GBP Rises As Juncker Says Brexit Deal Possible

Very good morning, I hope everyone is doing well. It is Friday 20th of September, I'm going to cover a couple things. As you can see here, story about the pound from a Juncker comment late yesterday evening helping elevate the pound this morning, an update on the Saudi-Iran tensions and how that's continuing to provide an underlying kind of area of support for crude prices. And then a quick look at the calendar for the day ahead. So hopefully we'll be quite prompt from my side. So there's not a great deal of new information that's come out, and I guess quite typical after you have a, a week where you've had the BOJ, the FOMC, the Bank of England. We kind of peaked, if you like, in terms of those big events in the middle of the week, and so now things have dropped off a little bit. And generally speaking, I'd say at the moment it's a relatively neutral, perhaps slightly kind of mildly positive feeling to the open. Equity index futures in the US just a touch higher, Europe pretty flat overall, oil a little bit up as well, about 50 cents or so, T-notes flat, gold up about $5 for the moment. Quite a stark difference though from where we started at the beginning of the week. Of course, there was quite a lot of tension in the air coming from the attacks that were seen on Saudi Arabia at the weekend, and certainly that's dropped away a little bit, although as we're going to discuss in a second, there still definitely is a lot to monitor within that region. And certainly just a, a, a course of action here or there that gets retaliated at in a certain way militarily could certainly spice things up pretty quickly. But certainly that kind of big uncertainty we had, the big gap in markets on Monday, a lot of that seems to have been removed. And I know Sam's going to talk about this more in a moment, but, you know, we were looking at the S&P 500 this morning, and you can see it here, these areas of which we've been looking at over the course of the week, really. And here we are once again. We had a real test of it yesterday, failed to break, but You know, if you look at the, the kind of formation of these candlesticks, certainly the pullbacks are getting more shallow up to challenge that trend line that arguably pushes us back up again to all-time high. The all-time high, of course, in the futures in the S&P would be just above at 29.5. And yeah, it would not be shocking at all to get up there at some point, whether that being today or in coming days. On the trade war side as well, apparently there's comments I was off the desk for a portion of the afternoon yesterday, but Kudlow kind of being a bit more positive, but then there was an unidentified source saying, well, just hold on, perhaps not quite so much. And this comes with those ground-level talks that have been happening in Washington yesterday and will continue today, laying the groundwork then for the more formal heads of state to meet in, in October. So definitely I'd keep an eye out today, although it's not a never really a scheduled specific time on a calendar, but just given it's the end of the week now and though that dialogue has been continuing at that lower level for those discussions on the agricultural purchases in Washington, I'd be mindful of any tweets or comments and things that might come out a bit later on today, particularly during the US North American hours. But yeah, looking at the pound, that was one that is a bit interesting this morning. You can see quite a violent move yesterday evening around 6 PM. And as the overnight Asian session has progressed, we've continued to move higher. And then in this morning in the UK European Open, we remain elevated above a 126 handle. So just knocking this over to a daily continuation chart here to encapsulate the whole— this is basically Brexit in a picture as far as the currency pair is concerned. You can see here on the left the dramatic fall on the night of the surprising vote to leave the EU, the no or hard Brexit mention that then forming this really key area of the lowest bound point of about 120 when we're looking at the futures. Obviously had a test of that only a couple of weeks ago, and ever since that point we've come, you know, rallying back aggressively. And so having got a brief break multi-decade lows and a sub-120 print, failed to close importantly below that level. And ever since that point, we're now trading a good 6 points above that for the moment. Now, one of the things that caused the short-term appreciation here of the last 