Weekly Game Plan 11 Feb 1911th February 2019
The FX market is struggling to find a trend and with no news out over the weekend, we might have a quiet start to the week unless China returns from the holidays and creates a risk-off environment after Trump said he won’t be meeting Xi before the March 1st deadline.
Themes for the Week Ahead:
- US/China trade debate: Trump & Xi won’t be meeting ahead of the March 1st deadline and that should be a negative for risk assets (commodities, EM, China & china proxies like Aud). However, high level trade talks between the two countries resume this week and the markets will be playing very close to any developments or lack thereof.
- RBNZ: the bank is expected to leave the cash rate unchanged at 1.75% and echo the dovish tilt that Fed, RBA and ECB already touted. Also, the NZ jobs data came in weaker than expected.
- Brexit: the markets’ conviction that a no-deal Brexit will be avoided may be starting to fade. Feb. 13 will see PM May in the British parliament again but what can really change? What amendments can be made that will satisfy Europe? I still believe no-deal is the default option.
- US Government Shutdown: it didn’t perturb markets before, and it probably won’t perturb them again if the US government shuts down again.
Data in the Week Ahead:
- US CPI and Retail Sales
- EU Q4 Flash GDP
- German GDP
- UK Q4 Prelim-GDP
- China CPI and trade data
On the radar:
There are a few caveats to this watchlist, but broadly speaking I like Eur, Aud, Nzd weakness vs. USD and JPY. I also have a short stance on the Dax.
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