Labour MP's resign but is this important?

Okay, very good morning, Tuesday 19th of February. I'm going to have a review myself of some of the major headlines from overnight, and then Sam's going to come on and look at the charts from an intraday technical perspective as well. So a quick look at things at the moment. The one thing that immediately— let's just jump straight into the, the charts— and it's gold. We just briefly touched a fresh year-to-date high. I know we're not that far into the the year as yet, but there was obviously that trend line setup we were looking at in the weekly strategy report we issued yesterday, and we just briefly flirted with that just a few minutes ago. Now, reasons for that little break this morning and for gold trading up about $6 on the actual session— well, I wouldn't say there's anything particularly news-driven as such, continuation of the trend. And actually, we just saw Again, without any fundamental catalyst, a little bit of movement in the dollar. As you can see here, both in the top left-hand corner, EURUSD, and then top center, Cable, both have seen a little bit of a move on the upside, moving back towards the R1 territory. Cable within sight then of the high of the range that was seen yesterday. DAX as well, a little bit of volatility. If you look at the Eurostoxx, it's even more kind of pronounced, the extension on that wick of price action, but no carry-through on that. And again, really down to the fact that there's not a great deal behind it other than just a bit of volume returning. Obviously, US markets closed yesterday, particularly quiet session yesterday. Actually, one funny thing Sam said to me this morning is he was looking at the range, the price range of some of the US instruments yesterday. And actually, the percentage change of the S&P yesterday even though it was exceedingly quiet in kind of electronic trade, that was basically the range that we traded on an average basis through 2017. If you can believe it, it's unbelievable, isn't it? You're so used to 2018 was so volatile, you know, decent return of movement from an intraday trader's point of view. But actually, the movement that we saw in assets in US base yesterday particularly from a US equity perspective, the average move was less than 0.2% on a daily basis for the S&P. So incredible to see how different, you know, the current environment is today. But certainly with US coming back and Canada as well, we're going to be expecting a full return and back to some degree of normality in that respect. So last— well, yesterday's tight ranges are likely to change now going forward. Otherwise, the other charts— oil's pretty static, kind of just trading sideways overnight, holding on to some of its recent gains. So still trading above a $56 handle, up about 40 cents. Treasury markets just basically flat. Let's get straight into the news then. And the main thing a lot of the press are looking at, of course, is this situation with Brexit as negotiators work on new text as time runs out. This of course comes after that news yesterday where there's 7 former Labour MPs have now splintered away to start their own independent group, being more kind of EU-friendly in a sense. Not getting into the actual party politics and the reasoning of why they left, but for the point being, from a Brexit negotiation, is they are more EU-friendly and want the aversion of that no deal, of course. Now, I guess one of the key things going forward in this type of situation is the parliamentary arithmetic of what does Theresa May need in terms of actual MP votes to support her proposals or potential going against the government, so on and so forth. Now, there were 7 so far. Now, if you read the press this morning, there's speculation kind of ranging from anything from around 30 to 40 people were part of these original talks who are unhappy with the way in which the Labour Party was going because of internal bullying, antisemitism, all these different things. And of the 40, only 7 pulled the trigger. Now, obviously they've been condemned by some of the more kind of core Corbyn supporters. Of course, that's kind of normal practice. But at the moment, 7 really doesn't change that arithmetic in Parliament at all. The question mark now becomes, do other people also splinter away and start to join this new independent kind of push? Now, The Telegraph reporting this morning that there's one Tory minister and four Conservative backbenchers that could also leave the Conservative Party and join this independent force. And the other one, of course, would be any link to the Liberal Democrat Party as well. Would be probably a key target for recruitment into that new fold. On that note, here's an interesting headline that came out of the FT this morning, just on the politics side, and this is: Pro-EU Tory ministers are at odds. Let me just get you the phrase of what they called Philip Hammond. They said he is spineless. One person close to the cabinet: He could be doing so much more but he doesn't have the guts. So absolutely decimating the Chancellor this morning. And as we know, dear Philip is an ardent backer or believer of staying within