12 hours or so has come after EU's Juncker basically has come out and said he thinks a Brexit deal can be reached by October 31st. So quite a radical shift, you would say, from what had been, um, the whole debacle around the Luxembourg PM where Boris was heckled so much he never even took the podium, um, to where we are, where Juncker making a particularly positive comment. So yeah, that's the latest state of play. And I guess going back to the chart for a moment, let's just talk very top level, top level, because obviously it's not as easy as a deal gets done or a deal is not done. Of course we know this. We're still going to be awaiting that Supreme Court hearing, and the verdict should be early next week on whether Johnson, uh, inappropriately used his powers as Prime Minister or not, which obviously will be quite key in the near term. But bigger picture, I just wanted to put it out there where would cable be if there is a deal before or by October 31st? So obviously upside, I think no problem. You would get another 2-point move up to that previous high. You can see here, this is quite, uh, from a longer-term perspective. If I just remove that rectangle here, you've got that low, the high there the low here, the low on the initial night of the referendum. So that would be kind of a target for sure. Go a bit higher though, start coming up to, I guess, the other areas that are really significant is then the previous, or the current year-to-date high of 2019, 1.3385. So this was before Boris came in and the threat of no deal was priced into markets. Um, so Sam's, Sam's shouting at me, 135. So 135, obviously a psychological big level. That would put us up then to levels that we haven't really seen going back until May of 2018. So they would be the, the kind of targets from a technical point of view. I think we'd get to that 128, 129 here, no problem. I would think then if that were broke, we'd then be pushing on the upside I'd probably be looking then more towards that 132 would be a target for me because there's probably still a lot of the details to be known. And as we know with the Fed last night, in a much more tighter time frame, devil is obviously in the detail. And even though he could get a deal in principle, that obviously could be still disrupted. So I'd probably see a, a strong move, but 132 I'd be a little bit more conservative than, than Sam. Certainly if it all gets rubber-stamped and details start coming through, well, ultimately I think the UK— there's enough underlying the UK from an employment wage point of view that if you X'd out Brexit and you were to remove then the uncertainty, which would then reignite, uh, business investment would come back on, manufacturing activity would pick back up. The service industry would start moving away from stagnation. I see absolutely no problem at all why we don't get back up punching 1.44 and higher. I mean, the Bank of England are in a different, uh, in a different phase to other central banks globally. If it was exiting out Brexit, I would, I would feel, but one thing that's particularly interesting is obviously the, the probability of getting a deal over the line by October 31st, I would say I believe is, is lower than what I think is more the base case, which is still that this thing's going to get dragged out, drawn out once again. So actually, if you think about it, let's reverse this conversation. The pound has rallied 6 points over the course of the last few weeks on the premise of, you know, the idea that perhaps Parliament's managed to get back a little bit control now, perhaps even a deal could get done. But if Boris ignores the law and we go down this route of, well, what if he does and then we have a no deal back on the table? Well, if we did have that situation, well, the pound's got a lot of way to come back down again. We've got a 6-point clear margin where we could come back and retest those levels. And as we said before, a break of that more forcefully at 1.20 opens the trapdoor to much lower down, 1.15. So yeah, medium term, long term, very interesting, of course. But there's obviously a whole load of hurdles to cross and navigate before we get to that point. Okay, moving on. Just the final thing I want to talk about literally is oil. And this comes after we've seen this. Oil is headed for the biggest week in 8 months, obviously, just given this surprising development we saw at the weekend with the substantial impact and the implication for production from the— one of the world's biggest oil producers in Saudi Arabia. Remember, at