ECB wait for September & markets cautious ahead of US GDP number

Hi guys, good morning. Friday the 26th of July, just coming up to quarter past 8 here in London. And as you can see on my right-hand side, the man, the myth, the legend, Mario Draghi, all but confirming we are going to have those rate cuts before He, uh, ends his term on October the 31st, and he's gonna go that whole, uh, journey as ECB president without raising rates at all, which is quite remarkable. Even going back at least 6 months ago where we were talking about, uh, just before he was going to leave at the end of the summer that he was actually going to raise rates, and what a difference 6 months made. We'll start by going over the markets and just having a quick recap of, of things from yesterday, and then obviously have a look at some of the news headlines from this morning, what's driving price in what's expected, I would say, to be a relatively quiet European session before we get to the main point of US GDP numbers, 1:30 UK time. So just bringing up the euro chart here, and you can see I mean, looking at that, you would say absolutely classic ECB meeting where you get a spike one way, reversal the other, and finish pretty much flat. So you could argue Draghi's done an absolutely amazing job on that. Uh, if we lower it down to a 5-minute time frame, the initial headline coming out that they were no rate cut— so we going into this meeting, 50% priced in from traders that, uh, we were going to have that cut. So that was just an unwind of those dovish bets, if you like. I'm just going to put this onto a minute chart now where you can see we spiked higher above the R1, above that 24 to 48 hour range, uh, and then the, the dovish forward guidance really led to this move lower, that they are going to start looking into this QE program, uh, and, um, starting up the asset purchase program yet again. And that did see us drift down pretty much until Draghi walked out. So 1:30, 45 minutes after the initial announcement Mario Draghi took the, took the stand, if you like. And look, the low of the day, 1:33. So 3 minutes into his speech, and pretty much when he started reading the statement as he walked out, a tiny bit late. Uh, no real talk of rate cuts or policy change at yesterday's meeting, or for yesterday's meeting. That saw us push higher, reverse pretty much the whole move in the first few minutes before pushing on. Hitting the R2, and since then we did drift lower, uh, on that, um, that, that push higher that we had. And then into the back end of the session, we pretty much finished where we started. So you can see here on the, the 12:45, we finished maybe 2 ticks above. So really well done from Draghi. It'll be interesting to see what happens with the minutes. The minutes will be, uh, an interesting release. What did they talk about in that meeting? You know, they're saying there was no, uh, policy change talk in there. Whether there would be, I think you could see some more, uh, or some follow-through of some euro weakness from that. We are just seeing the, the dollar strengthen a touch this morning, not just against the euro but the pound. And you're seeing euro-dollar just come lower. And worth, from a technical point of view, just being aware on the futures— I'm just going to move this above the calendar, the, uh, the camera, sorry, so you can see— 1.1170 very key level. We had support initially, uh, going back to Wednesday morning, then yesterday morning and afternoon. That'll be a key point to, to have marked up. My, my personal view on, uh, on the euro dollar, uh, it didn't quite get up to, you know, what would have been a lovely point of entry, but I do think over the coming weeks you're going to see a continuation of this this, uh, overall trend that we're in. Just putting this on the 240 chart, a 4-hourly, we have just been drifting lower. And even going back over the last few months, any, uh, potential rally, you're just seeing the dollar bulls come back in. Yes, you've got next Wednesday the Fed announcement, and depending on, on how dovish they are, how their forward guidance comes in, will depend on this market, uh, going higher or lower. But I think certainly, uh, or not necessarily certainly, but in my opinion, over the coming weeks and months, we are just going to continue this, this push down. And I think 1.11, uh, the futures in the euro would not be too far away, uh, which you can see today would come in at S2. Whether we could get down there today or not, I would be unsure. Effectively, it will come in to those US GDP numbers at 1:30. Elsewhere, the Bund made a new all-time high on that initial spike of the, the no cut, the unwind of those dovish bets, and then you saw a reversal of that move and more. We then pushed down and really came back up to finish near the pivot, and you could argue now it's business as usual. Let's continue as if yesterday didn't happen for the Bund. Uh, in turn, that did drag down, uh, US T-notes as well. You can see initial spike from 12.45 before coming lower on that correlated monetary policy move. The DAX, similar to the Bund, and you had the initial spike before reversing a lot of that. We haven't actually— and you can see here