the EU because, as the Chancellor, he's thinking predominantly about the economic prosperity of the UK, which would be called into question should we go down the route of a no deal, of course. Now, some ministers described the Chancellor as a peripheral figure in an anti-no deal group. and obviously these are the types of members and names that you would need to be looking at. None are really that surprising, they have been this way for some time. But it's just interesting at the moment, you know, could you have now some pro-EU Tories that are unhappy with Theresa May not removing a no deal off the table? If that was to persist, then you have the Liberal Democrat angle, you know, do these all start to fall into this new formed group? could be quite an interesting thing over the coming weeks. I think it's too early to say, and I'd say what happened yesterday is kind of the beginning of potentially something, but not something that's meaningful for trading the pound or UK assets right now, is the way I'd look at it. Going forward, what have you got to look out for? Well, yesterday in Brussels, you had Stephen Barclay meeting Michel Barnier, of course, this kind of two lead Brexit negotiators. Barkley was also meeting the Attorney General Geoffrey Cox yesterday, and they were in discussions with EU officials about the legally binding text on the Northern Irish backstop, which is obviously the sticking point. Now, Barkley and Cox will hold further talks in Brussels on Wednesday, according to people familiar with the matter. Coming back to today, the one thing that could be just quite interesting— I don't think it's going to be particularly market-moving, but it's just a continuation of the story that developed yesterday is Labour leader Jeremy Corbyn is delivering a speech in London today to argue Labour's strategy so that they can win a majority in the House of Commons. Now, this comes after he himself has warned that lawmakers could quit his party unless he acts on the concerns of the 7 who resigned on Monday. It's a lot of pressure building up on him now, and there's some other things again you'll need to just be aware of, things like potential by-elections which can act as good litmus tests as for the underlying sentiment in various different national areas as to either satisfaction or dissatisfaction of the current Labour policies at play at the moment. That's what Corbyn is probably going to be particularly worried about if that was to happen. So that's the current state of play. The Brexit circus continues. I wouldn't say this is anything that I've just discussed going to be, um, meaningful for a key contributing variable for your strategy to trade the pound today. I think if you're looking at it the reverse, it's more about just understanding who is speaking on what and where and at what time, just to have that kind of awareness of any increased risk of a snap comment coming out, hitting the newswires, that could spark some volatility potentially against your position in the pound. All right, well, let's move on. Interesting thing I saw, uh, this morning was, was a comment out of an ECB official, and this was that ECB could change its rate guidance if the outlook worsens. Now, the actual comment here was from the ECB's chief economist and added to the chorus of policymakers. You remember it was Villaroy the other day I believe it's the French member, and said that the concerns over economic slowdown, saying that officials could push back plans to raise interest rates at the first response against a deeper downturn. So one thing that's quite interesting is this graphic here, and this is from basically Citigroup, who have quite an infamous statistical indicator that basically looks at the deviation from an economic data actual print against its median expectation to derive a surprise index score, essentially. And what's been happening is, you remember in the US— let's take the US first, it'll make a bit more sense. Look at the orange line here, it's kind of just quite smooth, moves up, and then you've had this dramatic collapse last week. And that was of course because retail sales was an absolute shocker against median expectations, blew out the most pessimistic, um, expectation on the street. And so big downside surprise sees that factored in, and the index itself moves lower for US data. You then have Asia-Pacific data, of which obviously things like China economic data has been slowing down, but it's been at a relative gradual pace in comparative terms to Europe, where the economic surprises— not only are they— is this index much lower, but you can see the deterioration has been in play for far longer, if you like, than it has anywhere else, and continues to be somewhat questionable given things like Italy in a technical recession, Germany just flirting with that level at the moment. The forward-looking PMI is looking increasingly more negative. And the trade war, for example, not really talked about European-US trade negotiations that much, but Europe saying overnight that they would retaliate if the US was to single them out. Now they've said that before, but again, it just brings back to the forefront