APAC Global Macro Morning Brief – Happy Macro Tue 22 Oct 2019: Sensational Sterling...

APAC Global Macro Morning Brief – Happy Macro Tue 22 Oct 2019: Sensational Sterling...

Macro 1 minute to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Morning APAC Global Macro & Cross-Asset Snapshot


All market updates, research and trade ideas from our strategists in Copenhagen, Paris, Singapore and Sydney can be found at home.saxo => Traders => Market Analysis.

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

Latest Macro Monday For WK 43 - Does brexit deal = top of USD strength?

Happy Macro Tue 22 Oct 2019

 

APAC Global Macro Morning Brief – Sensational Sterling...


The sensational sterling ascent seems to know no bounds... with GBPUSD 1.2963 this Asia Tue Morning, after getting to 1.3013 o/n... just last month this puppy made a low of 1.1959

That’s a +8.4% unlevered... assuming +5x to 10x leverage which is conservative for FX... that’s +42% to 84% in a little over a month... +42% to +84% on a $10m exposure can buy a few drinks around the bar… on a $50m to $100m exposure…  one can buy a few bars & lounges... perhaps even a little boutique resort

Again take away here - whether you find it or not, there are always profitable opportunities out there. The likely direction of overall USD strength will be dictated by whether we get a deal & exit (likely USD bearish) or we an extension (likely USD bullish)

The price action on sterling crosses is obviously telling us the market believes the probability of a deal is high. The tactical skew (near-term) from these c. 1.29/1.30 lvls is likely 1.2500 / 1.2400 on an initial moves if we fail & upward of 1.3500 to 1.4000 on an extension to exit scenario

Our options desk point out that it should be noted that the day-to-day volatility on sterling fluctuates extensively, currently on cable is around the 130bp to 135bp, implying a range of c. 1.2795 / 1.3132 – which in KVP’s view is deceptive given what should be a binary move once we are clear on outcome  

The structural skew (longer-term) on the other hand is massively asymmetrical to sterling strength imho, check out the quarterly charts we used on this wks’ Macro Monday – from multi-decades perspective, sterling & its respective assets are still very much under owned 

Obviously the flipside of looking at 
sterling & sterling related assets on a longer time horizon is we still have credit impulse that is negative flagged by colleague Dembik, plus Jakobsen points out that the UK is almost certainly heading into a recession which has tended to see a weaker GBP

 

-


Cross-Asset wise o/n was a session that saw us getting back over 3,000 on the S&P 500 +0.69% to 3007, yields continued to rise with US 10s at c. 1.80%, which was also reflected in pullbacks in Gold 1491 -0.37%. Silver 17.56 +0.05% on the other hand was pretty much unchanged unlike the -0.77% in Brent 59.20

The Dollar o/n was predominantly mixed, with small gains on the likes of EUR, JPY & GBP, yet losing vs. the likes of the Kiwi 0.6408 & loonie 1.3089 gaining in strength by +0.41% & +0.30%. The results of the Canadian elections, which are due within the next 24 hours, could have a big impact on loonie direction 

For further thoughts on Currencies & John on GBP check out - FX Update: GBP shrugs off Brexit stumble, key week for USD. Our equity strategist Peter Garnry on Q3 Earnings & Amazon in particular, as well as overall comment on equity valuations

 

Today:

  • UK: Public Sector Net Borrowing, CBI Industrial Order Expectations
  • CA: Retails Sales, Canadian Federal Elections Results Should Come Through, BoC Business Outlook Survey
  • AU: CB Leading Index
  • US: Existing Home Sales, Richmond Mfg. Index

Other:

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

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

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 is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo 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 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.

©   since 1992