The two market bogeymen set to exit stage left? The two market bogeymen set to exit stage left? The two market bogeymen set to exit stage left?

The two market bogeymen set to exit stage left?

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The two bogeyman that have long dogged market sentiment, Brexit and the US-China trade deal, could be set to entirely fade away as event risks of consequence very soon. The question will then be whether this eventuality is already priced in and there is anything left in the tank to drive a further strong risk sentiment.

The UK parliament has taken control of attempting to avoid a No Deal Brexit, which points to a further delay and soft Brexit scenario. Late last night a one-vote majority in the House of Commons approved a move to require that May request an extension with the EU and that it could revise the length of the extension if not deemed sufficient. May is ready to cross her own red lines on a customs union, which would seem to guarantee what is increasingly already a fairly open civil war in the Tory party. Sterling appears cautiously optimistic that the process will proceed smoothly from here, though the lack of more upside on this latest news actually suggests some degree of underlying weakness.

Bloomberg reports that the US may give China until 2025 – conveniently the year that a second term for Trump would end – to make good on its commitments to purchases of US goods and allow 100% foreign ownership of Chinese companies. This is most likely an effort by the US side to extract something that looks good on paper to maximize political gain ahead of the November 2020 election and likewise to avoid any damage to economic and market confidence ahead of that date.

There are apparently outstanding issues on enforcement of the deal and the hot button issue of technology transfer, but where this process is headed is neatly encapsulates in this line from the Bloomberg article: “The White House is particularly focused on purchases commitments through the second quarter of 2020, in an effort to narrow the trade balance ahead of Trump’s re-election bid.”

So – now it looks like we will be getting the softest of Brexits and the maximum market-friendly outcome of the for the US-China trade deal via a near six-year delay. This means that global markets will have to get back down to the humdrum business of assessing the global economic outlook and how far it has taken its celebration of accommodative policymakers. To my eyes, the exit of these two bogeymen for markets was long ago priced in. 

And now, given a steep backup in US interest rates all along the yield curve over the last week, we are at a near term pivot point as well: the point at which circular logic becomes unbearable if my diagnosis of the situation is correct. In other words, can market sentiment and global yields continue to back up when it was precisely the reintroduction off the policy punch bowl earlier this year that goosed confidence in the first place? Either markets pivot back lower very soon, or we are building all of our confidence for a further melt-up on a single round of a PMI bump in China providing stimulus for the world economy and  boosting it enough to overcome  rising yields and  energy prices.


GBPUSD has rebounded, but shouldn’t this latest round of news have boosted the currency even more? Supposedly, we’re just waiting for the EU to grant the requested delay (don’t see any reason for the EU to play chicken now that May has folded on her red lines) and for the actual agreement to take shape, but we’re sceptical that sterling can put much more together here even if a clear path to a soft Brexit emerges. Stay tuned.
Source: Saxo Bank
The G10 rundown

USD – the big dollar is easing a bit lower again ahead of the jobs report tomorrow – remember last month’s negative payrolls growth surprise.
EUR – the bounce from the sub-1.1200 lows looks half-hearted so far. Very ugly German factory orders this morning and the ceiling may be low for any euro revival, especially in the crosses if risk sentiment remains strong.

JPY – the yen looks the high beta currency to any possible pivot in sentiment as outlined above – i.e., US treasuries taking a dive lower, for example, on an ugly US jobs report tomorrow and/or weakening confidence in the state of the global economy.

GBP – sterling is bid and there is not a lot more range to work with in EURGBP on further supportive headlines, but we question the potential magnitude of a positive reaction even if we get a roadmap to a softer Brexit scenario in coming weeks.

CHF – Brexit hopes and strong risk sentiment pushing back against ECB dovishness to keep 1.1200 pivot area intact in EURCHF for now.

AUD – the Aussie getting a boost from the raging optimism that China will stimulate the global economy into lift-off and that US-China trade negotiations prove a non-event or even better.

CAD – strong oil prices have kept USDCAD in the range as the price action coils in a tight range – the pair looks a low beta play on the direction of risk sentiment and oil prices. 

NZD – the AUDNZD gunning for the next significant level – overcoming 1.0500 which at least starts to suggest a turning process. 

SEK – EURSEK has probed the 200-day moving average – currently around 9.38, but so far reluctant   to break. Given maximum support (for SEK relative to EUR) from global risk sentiment, this is a weak performance. 

NOK – given the backdrop of strong oil prices, what is taking NOK so long to break higher versus the EUR (EURNOK lower). Watching the 9.60 area in EURNOK.

Upcoming Economic Calendar Highlights (all times GMT)

1130 – ECB March meeting minutes
1230 – US Weekly Initial Jobless Claims
1400 – Canada Mar. Ivey PMI
1700 – US Fed’s Mester (non-Voter) to speak


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.