these kind of potential risk event or issues that could exacerbate these conditions. So interesting for me then is the fact that the chief economist and other European central bankers are saying this type of commentary, to me means the ECB are on the cusp of following the lead of the other central bank, of course, which is the Federal Reserve, which is they're going to have to start sounding a little bit more dovish. Now you've got the ECB minutes coming out later this week. That's on Thursday. I don't actually think the minutes is the one though. I actually think by the end of the week we hear from ECB President Mario Draghi. And that's going to be really interesting to see. Does he cement this new kind of slightly more dovish-sounding commentary and therefore, you know, take the ECB on a slightly different course? I'm not looking for any radical changes here. I'm just looking for the ECB, who I think have played quite a good strategy so far by not conceding to the markets too quickly in order to keep their options open. And I think it's relatively inevitable at this point. Um, there's an interesting article here. I did send this out to you guys this morning. Talks about things like the Targeted Long-Term Refinancing Operations. And for any of those who are not familiar with these unconventional policy tools, this is essentially a 4-year favorable loan issued to the major European banks in order to instill liquidity and lower lending rates as a consequence. The problem with this is obviously these are issued every 4 years, and so as those 4 years come due from these being actioned many years ago, there's more than €720 billion in current 4-year financing that will mature in the summer. And so, you know, are the ECB going to start hinting, as officials have done, that policymakers will need to find a monetary policy case to offer a new round? And a worsening situation economically developing in Europe would be a fairly compelling case that they should be issuing new rounds of these loans. And you can see that's €720 billion of these loans that are in the market at the moment. That's a phenomenal amount of, uh, kind of indirect support that's being offered by the bank through the form of liquidity at the moment. Okay, other things. I had momentary move in the Aussie. Not going to dwell on this too much because the move was, wasn't that great, but RBA minutes were out. Central bank outlining case for shift to neutral policy. On alert as property slump, weak incomes threaten spending. The one that was probably more interesting was we had a little pop in the Japanese yen overnight, and this came as the governor, this chap here Kuroda said the central bank was ready to ramp up stimulus if sharp yen rises hurt the economy and derail the path toward achieving its 2% inflation target. This came after he was questioned directly by, uh, opposition. One of the things he did say that I thought was quite interesting, he repeated that the BOJ could deploy tools included cutting short and long-term interest rates, expanding asset buying, or accelerating the pace of money printing. Now for me, I know this sounds like, wow, crikey, he's really going to town here. He's outlaying literally every potential pea shooter to bazooka in the toolkit as far as monetary easing is concerned. But you know, these are available options and And these are options which we've always known about. I'm not sure how much new this information is, but I guess it's just the fact that in a world where markets are very sensitive to, you know, policy developments at this particular juncture, the fact that he's recommitted that he can ramp it up if necessary has been received as a dovish signal. And consequently, the yen has weakened and remains weaker at this point. Um, finally, anyone who's looking at the big UK earnings this week, uh, you've got HSBC, Lloyds, Barclays, they're all coming out this week. HSBC is probably the main one because from a market capitalization point of view, it's one of the biggest companies within the FTSE 100. I know there was a couple of guys that are already in and out of a FTSE trade, I think Mike, this morning. So good Great stuff. HSBC were lower overnight in their Asia-Pac listed shares. They were also down, the worst performer in the FTSE, to get things going this morning in the cash market. Comes after they reaffirm key targets despite though what's been a pretty bruising fourth quarter. Profit dropped by a percent and came in below analysts' expectations. So just to make you aware of that. All right, quick look at the calendar. And I'll hand you over to Sam. So what have we got on the docket today? Let me just blow this up, make it a bit bigger. Fairly quiet up until the point of which we get UK wage numbers. They'll be coming out at half past 9. You can see here from the analyst expectation, not really looking for too much of a change. And quite honestly, although this data, if anything, kind of bucks the general direction of what has been, um, economics or data that would warrant pound weakness. The wage component, if you like, of the employment sector has been a bit of a sweet spot and actually has been holding