the beginning of the week, it was said to have knocked off about 5.7 million barrels per day of production, which is akin to more— just over half of the entire country's production. Reports have kind of fluctuated, but the time frame seems to be a little bit too of relief to put some minds at ease that they can bring some back online, at least to the tune of around 2 million. They also have about a month's worth or so of spare kind of infantry, uh, to, to see out and facilitate client orders in the, in the interim period. But that doesn't mean that this event has kind of completely gone away. Iran has said overnight that US-Saudi strike would lead to all-out war. Now, what this has meant has— last night, Saudi-led coalition last night launched a military operation north of Yemen's port city of, uh, Haididah against what is described as a legitimate military target by the Saudis. And obviously, this is an incident that can aggravate these regional tensions, having seen the attacks on the Saudi installations at the weekend. So Basically, Saudi Arabian-led coalition has done an airstrike on Yemen, which we know is the hotbed of activity for the proxy war with Iran south of the country of Saudi Arabia. So this definitely hasn't gone away, and it definitely is a key, uh, risk event, and you need to be absolutely aware of the headlines as they're coming out for sure. So having a look we, you know, I did mention the other day when I was looking at the price of oil that I felt like we weren't going to close that gap. We weren't going to get the gap fill after that aggressive move on the reopening of electronic trade on Sunday night because of these exact reasons. Yes, there's a degree of relief, I would say, from Saudi Arabia that perhaps, um, the speed of which they can turn this around was a little bit quicker than some may have thought at the beginning, but Ultimately, I would say that there is undeniably new tensions now with Iran, and for sure this could flare up again quite quickly. So this will be something to watch as well as we go into the weekend. I'm sure there'll be more activity of sorts being conducted over Saturday and Sunday, so it'll be another interesting open, of course, when we get to the— when we get around to next week. Okay, that is pretty much it from me. So quick look at calendar and then I'll hand you over to, to Sam. The actual schedule for today is particularly quiet, in fact. So just having a look here, there really isn't a great deal coming out of the UK or Europe. There's the public sector net borrowing coming out of the UK, that's not going to be really a factor for sterling currency if you are looking at that. Canadian retail sales, the loonie always responsive to these types of indicators. So unless you're looking at the CAD specifically, I'd be aware of that. European consumer confidence flash reading, that's a non-market mover. Then for oil traders, more of a lagging indicator of sorts, the Baker Hughes rig count will come out as per usual 6 PM tonight. A couple of Fed speakers though, obviously the first we'll start hearing given now the blackout period is over from the decision we had on Wednesday night. So Fed's Rosengren Rosengren speaking on, on credit cycles. But obviously Rosengren was a dissenter at the meeting, has continued to be that way, sitting right on the far extremity of being one of the most hawkish. So be interested to hear what he has to say, talking at 20 past 4 London time. Fed's Kaplan, kind of opposite view, but a non-voting member, um, speaking at 6 PM this evening. Final thing, just wanted to mention, of course, is today is quadruple witching. And that's the kind of final word I'll leave you with. So it means that you get all of the, the single stock and index option and future expiries all at the same time. From a practical point of view, this does mean if you're trading equity indices, they tend to be quite volatile, particularly around the times of these expirations. So just to be clear, the FTSE 100 is at 10:15, the Eurostoxx at 11, the DAX at 12, the CAC 40 is at 3 PM. The US indices, it happens at the open, so cash market open at 2:30, and then you get the boom, bubble, shats at quarter past 4 later on this afternoon in the fixed income space. Okay, that is it from me. Hand you over to Sam. I wish you a fantastic weekend. I won't be here next week, but Sam will be, and then Piers will be covering the briefing as per normal. So if I don't speak to you beforehand, have a good weekend and a good following week ahead. Thanks very much.