that the DAX just going to go through that increased volume period from the open. The DAX didn't really recover from yesterday afternoon, and that move coupled with US stocks coming down at the same time, you can see very correlated across the, the board there for European and US markets. Overnight we did have, um, some earnings out, uh, from some of the larger companies. Alphabet, uh, shares rose, uh, about 8% after the company reported quarterly results, uh, that, um, that eased investors' concerns about the growth challenges facing its Google advertising business. So driven by ad sales, second quarter revenue and earnings beat analysts' expectations. In addition, the world's largest online search and ads firm, unlike number 2 online ad player Facebook, uh, a day earlier offered no worrisome guidance about increasing regulatory scrutiny. So we saw, and we can have a quick look over at the NASDAQ here, and we also had, um, earnings out of, of Amazon as well, which slipped, and we'll come on to that in a moment. But you can see which way the market decided to to take this, uh, certainly over the last few years when there's been good and bad news at the same time. It's going to go with the good more often than not for these stock markets. And we had a really strong push higher which helped bring that S&P and the Dow Jones in correlation with it a bit higher, rather than the DAX, which has obviously still remained lower from yesterday's push. So the, the, uh, you can see here the NASDAQ back to pretty much where we were before the press conference from from Draghi yesterday. Obviously the, the tech sector in the S&P benefited a touch as well from there. We have drifted on, but nowhere near as much as the NASDAQ. So all good there for, for Alphabet, pushing about 8% higher. Conflict for— in confliction there you had, um, Amazon, who were worse than expected, the first profit miss in 2 years. Said income would slump in the, in that current quarter as the online retailer ramps up spending on one-day delivery, uh, to spark sales growth. So first miss in 2 years hasn't necessarily worried investors, only drifted down about 1%, which is, is crazy really considering, uh, you know, the moves that it's been having over the last few weeks and months and years. So only 1% miss on that, uh, looks as if people may already be interested to certainly buy the dip. And the stock markets in the US, not worried, uh, it seemed. We're yet again in the build-up to these earnings. They're going to be the worst for XYZ, that's all priced in. And then unless they're really bad, the markets aren't going to blink. And it does seem going into next week that's all put behind us. It's going to be, um, the, the cut we're all expecting. Stocks could continue this, this push higher into the election, and Trump will be tweeting happy days. So Yes, Amazon, uh, worse than, than expected. The— just going into a bit more detail there, the— they actually said the company also said its investment in faster shipping was starting to pay off. So positive with revenue rising 20% to $63.4 billion in the second quarter ending in June. That topped an analyst's estimates and the 17% rate of growth that Amazon posted in April. So while shares did fall, there was some positives in there which of course would have capped price, uh, a touch. And you can see here, uh, the NASDAQ, well, continuing to push on this morning. Quick look, uh, elsewhere in the markets just to have a quick look. I didn't mention there's a bit of dollar strength, and you have seen, uh, the, the pound certainly overnight pushed to this low. And worth keeping an eye on this level that we're trading, 1.2454 in the futures. Quite a lot of support around this area from, uh, well, going back to the 23rd, so Friday, Thursday, Wednesday, and Tuesday, and also back on the 18th last week as well. So quite a lot of support around here. It was all going okay for the pound yesterday, not really too interested in, in what was going on. And then, uh, we had a couple of tweets that— well, a tweet that came out. I'm just going to transition over here. So Alex Barker just, uh, tweeting what Michel Barnier's email to EU member states, uh, was. And he was basically calling Boris's statement rather combative and basically unnegotiable. This was squawked around— well, you can have a look at the chart and you can guess when it was scored. It's pretty much scored bang on 4:30, 4:45, and, and, or actually maybe a bit before that when we first started coming down before, uh, the sort of European close. And the pound gathered a bit of momentum, or the cable gathered a bit of momentum to the downside. Euro pound pushed higher, uh, and we have seen a really a continuation of that. Wouldn't necessarily— it's all driven from that, that headline as such. The, the dollar did strengthen a touch yesterday, and we also saw a big technical break in gold, which we'll come on to in a moment. But worth just keeping a, you know, an ear to the ground on, on what Europe's view on Boris Johnson is now. They going to go into the negotiating table, and are they happy to make changes? Is Boris going to be able to do so? We also had a tweet from Stephen Swinford here. If I