Super Wednesday with big days for Brexit, ECB and Inflation out of the US

Hi guys, good morning. Wednesday the 10th of April, just gone 7:40 here in London. Super Wednesday, they're calling it, and you can just have a quick look here at the calendar to see the amount of data we have coming out. We actually do have a bit of data coming through the wires out of France, industrial output in a couple of moments. So we'll keep an eye on how that comes out. As we go past 9 o'clock, in an hour or so, we have a flurry of data out of the UK— GDP, services, industrial and manufacturing output— all something to keep an eye on in what is going to be a busy morning leading up to the ECB interest rate decision, 12:45. Probably looking at the, the two between the 9:30 and 12:45, probably the least interesting in terms of market-moving events. I think the, the press conference, which we'll come on to in a bit, uh, 45 minutes after the interest rate decision, will be the more interesting, if at all. Into the afternoon, uh, US data at 1:30, core CPI, uh, for the month, for month, year on year, before the DOE figures come out at 3:30. And then we have the FOMC minutes at 7 PM tonight. And of course, a few speakers, most notably Draghi speaking at 1:30 this afternoon. If we have a quick look over the charts, just how we're trading going into the morning, you can see my top left here— I'll just bring in a picture— the euro just helped by a bit of dollar weakness over the last few, just coming up to quite a key resistance point where we found initially support yesterday on the EU close before breaking through there around 6 PM. So just keep an eye on that if trading. That dollar weakness has helped gold push higher, but again, just coming up to some key resistance. And the pound, of course, will come on to Brexit in a short moment to, to cover what's been going on there. But again, that has just been helped to push higher despite what was a very topsy-turvy day yesterday. Equities, we'll come on to the reason why, uh, we finally had a down day, uh, S&P snapping its 8-day win streak, but starting the day well, 4 points up, uh, so far. Of course, the, the volume gonna pick up later into the afternoon, uh, for sure. Yesterday was, um, was certainly a, an interesting day, uh, into the afternoon, but as has been the case for the last well, as long as I can remember anyway. The Monday, Tuesday after non-farm payrolls are very much a quiet affair. Looking at the pound, and we'll bring in the, uh, the, the price action just here a bit more clearly, you can see the up and down nature. Uh, we had the rumor out 9:30 and then denied at 10 o'clock. What was that rumor? Well, unfortunately for, for everyone here, there's no Anthony Cheung. He's on his, uh, way to Hong Kong. I hope he's sort out a trade deal rather than have a holiday. But you can see here, uh, the, the comment that he tweeted, um, just, uh, the reports were Merkel open to 5-year time limit on backstop. Of course, this would be a hugely positive, um, source comment. However, it didn't take long for Germany to officially deny that, and we came all the way back down. However, we have had a bit of upside overnight, uh, late— well, late into the session overnight on the idea that this extension is going to be granted. It's going to be perhaps longer than what people are thinking, actually longer than what the UK currently wants as well. So we'll come on to that in a moment. Also, with equities coming down yesterday, if we just have a quick look at the grand scheme of things for the, the S&P, you can see that 29 handle, 900 handle working superbly, as has been the case with every other key resistance point. But we did have a down day yesterday. We also did have headlines that came out supporting the, uh, the— well, not supporting— the IMF cutting global growth outlook to the lowest pace since the financial crisis. So cut from 3.5% to 3.3%. And this is, I think, the, the third changed in the last 6 months. Just having a quick look here, you can see the lowest since the financial crisis there of '08, 3.5%. However, it is expected to, to push higher. But yeah, the third time they've downgraded the outlook in the last 6 months are quite, uh, you know, stop me if you've heard this one before, I would say, but understandably leading to, um, a bit of a downtick yesterday. On those headlines. EU tensions with the US also not going to be helping yesterday's price action. But really, the, the main sort of reason attributed to this will be the trade wars between— the trade war, I should say, between the US and China, obviously not going to be, be helping the situation out there. So global growth, it seems to be the, the main excuse whenever there's an equity down day. As if it just can't be an area of strong resistance on the S&P that holds up well. I mean, make your, your mind up if this is going to be lasting or not. I think to get excited about any real push lower, I mean, the— yeah, I think you'd have to definitely get below 65 again and quite quickly. And then, I mean, maybe even the, the sort of The two— well, you can see that the Golden Cross, we're quite far above now. I think— look, listen, I think we're gonna get all-time highs relatively soon, and this is just a mere speed bump that, you know, if we look at the, the size of the, the candle yesterday, you may even have to squint to see it, uh, where I circle up here. We've had many worse days than this, this year, uh, so I, I feel Yeah, just a small speed bump. Also yesterday, uh, yes, Billy's the Mark Ronson quote. I'm glad you picked that up. Um, the API again, spot the candle, very small reaction. I suppose this is more accustomed to historically what it, what it, uh, usually produces. The API, a bit of a confusing, uh, reaction, did go higher to come lower, just almost snapped back to where it was. The The API came in as an actual larger build than expected, 4.9 rather than the 2.5. However, the gasoline drawdown, biggest draw since September 2017. So if we just switch back to the charts, you can imagine that the gasoline reaction— if I just switch here, you can see— was much bigger than that of the crude oil, and that's continued its push. So that's something to bear in mind going into The DOE is later. I'm not a massive fan of getting too involved in the, uh, in, in Wednesday trade before that. But you can see oil a lot more range-bound, uh, and gasoline, uh, a lot more elevated. So how that comes in, how, uh, accurate those APIs are, will ultimately drive price, um, going into the afternoon post-DOE. Main headlines, uh, to be aware of Of course we have to talk about Brexit, as I'm sure you are as bored about it as I am. The main sort of headline running through, Theresa May to make plea for 30th of June delay at EU summit. She's off there this afternoon after having it out with Jeremy Corbyn at their weekly