Market Overview by TrioMarkets

[GerasimosPapagiannis]

Fed is going to meet in less than a month from today, between then and now, a big debate will start about the chances of a possible rate hike this year. Last Friday, Yellen supported that the case for a rate hike has strengthened and she appeared confident that the USA economy will strengthen further. However, once more it was avoided to give a better indication as for when the next hike might be. Despite that, the next Fed meeting later in September is live, the market does not really believe that Yellen will hike but the December possibility has started to gain momentum.

At this stage we see the pullbacks for USD/JPY as a good buying opportunity and see high probabilities that the USD will have some gains against the JPY at least in a short – medium timeframe. Moreover, we see that the downside pressure for global equity market is very likely to continue with a moderate pace.



Key points:


* Fed Vice Chair Fischer’s said: ‘’ Yellen’s comments were consistent with a possible September rate hike and 2 rate hikes this year is possible’’

* The world’s largest pension fund (Japan’s Government Pension Investment Fund) has said the UK’s surprise vote in late June to leave the EU was partially to blame for a $52bn quarterly investment loss.

* Aussie falls to 4-month low

* Japan’s inflation falls the most in 3 years, BOJ under pressure

* Angela Merkel is under fresh pressure over her refugee policy.

* After Yellen speech last Friday the odds for a Fed hike rose to 42%, up from 22% on Aug 19

 

[GerasimosPapagiannis]

The economic calendar is fairly busy today. All eyes will focus on important European macroeconomic news with the most important to be the German CPI number. There is a strong bullish bias in the market for USD after the hawkish comments of Yellen and other Fed officials and we should be cautious about it. The pair USD/JPY seems very attractive for a possible bullish reversal as the FED and BOJ monetary policies divergence deepen. Many expect now that Kuroda will adopt new stimulus the coming September whilst the Fed will hike. Global equity market consolidates the last days but seems to not have much strength at the moment in order to move higher.


Key points:

· EUR/USD has fallen 2 days in a row, dropping a total of 95 pips (-0.8%) - the biggest 2 day fall since Monday 27 Jun'16

· Fischer advised watching this week’s employment data closely.

· Japan's Suga: G7 has agreed to act against excessive FX moves

· (Fischer’s) comments,” in an interview with Bloomberg TV later today, especially after his hawkish remarks last week,

· Retail sales in Japan grew in July at their fastest monthly pace in four months, helping the overall pace of contraction to slow.

· Japan’s jobless rate falls to 21-year low

· Contraction in Japan’s household spending moderates in July

 

[GerasimosPapagiannis]

Market Overview: Expect a quiet day with soft European macroeconomic news and USA participants to stay away from Labour Day. NFP number fail to surprise positively the markets last Friday however still there are many who believe that Fed will hike later this month. We do not believe that Fed will hike later this month unless there is a secret plan from Yellen to rise rates in order to cause a market turmoil and extra uncertainty which can favor at this stage H. Clinton or at least burn the next president (possibly D. Trump)…. As we have repeated before the most worry thing is not the conflict and weak USA macroeconomic numbers but the conflict statements from high ranking Fed officials who appeared very confident about domestic economy.. however the numbers so far do not verify their optimism
I see some opportunities to buy European equities at lower levels for today as are oversold compare to USA stock market. Also the last week’s soft European macro data will increase pressure to Draghi for more stimulus while the BoJ later this month will probably will rise and extend QE

Key points:
• Japan’s 10-yr bond yield hits six-month high
• European stocks hit three-month high
• Gilt yields rise to four-week high
• Japan PM Abe says downside risk to global economy increasing
• BOJ's Kuroda speech - Limits to what the BOJ can do
• Kuroda: Can deepen rates further into neg territory, but we must consider the costs
• Kuroda: Japan is no longer in deflation
• Goldman Sachs economist says 55% chance of September FOMC rate hike
• German's AfD party beats Merkel in her home district. Merkel’s power under decline
• G20: China and US agree to refrain from competitive currency devaluations
• Spain headed for third election with parties deadlocked
• Fed's Lacker Q&A: August payroll report was 'reasonably strong'

 

[GerasimosPapagiannis]

Market Overview: Markets continue to remain too quiet and await the next key driver which will give direction. Traders try to identify in which direction the major central bank monetary policy will move. ECB BOJ and Fed later this week and month will give a signal to the markets. Is very likely that ECB will not get further action the coming week despite the fact that different numbers show that the macroeconomic environment in Europe has lost momentum during the last month.