just transition my, my charts again, who is just saying that, you know, Boris is, is out and about, he's hitting the road. And this is what, you know, Anthony had been mentioning. We were talking about this yesterday, you know, he's gonna be heading to these, uh, these places up north, the Uh, you know, on Saturday here giving a speech in Labour seat in Northwest. He's also going to Birmingham over the weekend. He's going around talking up the, the game, if you like, ahead of what could possibly be his plan of getting that general election in before the 31st of October. It would make sense for him to, to do so, to get some support, to get people to buy into his plan of getting us out by the 31st and To be honest, the way he was speaking yesterday in Parliament as well, saying, "We're leaving, 31st, no deal or deal, you know, none of this, you know, this is not what we want, we're gonna do it." What better way to try and get people on side than doing a bit of a tour? Whether it will work or not, time will tell. I think everyone could agree it was a bit of a laugh watching him have a go at Corbyn yesterday. His speech was quite interesting. Uh, but just worth keeping an eye on this as well. You know, the more Boris goes around, does his popularity grow? What's going to be the impact then of a general election? You could argue in the build-up to, uh, this general election gathering speed that the pound would come under a bit more pressure. Uh, certainly not really looking all too rosy for the Conservatives at the moment. Labour necessarily not necessarily have made any progress over the last few months when they should have. But if this general election was to be called, more uncertainty, and then it will have to price in, you know, are the Conservatives gonna take back their mistake from when Theresa May called one back in 2017? If that was to be the case and the Conservatives were to come out on top, I think you would see a bit of a pound rally and euro-pound would come lower. You would see euro-dollar at least appreciate a touch as well. As he would have more room on that negotiating table. He could go to Europe and go, look what I've done, I can now deliver this, this deal, uh, I can get this all passed through and we can go from there. So worth keeping an eye on these couple of things. What, one, what Europe is saying about Boris, and two, uh, this idea of a general election getting called. And he would have to call it before the 31st of October. And of course, as we go into August next month where, you know, a lot of, a lot of guys are on recess, you know. So it could even be called soon, if not maybe, you know, September. But then it leaves little time for Boris to go around and really rally, rally the troops, so to say. Going back to the chart, so yesterday with gold we had a technical break, and I've been eyeing this up for for a while. And you can see here, just going to put this onto the 4-hourly chart, going back. And I'm just going to move this to the other side of my camera quickly so you can see where it starts. Back on the, the end of, uh, of May here, starting on, yeah, the 30th. We then had another test on the 17th of July. We were really getting squeezed in each one of these days of the last few, uh, weeks. And then price finally getting that breakthrough yesterday. We've confirmed that that break below. We hit what would have been ideally the first sort of target, 1414 on the futures, uh, and now we're back below that trend line. If we were to push higher today, would be very interesting to see what happens around that point. If it was to happen in the next hour or so, that would be coming in around 1426, and we remain obviously some very key resistance up at the top which we just could not break through. So price is really getting squeezed in from both directions. You've got that breakthrough, break of that trend line could be key. Going back to gold, certainly, uh, from a couple of years ago, when you do get these big trend line breaks, you can see that it really is strong moves. And here I'm just going to start this one, yeah, from December 2016, we got the break through the 11th of June, and what a push down. I'm not saying that's going to happen now by any stretch of imagination, but just when gold breaks these trend lines, you can get obviously quite, uh, fast moves, uh, and, and where we close the week will, will be important. Uh, back to some of the headlines, or lesser headlines I should say. You had this come out overnight from yesterday: Spain's Premier vows to avoid snap election despite defeat. This could have been possibly a bigger story. The euro is not biting off it. So yesterday, uh, sorry, yesterday they vowed to avoid a new general election, which would be the country's fourth in as many years, and will work to build a coalition which has remained elusive despite two parliamentary votes. It's not enough to really drive price in the euro. It was a bit of a risk to be factored in Uh, but you can see if we look at price now, you would, uh, say nothing, nothing has happened from that. Uh, elsewhere, another headline today, not necessarily new news, but Iran test fires medium-range ballistic missile earlier in the