Weekly Game Plan 10 Jun 1910th June 2019
A few hours after the markets closed on Friday, US and Mexico agreed to call off the planned tariffs and avert a trade war. The market was already in a buoyant mood due to hopes the US Fed will commence with an easing cycle, so the US/MXN news will likely spur more positive sentiment, and fuel expectations of some kind of de-escalation of the US/China trade war. This may also take some of the momentum out of the USD downtrend.
Also remember that there is a Bank Holiday in EU on Monday.
Themes for the Week:
- The US-China trade war will remain in focus after US Treasury Secretary Mnuchin told reporters that US President Trump and China’s President Xi will meet at the G20 Leaders Summit June 28-29.
- FED in focus: market expectations of multiple Fed rate cuts dominate the current landscape. After misses in NFP and ISM, the remaining data points before the June 19 FOMC meeting should be watched closely.
- China data should also warrant focus in the following days as the markets will be watching for signs of recovery or further slowdown.
- UK political noise will also reappear as the Conservative Party leadership race gets underway. Candidates need the support of at least eight MPs so the current line up is Boris Johnson, Michael Gove, Jeremy Hunt, Dominic Raab, Sajid Javid and Matt Hancock. First round of voting begins June 13
- Italy headline risk continues. The European Commission recommendation to start the Excessive Deficit Procedure has to be ratified by the junior finance ministers committee (EFC), possibly this week. The EC then has to specify the parameters of the EDP – policy recommendations, fiscal targets, deadlines. The formal decision has to be formally approved by the Eurogroup, possibly at the July 9 meeting.
Data in the Week ahead:
- UK GDP m/m
- UK Employment Change
- US CPI (influential in the current dovish environment) and Retail Sales
- AU Employment Change (influential after the latest RBA minutes)
- China Trade Balance, CPI, Industrial Production
On the Radar:
With the recovery in risk appetite, I like Dow and SP500 longs. Alongside that, I like pairing up Cad strength vs. Jpy weakness and perhaps USD weakness (if it continues despite the news). NZD also remains strong and I’d pair it up vs. Jpy and USD as well. GBP is in need of a breakout, which may happen this week after very sluggish action last week.
About the Author
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