Key points:

· Japanese 10yr 0.00%

· AUD/USD at pre-announcement levels after RBA kept rates unchanged at 1.50% as expected and sees continued weak inflation

· Abe advisor Hamada says the BOJ should wait for the Fed

· Brent oil strengthens on increased prospects of OPEC output freeze agreement

· Eurozone QE bond buying passes €1tn mark

 

[GerasimosPapagiannis]

We read in the press that last Friday the hawkish comments of Fed member Rosegreen created a Global equity and bond market sell off , however the reality is that the recent sell off had to do more with a combination of many different factors... Many times in the past markets try to find excuses in order to sell off for different reasons any time. This time if we look the current situation is not that bright and is not difficult to understand why markets getting the last days aggressively risk averse:

Stock market is falling at the fastest pace since Uk Brexit Referendum some reasons behind this sharp selloff:


Fears that the Wall Street favorite candidate (Hillary Clinton) facing some serious and worrying issues with her health is something that causes uncertainty for many investors. If Clinton’s health is weak obviously this will influence her ability to continue one very competitive campaign against Donald Trump. Furthermore the popularity of Clinton recently dropped sharply at the same time the popularity of Trump skyrocketed. Polls show that Trump getting closer than many epact to become the next president of USA.. Unquestionably is too early to say that D Trump will be the next President of the USA but only the increasing possibility force some investors to get some risk off the table.

West seems indecisive and reacts slowly against North Korea where a psychopath dictator has the ability to plays with the fire and does whenever he wants nuclear tests. North Korea has made five nuclear tests since 2006, the last took place last Friday. The reality is that North Korea nuclear capability is expanding fast. The last years the huge stimulus from central banks have created irrational exuberance and the bad news becomes good news at certain times. For example if a terror attack occurs in the capital Centre of a large European country investors will rush to buy equities and other riskier assets, but what happens with North Korea is different as we do not speak for some extremist suicide bombers who kill some people but for nuclear weapons that at any time can blow up or even worst erase whole countries from the map


Despite the recent soft USA macroeconomic data and the tremendous global economic recovery Fed seems to be ready to hike once more before year end. Despite the possible hike what worries more markets are the conflict signals from different Fed members. Fed officials in nearly every speech and statement appear very confident about the status of the USa economy but a few days later the macroeconomic data (for very crucial macroeconomic numbers) reveals that the USA economy is much weaker than most Fed officials were expected. This creates frustration, nervousness uncertainty about the Fed ability to guarantee the stability and to give a tone of confidence to the markets

Mario Draghi in the last ECB meeting failed to impress market and extend QE. The fear rises among investors that central banks running out of weapons and tools that can use in order to boost inflation and growth



The recent volatility might be not positive for many investors or central banks but for traders is a unique opportunity to make money. Traders begs for volatility and uncertainty, simply because give them opportunities. The recent years the ultra-easing monetary policy which followed by central banks have keep volatility in historic low levels. However many times unexpected events (e.g. Japanese tsunami, Brexit, European crisis etc.) with huge economic and political implications and importance have given great opportunities to traders to profit from markets


Trading Oil is one of the most difficult and dangerous products that someone can trade out there. Oil market is highly manipulated and ‘’ very sensitive’’ to inside information.. Also by trading oil is very difficult to manage your risk as breaking news can create huge volatility within seconds. Our view is that Crude oil prices in the next couple of months will be in much higher levels than the current levels, there are big players/insiders that keep buying for their own reasons. Most probably somehow they know that the freezing oil agreement will be achieved.


For the coming week Wednesday and Thursday are the key days that will give us the tone as USA macroeconomic data will be released and will probably give an answer if Fed hike next week


Sincerely,
Trio Markets Team

 

[GerasimosPapagiannis]

Market Overview:
Despite yesterday’s weak USA macroeconomic numbers the global stock market gained on expectations that Fed will not hike next week. Apple share price also helped USA market to recover. Markets in China, Taiwan, South Korea and Hong Kong are closed for public holidays while the economic data today is very soft. The most important number today is the USA CPI number. We do not see reasons to trade actively today as we expect low volatility and insignificant trading opportunities. We recommend you to hold as the next week will be one of the most significant of the last months. BOJ and Fed will reveal their thoughts about future policy and global and domestic economic status. The main problem that market examines at the moment is that there are significant evidences that the global economy is very weak to rebound without central bank support and this is a big headache for central bankers .