week, and the US are now aware of it. What could this mean for, for oil? Because it's not really new news, I would say business as usual and let the market tell you what's going on. You can see we are getting squeezed in from both directions. So on a day like today for, for oil, I'm just sitting back and waiting for price to either get above the trend line or below. And not necessarily saying we're gonna really blast out the gates when that happens on a, on a break of it, but that's what I would be waiting for really, to look for us to get above— well, at the moment that would be around 56.40 or 56 handle on the the dot. So quick look over the markets right as we're trading now before we have a look at the, the calendar. You can just see— let's put the gold on here and the pivots— you can see a bit of dollar strength against the pound, more so pound weakness you would, you would argue, as euro pound is back up to its high from yesterday. Euro was under a bit of pressure. I would still be keeping an eye on 1.1170 on the futures. Stocks in the US certainly seem as though those results yesterday from Amazon and Alphabet have been taken as a positive. So I'd favor for now an upside unless we were to break one of these trends to the downside, which you can see we're not far away from getting that third test just above 30, uh, 10, uh, and the pivot. So for now, favor the upside. Your line in the sand for, you know, the buyers and sellers above where we're trading 30.16, bit of resistance here, previously support. So you can see, similar to oil, it might not be the worst idea just to wait for what price does around these two points between 30.10 and the pivot and 30.16 as a whole. And like I said with oil, just waiting for price to let you— tell you what is, uh, is really, uh, going on. Moving over to the, the calendar for, for the day, mentioned at the beginning it's going to be quiet not much coming out at all of interest, not even any speakers. Usually after an ECB meeting you will get source comments that come out. We did have some overnight ECB policymakers see rate cut as done deal in September. Sources, you know, just trying to make sure the market does understand ahead of September that there's going to be a rate cut. So there's no surprises. I mean, straight after 12:45 is 90% priced in anyway. But certainly today, just maybe keeping an ear out or keeping your, uh, your, your tweet decks with the, uh, the search as ECB sources wouldn't be the worst idea, just in case there is any follow-up comments to yesterday's meeting. As we drift into the afternoon, it's all about US GDP, and really, once that's done, it could be done for the week, to be honest. Expected at 1.8%, so you can see that would be the, the lowest quite some time for— from the US GDP numbers. So, uh, it would, you know, down from 3.1%, uh, and would post its, uh, its first decline in, in a while. Um, GDP, they're saying it rose one— well, analysts reckon it's going to rise 1.8% on an annualized basis in the second quarter, which would be the slowest since 2017. The GDP report, however, is, is unlikely to make too much difference ahead of the, the Fed's decision next week. However, it could obviously have an impact on future decisions that they're, they're going to make, and that detail will help, um, sort of form their opinion on the central bank's thinking of whether they're going to follow up with additional easing this year. So 1.8 expected, so off that no real reaction, but you can see the range 1.1 to 2.9 is quite big. If it was 1.1, well then suddenly, you know, it's not looking too good, and you would see, yes, stocks come down, but then again, a better opportunity to buy on the fact that they're gonna have to start cutting a bit more. You would see dollar weakness from this, which I'm sure Donald Trump wouldn't mind too much. And either way, good or bad number, Trump is gonna be tweeting. If it's bad, it's gonna be, well, look, the Fed have of course this, we need to, uh, we need to be cutting. If it's really good, you would then talk about how good it is and how much better it could be if the Fed weren't being tight with monetary policy. The reason why we're expecting, uh, the, the 1.8%, you guessed it, trade. So trade is, is the reason, uh, this has been, uh, expected to, to be bad. So 1.8 expected, but quite a big range. So something just to, to factor in there. As well. Just quick look over the markets one more time to see what's happened following the DAX open. And if anything, that 35-minute period from, from the open, uh, 8 o'clock, will tell you, uh, what is expected from today's morning session. Not much. Probably the quietest open certainly of the week that I've seen from Europe. So I wouldn't be looking to get into aggressive really is the market just waits for those US GDP numbers. As usual, any questions, obviously please do let us know. If I don't speak to you throughout the day, hope you have a great weekend. It seems as though the sun has gone for now, looking very gloomy here in London, but I think that might be a bit of a refreshing change for people after not being able to sleep for a while. But hope you'll have a great weekend and I'll catch you Oh, next week.