up relatively well in comparison for the last decade or so. If this did cause any movement, I guess just given the close proximity to yesterday's high from a technical near-term point of resistance, could create a little blip and a break that could add a few extra pips to the move. But ultimately, there's obviously much more focus on the bigger narrative, which is Brexit. So any trade, if there were to be one, needs to be managed fairly proactively, I would say. Otherwise, German ZEW, and that's coming out at 10 o'clock, could be worth watching. Again, the difference from the IFO, which is companies, this being economists and analysts forward-looking 6-month expectations. Interested to see what their optimism is about the German outlook going forward. And then this afternoon, it's actually pretty quiet. Uh, the only thing is the NAHB Housing Market Index, which is never really a market mover. So I guess accordingly, looking for updates, anything on the US-China trade side. There is no definitive schedule on that at the moment, despite last week them saying upon conclusion of their Beijing talks that they would recommence in Washington. Still not much more on that, but now that the US are returning from holiday, it's potentially a case that we could get some obviously tweets from Trump and some further updates. I'll keep you up to speed as and when I get them. From a speaker's point of view, you do have Fed's Mester speaking later, who— an alternate member of the FOMC hawkish leaning, is speaking on the economic outlook and monetary policy. Could be quite interesting. Obviously the Fed have sounded quite dovish of late, and Mester being one of the furthest kind of right-leaning hawks, if you like. Interested to see how much she's softened, if at all, as to warrant then where does the centrist kind of view sit for the Fed at the present point in time. And then the chief economist of the ECB, who's spoke in that press article I went through a moment ago speaks again this afternoon. The one earning report from the US— and US earnings season is still rolling on. The only thing is, the reason why you're not really reading anything about it or it's not impacting the market, it's because predominantly these are all the small companies reporting now. The one company I think that warrants watching this week is the one that's coming out today. And that is Walmart. They come out pre-market. What I'll do is after this, I'll dig you, dig you out a kind of earnings preview specifically for Walmart. But typically they come out about half 12, 1 o'clock. But it could be interesting from an index futures point of view ahead of the cash open later. Okay, that's it from me. Hand you back to Sam. Wish you a good day, and I'll see you in the chat room. Thanks very much.

Thanks, good morning guys. Hope everyone is good, and if you're coming back from having a day off yesterday because of the, the bank holiday, I hope you had a good weekend as well. Just having a quick look over some of the charts this morning. You've seen a bit of dollar weakness come in to a few of the, the pairs, certainly pound and euro pushing up to the higher points of today. Now, of course, on, on the CQG platform, the pivots and, uh, will be carried over. So just a word of warning, especially for the, the guys in-house using CQG, just, uh, to bear in mind that these are the, the pivots, the R1s, the S1s from yesterday. So yeah, pay a bit of attention to them, but perhaps a tiny bit less than normal. Uh, so yeah, last sort of 15-30 minutes or so, a bit of dollar weakness come into the markets, but we are starting to see a slight recovery. Uh, one market I do like the, the look of for a potential, uh, long at some point should we see a bit more retracement is gold, which is really since— well, if we take it back a bit here, you can see once we, uh, once we found a bottom on, uh, that previous high around 0.704, yeah, in, in gold it's been, been one way since then up to the high of the year. And this morning, following obviously yesterday's lackluster, uh, day, we have pushed on. And I would like the look of a retest of this trendline break that we've had, um, not too far away from that, uh, but you know, something to bear in mind should we see a bit of a slow push down later. You've got that trendline, you've got a previous high that we also broke through at 27 0.6 on, on the futures. And similar for a couple of those euro-dollar pairs as well, different trendline breaks. And any sort of retest of that at any point today, I wouldn't mind the potential to, to get long. You can see— actually, let's make this a better trendline there. You can see on euro, you perhaps had it, you know, it was slightly messy. I don't know why that's not marking up on, on there, but similar sort of thing. And this morning we've had a bit of a breakthrough, and looking for any sort of retracements back later I think will be the, the way to look for, uh, any potential continuation of dollar weakness that we've seen this morning. Uh, equity-wise, as I mentioned, it was, you know, I mean, let's have a look at that, reminiscent of 2017 where unbelievably these were the kind of ranges