally, externally, etc. Your feedback, energy & participation have been greatly appreciated.

So much on this wk, it’s hard to know where to focus. From a host of central banks including the Fed & ECB, to UK elections on Thu, next steps on the Trump Impeachment & of course the Sun Dec 15 Trade Tariff deadline. As we’ve said numerous times on MM, across assets the market is trading as if we have a done deal. What the market is definitely not pricing, is the potential break of a deal.

Wishing everyone a profitable & smooth close into year-end, as well as fantastic year-end, & Christmas/Holidays break.





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


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