Weekly Game Plan 26 Nov 1826th November 2018
The EU has approved PM May’s final Brexit deal…but the game isn’t over. Now the UK Parliament needs to approve it sometime in December. It is still unclear whether PM May has the support to pass the deal. Junker said “this is the only deal possible” so it’s either this or a hard Brexit. GBP might gain some traction into the week but Parliament has the final say.
Downunder, the Labor government in the Australian state of Victoria won an unexpectedly large majority in an election. The anti-establishment movement is alive & well, and we’ll probably see more of this in Australia as the national elections (6 months away) draw near. Aussie was one of the weakest currencies last week and it may come under a bit of pressure on this outcome.
Meanwhile, civil unrest is growing in France against Macron’s Diesel tax. Violence will grow proportionally to the lack of food on people’s tables. And this brings me to a fairly aggressive comment that finds it’s roots in the US Declaration of Independence. Our biggest danger is Government. In France the police shot tear-gas at the protesters, but what will they do if government doesn’t make adequate changes and civil unrest grows even more? Government has the tanks and the bullets! Also, politiians constantly deny that they are the cause of the situation and blame everybody else for their own failures in an attempt to retain power. Will we really degenerate into a “V for Vendetta” kind of situation?
Themes for the Week:
- GBP: While clearing the EU hurdle is a positive development, UK PM May still faces a grueling task of getting the deal through UK Parliament. I am not expecting much form GBP yet, although some positive movement would make sense as we’re one step closer to a deal.
- I don’t know what to make of the civil unrest in France and Salvini’s latest bluff against the EU (let our budget pass or we will force a collapse in government). I think the Euro will take it’s cue from the positive Brexit outcome for now. But things just aren’t moving in a positive direction here in Europe.
- FOMC Minutes: the USD has stalled since rejecting 98.00 but it remains in a broad uptrend. We expect the FOMC minutes to add some hawkishness to the picture – which the market isn’t really discounting as of yet. To note, Black Friday sales started off pretty well – an encouraging sign.
- Trump/Xi meeting on November 30 at the G20 in Buenos Aries. Market expectations of a “deal” to end the US/China trade war have receded following the tense showdown between US Vice President Pence and China President Xi at the APEC Summit. However, Trump’s own comments have been upbeat so we would expect a positive outcome.
- Equity market woes: Nasdaq leads the way as tech stocks continue to suffer. I do believe that only a Trump/Xi resolution has the potential to end the correction in the near-term.
Data in the Week Ahead:
- NZD Retail Sales (Sunday)
- RBNZ Financial Stability Report
- UK Bank Stress Tests
- US GDP (revision)
- FOMC Minutes
- CAD GDP.
On the Radar:
After Thanksgiving, markets usually start to wrap up ahead of Christmas but this year I do believe we will continue to trade (cautiously) into mid-December given the outstanding issues. In the meantime, going into the week I remain bearish on Nasdaq, Dow & Crude Oil. I am bearish on EurUsd and EurJpy and will see what happens on GBP.
About the Author
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