since that price is moving 0.2%, uh, very contained. I think overall bias— I mean, let's just have a quick, quick look on that daily chart. It, it does seem now, you know, we're above the 200-day moving average. We've got a bit of clear room perhaps now up to that trend line, 2800, you know. So I'd favor the upside. And same with oil now, having broken through $53 last week, and it was quite a key level on, on that intraday chart. As well. Could just lower that down, 53. Oh, it's obviously changed a touch because of the, the contract rollover, but it was around this level here where we had resistance from the 8th, broke through, found support, and we've continued to push higher since then. I think with oil as well, from a more intraday perspective, looking for the longs might be the preferred trade. I do quite like the look of and it's a shame it didn't quite get here, but around 5550 on, uh, on the new, uh, contract, the April contract, I think looks quite nice. The only thing you'd want to bear in mind should we get there is perhaps this potential trend line from those lows. Let me just move the camera to bring in that low from the 11th as well. So yeah, one to bear in mind going forward. Have a quick look over at the other dollar pairs. You've got AUDUSD, which is, you know, poor off the, uh, the dollar weakness this morning. We're still below the pivot from yesterday. So I think with, with this pair, we talked yesterday morning about— well, I talked how, how I would like, uh, you know, a short from either the, the low of the 30th that you see here. Let me just circle that. Or from the real sort of breakdown areas around the 5th, uh, of Feb as well. It didn't quite look like it wanted to give that a go. So while we're, we're still pushing lower, I think, you know, any sort of continuation, maybe looking to see potential trend lines that you can get on. Let's see if we've got the free tests, and it's a bit messy there. Let's have a look from down there. I mean, that, that interests me, a potential break of the S1. So you can see it sort of lines up around there and the 71, uh, handle, 7100. Bit of support found on, on Friday. Yeah, a break of that down to towards the lows that we have on the 15th. I quite like the look of that. I think that's not a bad trade to keep an eye on should we see a bit of a drift lower there. Elsewhere, just having a look at the yen against— or dollar against the yen. You can see that's just coming up to quite a key point from the high that we had back on the 14th. And the R2 got a bit of resistance on the sort of the overnight low of the 14th as well. So quite a key resistance area. But of course, this market really has, since that flash crash as we mentioned a couple of times, been pushing higher since really the sort of first trading day in January. So key level to be aware of around here. Not saying to get too aggressive because obviously it's already above its R2, or yesterday's R2, but of break above that might be a good opportunity to continue this overall trend that we've seen with, you know, Dolly Yen pushing to the upside as well. Let's have a quick look over European markets and the sort of the overview as a whole. You've got the DAX just waking up a bit this morning and pushing higher, not really having an effect on, on US equities for now. So, you know, if the DAX perhaps was to you know, push above the, the high that we had, uh, yesterday's high, it might see US equities also follow suit. And opportunity-wise, if we do look intraday, I know, um, I was talking with Charlie yesterday and he quite liked the look of around the pivot 2760. I think that's a, you know, strong sort of zone where I think we would find some support. I mean, it's got come a long way down to get to there, but potentially one to, to keep an eye on. More intraday, I think if we just have a look, we can get a bit of a trend line on the— from those highs. It might be worth seeing later if we can, you know, get really squeezed in before a break higher to, to continue this overall recent trend that we've had. Each time we try to push lower, you can see it's rejected that as well. So maybe down the line if we can contain ourselves within this pattern. A break either way could be favorable, obviously favoring the upside considering the, the, the overall trend that we've had really since Boxing Day. 2800, the, the trend line from, uh, last year and the R1 should, uh, provide a bit of resistance, you'd imagine. Um, definitely one to bear in mind later throughout the session. Any questions, as usual, please, uh, you know, do let me know. I will be on throughout the, the market course. Um, and it, uh, after yesterday, you've got to imagine these markets will sort of come to life for, for the week from today. But as we've sort of seen a bit of dollar weakness across the, the pairs again just coming through, you know, no harm in sort of, if you're not in these trades, just having the patience for a bit of a retracement. You know, it's only going to start getting busier from now anyway, so opportunities I imagine will come. But I hope you all have a great trading day, and I'll catch you in the chat later on.