Mixed signals : Rates , Trade and Oil

ref :- General Plenty going on today, and much of it revolves around yesterday's comments from Fed Chairman Jay Powell. More doveish noises from Fed personnel of late had encouraged traders to believe that the Fed might be adjusting it's stance on monetary policy, and Mr Powell's words seemed to confirm that . In particular, his statement that rates were currently somewhere "just below" the neutral rate caught the attention. You'll remember that the neutral rate of interest is defined as the rate that both encourages full/maximum employment but at the same time keeps control of inflation. Another common way of putting it is that it is the rate that neither stimulates nor restricts growth. T

The consequences of cheap oil... good and bad

ref:- "What Oil at $50 a Barrel Means for the World Economy", Bloomberg Economics Catching a falling knife is a particularly unpleasant but descriptive metaphor used about the dangers of attempting to pick market bottoms ..... the essence of it being course that trying to do so and taking a counter-trend market position can prove a very costly business. The crude oil market over recent weeks would be a fine case in point. In early October Brent crude was trading above $85 per barrel and the talk was all about the possibility of $100 oil once more (West Texas Intermediate (WTI), the US benchmark, currently trades a touch over $9 lower). Crude had a better day yesterday but at one stage on Fri

Some views may have changed ..... but not everybody's

ref:- "MUFG Scraps Yield Curve Inversion Call" and "Goldman, JP Morgan Still Betting on 5 Rate HIkes by End 2019" Both in Bloomberg Markets There was an old trader of our acquaintance who would always greet a difference of opinion with a shout of "That's what makes a market !". It was a mildly amusing routine for a spell, but fairly swiftly became a bit tiresome .... and is even more so now that we realise that inadvertently in our weaker moments, and as result of constant exposure in our early years, we can on occasion wheel out the same line ourselves. Disappointing .... but in fairness to the old boy, he wasn't wrong. Essentially, opposing views are exactly what makes a market, and on sca

Inflating your way out of a hole ....and possibly straight into an even bigger one

ref :- "Inflation offers an escape route" by Irwin Seltzer , Business Section in The Sunday Times Crushingly high rates of inflation certainly capture the headlines when they occur ...... and one of the many reasons why they should be newsworthy is that in the more developed nations they have become comparatively rare things of late. The odds are that most younger readers will never have encountered inflation rates that have seriously affected their existence or standard of living. Those of an older vintage, however, will have unhappy memories of the scourge of high inflation, and they will probably find it distinctly odd to talk about the benefits of higher rates of inflation in any sense.

Trying (and largely failing) to avoid Brexit ..... Is the Dollar topping out ? ref :- "Morgan

Well you can't, can you ? Avoid Brexit, that is ..... but for now we'll just say this : £/$ is trading just above $1.2800 as we speak, having been as low as $1.2738. The FTSE 100 is marginally lower (about 0.3%). Frankly, we're a little surprised that the reaction to yesterday's events and how they may develop hasn't been even more extreme for sterling assets. When it comes to sterling assets, particularly at a time such as this, we need to remember two things .... first, with its heavy weighting of companies with largely dollar-based revenues, sterling weakness is generally good news for the FTSE 100 so yesterday's reversal and today's move lower, marginal though it is, is probably a bigger

It's just the same old things, day after day .... you can hardly say it's dull, though

Wednesday 14th November 2018 It's just the same old things, day after day .... you can hardly say it's dull, though ref :- "Daily Briefing : Cabinet cliff-hanger on Brexit" , Reuters Markets Online All the news agencies offer some kind of morning round-up, and if Reuters wouldn't necessarily be your first port of call if you were after hugely technical insights into the workings of markets, as you might expect they're pretty competent when reporting domestic and geopolitical developments that may lie behind market moves .... as they do now, for instance. Regulars will be aware that we have considered attaching too much significance to every daily (hourly ?) Brexit report a mug's game, and fo

What's catching the eye on a Monday morning .... and a reminder about tomorrow

Monday 12th November 2018 What's catching the eye on a Monday morning .... and a reminder about tomorrow ref : Various in Bloomberg Markets It's a big morning if you're a UK sterling trader (aren't they all ?) , and if you are one of those brave souls we can only say "Rather you than me", and hope that you're keeping the right side of these repeatedl vicious moves. GBP / USD is trading below $1.2850, when three trading days ago it was approaching $1.3200. It's Brexit of course, with reports that PM Theresa May is facing rebellion by cabinet ministers from both hard and soft Brexit wings of her party. But it's also about a very strong dollar, which is higher across the board .... not just aga

Only fools rush to judgement ..... so here goes ! The US mid-term elections ......

ref :- General, and everywhere Just quickly, a knee-jerk reaction to the result of the mid-term elections .... Frankly, it's not the sort of exercise to be encouraged unless you make your living trading this kind of thing. There's a long and inglorious history of commentators reading too much into initial market reactions to events, and you can very easily make yourself a hostage to fortune if things turn around after more thoughtful analysis. Still, despite the dangers let's have a look and see how the markets are taking the breaking news : As we write, it has become clear that the Democrats have regained control of the House of Representatives for the first time since 2010, and the Republi

Watch your mouth ! The Federal Reserve's head man cops some flak ......

ref :- "Powell Policy Lost in Translation as Fed Blamed for Market Woes" , Bloomberg Markets You've got to have some sympathy for the (relatively) new Fed Chairman Jerome Powell . Well, we've got some sympathy for him at any rate ..... but that's because we belong to that group who don't believe that Mr Powell has said anything untoward during his tenure so far. But others were plainly upset by Mr Powell's comments on Oct 3rd when he said that monetary policy was still accommodative and probably a long way from neutral -- the point at which interest rates neither spur nor curb growth in the economy -- but might eventually have to turn restrictive. "Yeah .... so ?" we might have uttered,


ref :- General Just in case we're running around a bit and find ourselves in some communications blackspot (well, we can but hope....) , we thought we'd better alert readers of some key events over the next few days : Friday 2nd November : Release of October Employment Data Average Hourly Earnings (y-on-y) : expected +3.1% , last at +2.8% Non-Farm Payrolls (y-on-y) : expected +190,000k, last at +134,000k Unemployment Rate : expected 3.7% , last at 3.7% Just the other day we were talking about how the odds of the Fed's intended fourth rate hike of the year next month had slipped a touch ..... still odds-on mind you, but no longer a "lock". Reasons as

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