Yeah, hi guys, and happy Rugby World Cup start date. I was actually, funny enough, just looking at exactly the same same trend line as Ant, which is always good to, to see, uh, looking at the same thing. And the market will be as well. And I do like the look of this, this, uh, this trend line to the downside breaking. Well, you know, even then it's not going to guarantee, of course, a strong push to fill that gap, as Ant was saying. It's a good opportunity on the break of that. So hopefully the, the way this will come in, you know, the way I would like to trade it anyway would be to, to see this more in the afternoon, maybe post-2 o'clock volume increasing, uh, get another test of the trend line beforehand and then get a break of that. Uh, of course it could hold, and, and then we are looking obviously then closer towards that R1, yesterday's highs, which could be a good level. I mean, it would have to get through the high that we had back on Tuesday, Friday, Thursday, Wednesday morning, um, at 59.24. But, uh, yeah, could be good opportunities, uh, either way. And just having a look over at the dollar, it's a pretty interesting point, uh, as we speak. Just going back to, uh, the low that we had on the Fed, just having a look, it seems like we're just testing that now and bringing in those dollar pairs. The euro is liking this the most at the moment. However, coming to a pretty interesting point. So you've got obviously these trend lines coming down a bit, uh, you know, rough and ragged, but certainly from the last couple of days, from the 18th to yesterday on the 19th, are we going to get that third test along with the R1? You've got some other key resistance points around there. So euro just trying to have a push to the upside. However, it is a key resistance point and, you know, you struggle to get through there maybe on the first test. Of course, if it did, you've got those previous highs and the, you know, the higher points from the beginning of the week as well. But the dollar just under a bit of, bit of pressure. The pound, who, which did push just now, trying to find a bit of support, uh, well, kind of trying to find a bit of support on yesterday's high. Obviously quite high up now. And it just takes one headline, one, you know, Juncker didn't really mean what he said kind of headline, or someone on the other side saying, no, it's not gonna happen, and we do come lower. And rather than trading at 1.2650 at the end of the day, we're trading back down at 1.25. So headline risk, obviously something to factor in there. But the dollar is weaker, and you know, just before we move on to gold, which I do like the look of at the moment. You can still see these trend lines that broke yesterday, so, you know, keeping a watch on that. Should we come back lower there, you know, could well be a good opportunity to find some support around these, these areas here, 124.81. And at the moment, that trend line coming in around 125.20 or mid-20s. There as well. Gold, I do like the look of, um, as a, as a, even a medium-term long. Ideally you would, you know, you'd have been brave and got in on that amazing low round at 1492, and, uh, it's, it's just bounced so well from there. We are coming to the perhaps the top end of that range, which means you might, you know, be better off waiting to see how we close the, the day and the week above that, that point. But a push above there and, and then suddenly, you know, we're back looking at the top that we had back on the, the 12th and those, those highs from the year, that double top from the 23rd of August and 4th of September could be in, in sort of touching distance. Having a look more intraday, is there an opportunity to get in gold today? I do quite like the look of the, the pivot 1505, um, more so because the support that we had yesterday rather than just the pivot itself. But I quite like the look of that as a midpoint perhaps to get in for a long. Um, short-term resistance, I think this point around here, 1514 point— if I get it right, 0.8. You also, you know, the breakdown we saw before the Fed was also the high that we had back on Tuesday. And good support, uh, resistance there on the Monday as well. So, you know, there's a good line in the sand. I don't really like the idea of a short from there, but that could be the point where we just start to see a reversal to then maybe getting a long to, to continue, uh, the bounce that we had from, uh, Wednesday evening following the Fed as well. US equities, it'll be interesting to see what happens when we, we finish the the week, you know, where we close. And, you know, just having a look here on that daily chart, just from the all-time high— let's just move that down, bring in a trend line— you can see quite nicely respected from the all-time highs, the last two tops that we've had. And I didn't quite make it, but something just to bear in mind should we get a push to that area. Remains to be seen, of course, where we finish the week, and, and that will bring in some new, uh, buying or selling pressure. But, uh, 2921, you can see, was the, the high that we had back on the 9th of September. Each time we've tried to get below that, we've obviously had quite a few false breakouts— 1, 2, 3, 4. So 91 to the downside, obviously you probably need a comment for us to get to there. And we're pretty much bang in the middle between the time high in that level. But there's a bit of a line in the sand. I do quite like the look of that. Also, for us to, to get that, you know, probably going to be another third test of, or the third test, I should say, of that trend line. So a couple of interesting points for equities as we come into the close of the week. I do like the look of, of oil if we can technically push lower. Obviously still a whack away from that. Euro and pound just, you know, pushing against the dollar. Dollar index, we're keeping an eye on these levels here as it is just testing the post-Fed low. But any questions, as usual, please do let us know. Obviously hope you have a great weekend. Enjoy the rugby as well as we all cross our fingers, I'm sure, for England to do better than last time and get out the group stage. But I hope you, uh, have a good trading day, good end to the week, and we'll catch you all on Monday morning.