Senior Relationship Manager
Summary: FX Trading is back
Good Morning,
As Markets keep looking for direction, volatility and trading opportunities are back especially in the FX market. A lot of old players who were recently trading more Indexes and Crypto are back in play.
A good measure for the moves in an instrument is the ATR that measures the recent average move of an interest on any given day. The result is the daily swing one should expect and I like to compare the 10 day average to it`s 200day Average, that tells me it moves are relatively big or small. USDJPY is at 183 pips vs a 92 pips average, EURUSD 113 vs 83 GBPUSD at 180 vs 100, EURCHF 100 vs 70. Silver is an interesting outlier where it is 54 vs 60. For the US500 the numbers are 115 vs 82 and the GER40 346 vs 280
Hopes that price increases may be coming a bit more controlled let stocks gain and yields fall, German 2 years had the strongest yield drop since 2008 giving up almost 27 basis points in a day. The hopes are fueled by a falling EU PMI hinting at declining demand and at the same time falling commodity prices that ease inflationary pressures. Copper is down 7% on the week, Brent gave up 2% and US wheat 9%.
The EU PMI was released at 51.9 vs 54 expected and the US came at 51.2 with manufacturing PMI 2.5% below expectations and services 1.9
US 10 years yields fall to 3.1% aiding equities with the S&P500 up 1% and the Nasdaq 1.6, over night the trend continues higher an additional 1%.
EURUSD is at 1.0540, GBPUSD 1.2270, the USDJPY 134.76 and gold and Silver low at 1822 and 21.05.
I would see the relief as fragile until it is confirmed by solid data. Next week is marks the end of Q2 and H1 and adjustments could further fuel volatility.
In terms of data today we expect the German IFO at 10:00, US Building permits at 14:00 and the University of Michigan Sentiment at 16:00. Last month it was the usually not closely watched Infaltion expectation compiled by the University of Michigan that spooked the market.
German Minister Habeck issues a warning on Energy supply and raised the warning level to the the second highest of three, he also fears a “Lehman Brothers” scenario in the Energy market.
In the UK the Conservative Party lost 2 parliamentary by-elections on Friday, a signal Boris Johnson' is under pressure
Japan' CPI remained above 2 for the 2nd month in a row.
The EU accepted Ukraine and Moldavia as EU candidates
Expect nervous markets – perfect for trading, a bit more tricky for investors.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.