Key points:

• Deutsche Bank asked to pay $14bn in US probe
• 'Britain will give up on Brexit if they make negotiations tough enough' - EU official
• Australian stocks post longest weekly losing streak since 2014
• Junk bond funds see largest outflows since January

Sincerely,
Trio Markets Team
https:/triomarkets.com

 

[GerasimosPapagiannis]

FED:
Personally I cannot find enough evidence that can justify a Fed hike tomorrow for a variety of different reasons. I expect that Fed will keep a very hawkish tone and will send a clear message that is ready to hike on December. We expect a very interesting and full of new news FOMC


Why Fed will not hike?
• The USA macroeconomic data during the last month has lost momentum only last Friday’s USA core CPI number was stronger than many expected however this is not enough to justify a rate hike at this stage
• Political uncertainty over the health status of Clinton and USA elections rising
• Fed hates to surprise markets and most importantly to create volatility and uncertainty.
• Many economists support that despite the significant steps that took place in USA economy the last years a rate lift will trigger an economic recession which will force Fed later not only to cut even lower the rates but also do introduce another round of QE

Why Fed might hike?
Low interest rates for so many years creates bubbles to economy. Many fed members have supported that is better to lift rates earlier than later in order to avoid economic overheat. Moreover they support that any hike is going to be minor and almost insignificant factor for the economy as rates are close to zero for first time than ever before
Since financial crisis USA domestic economy had a significant improvement which justifies a rate hike.
With this movement fed will show its determination and that is not influenced bt markets. Also a rate hike will help Fed to regain its credibility on the markets and send a message that the USA economy is very strong.

What to trade
Even if BOJ do not introduce aggressive easing, the Fed hawkish language tomorrow will not leave a lot of opportunities for USD/JPY bears. We see high probabilities for some aggressive bullish movement for USD/JPY

BOJ:
When BOJ started quantitative easing programme in 2013, BOJ Kuroda promised that within the next two years inflation will hit 2%. Three years later inflation has not even touch 1% obviously BOJ Kuroda has lost his bet and has damaged seriously his credibility
Our view is that BOJ will impress markets with huge stimulus however we must see crucial changes to BOJ policy meeting in order to have an aggressive market reaction
Today a former BOJ official supported that BOJ must change the inflation target lower than the existing 2% because 2% seems unrealistic. The reality is that if Kuroda lower inflation target then is like he admits his failure. I think that Kuroda will avoid to do it as its credibility will be damaged even more.
The most anticipated scenario is that the BOJ will cut its rates further from -0.10 to – 0,10 and will purchase a larger amount of assets 90 trn from existing 80 trn. We think that the most possible scenario is to do both. Here we should remind that BOJ July meeting largely disappointed markets.

The last months many support that BOJ and central banks running out of options and time. We think that central banks can stay more accommodative for much more time than the average investor thinks so BOJ can adopt a variety of different tools. BOJ has the ability to buy Japanese government bonds, adjusting the maturities of bonds eligible for purchase, boosting spending on commercial paper, corporate debt and exchange traded funds, are also very likely scenarios.

Here we should be cautious. Market has high expectations from BOJ.. A small cut on rates or some more QE will not fulfill market’s expectations. In order to see Jen to plunge and stock market to skyrocket BOJ should done much and of course introduce a new more even more dovish language

We should not forget that the current negative interest rate policy which have introduced by ECB and BOJ is something new and has never occurred before so there is not predictable outcome for this global experiment


Some trading tips:

BOJ decisions are by far the most complicated from major central banks as we do not have direct access to details (as we got with FED and ECB). That makes hard and risky to trade BOJ announcement. We suggest to forex traders who have not enough experience to trade very carefully or even do not trade the BOJ decision particularly the first hours where the details will be conflict and unclear. The best time to trade this week is after tomorrow’s night Fed decision and press conference where we will have all details from both central banks in order to make comparisons and get the right decisions. We will have a much better control and can manage better our risk by trading after than before a monetary policy decision. We want to protect our capital from 200-400 pips possible movements that can take place within few movements.
Sincerely,
Trio Markets Team
https:/triomarkets.com

 

[IrwanI]

Any new update from TrioMarkets