debate. So that'll be something to bear in mind, you know, going into the afternoon. Is it gonna be June the 3rd, or is it gonna be the headline where EU's Tusk is actually looking to make it more like a year. So Theresa May, whether she can, can handle the embarrassment of a further delay after saying we're leaving on time, then we're gonna leave this time, or not, I think she's gonna kind of have to get used to it. If they're giving you a year delay, you know, regardless of your, your view on, on things, I think this should be seen as a pound positive, at least short-term anyway. The, the idea of this, this year delay, and reading through this article, it does suggest that a deal can be reached at any time, and, and that's it, the, the extension will be, will be cut. And whether we can get anywhere with the Corbyn and May talks, that's probably past, I would suggest. If we have a quick flick back to the way the pound is, is positioned You can see where, well, we found a bit of support back in the last week, but we are still significantly lower, uh, going back from the beginning of the month. We've drifted down, the, the highs are getting lower. Sentiment for this market has just faded a touch. The idea that the May Corbyn, uh, coming together, which is around these, these times here where we did get to the high of this month Since then we've drifted down. And, uh, it— yesterday's reaction, just flicking back to, to Anthony's chart, um, you can see that that full reversal, usually, um, a good, good sign of the reaction following a rumor. It shows how short or long the market is. If we had sort of, I would say, stayed above the the spike, then you would have presumed that the market here is more inclined to sort of have positive news. But with the push lower, we ended up breaking that low until the, the sort of the, the positive outcome on potential for a further delay, which really is all about the, the idea that no-deal Brexit is just getting pushed down the road. Of course, we're scheduled to leave in 2 days when whether that will happen or not. I think there's more chance of there being an interest rate change at 12:45 today. I think the market can't have that. Europe can't have it. The UK can't have it. However, of course, if that was to happen, I mean, you would have had plenty of people on the referendum saying similar sort of things about us leaving, about the UK leaving the EU. So if that was to happen, you have to, of course, be prepared for it. Uh, and from a market perspective, well, I think you would get down to, to the low of last year pretty quickly. I would say 125 within ease. Well, let me know what you, you think in the chat. If we were to leave, uh, on, uh, on the 12th with no deal, where do you think we would end Friday? Where do you think we would end Friday on, on that? Uh, interestingly, this trend line still being respected from, from this week. But a break of that, you would, you would have a pretty, pretty big move to, to the downside. Also worth, worth noting this article that Bloomberg posted: a Brexit delay until New Year's Eve could spell trouble for the markets. Of course, you know, you'd think they would be smarter than this. The reason being, if the delay was to, to come with the extension up to the 31st and any deal or no deal was, you know, put forward today on the, on the cliff edge. The illiquidity in the market, of course, would drive markets crazy. You saw what happened with the, the S&P, or equities in general, in December, where you were getting 2% swings higher, or lower, I should say. If Brexit was to go down to the wire in a low liquid market such as December, well, things wouldn't really get too pretty around there. But hopefully that isn't going to be the case. A long Brexit delay could shorten time left on for Theresa May. Another point worth noting, there's been some rumors overnight that the Conservative backbenchers, or some Conservative backbenchers, are already planning again another sort of, uh, voice for Theresa May to resign, or a leadership overhaul, which I think short term, we, we had a, uh, a session that we run here, uh, Amplify on Monday, um, and the question was asked to the participants, what would be the reaction should there be a leadership change, a Theresa May resignation or vote of no confidence that has passed through? And I think we have to say certainly short term that push would be to the downside. I think a resignation we get 128, I think we get a 3-point push there. And then it all comes down to who's going to take over. Obviously Boris Johnson, I know at the moment is the, the favorite. What that would mean, what his stance then would be on Brexit, because of course he's changed that like the wind, uh, as well. Uh, so yeah, uh, something to just to bear in mind, keeping it near to the ground on any Further developments on Theresa May's position as Prime Minister would be interesting. If we do get that longer delay that's granted by the EU, this of course is further embarrassment for Theresa May, and it's not going to sit too well in the Commons. But I think, you know, taking a step back, regardless of your political view, I think this is a decision of a lifetime, and if it takes as long as it takes, is that really the, the worst thing in the world? Um, I think that's, you know, obviously up for opinion and, and a debate over a few drinks, uh, for sure. Just going back to the, the calendar, just to, to, you know, I, I out the potential opportunities for the pound today. I wouldn't really be looking to get into the market ahead of 9:30. While we've seen UK data over the last few months not really move things. Um, you have a period here where you've got quite a lot of data out, all to be aware of. So in terms of market reaction data points, the UK, I think this is one to keep an eye on. We'll do a run-through, of course, just before the numbers come out. The GDP, uh, for Fed month for month, 0.0. The estimate year on year, 1.7 for the February GDP. So, uh, year on year, so worth focusing on that mainly. The industrial output year-on-year, no, -0.9, and manufacturing -0.7. So not looking too rosy on that scale of things, but that will be an opportunity for the pound. As mentioned earlier, Theresa May is, uh, off to Belgium this afternoon. So in terms of times to be aware of the summit, which begins around 6 PM local time, so 5 UK, uh, on Wednesday, on today evening. So any comments from that onwards, it could be a late one for, for, you know, pound-related traders as well. Also on the calendar, I mentioned we had the, the ECB meeting 12:45, press conference 45 minutes earlier. Very much expected to, to be a sort of, uh, a non-event really on, on Super Wednesday. One of the key things to be aware of, rather than the 12:45 announcement, is going to be the 1:30 press conference. Any comments regarding— let me just zoom in here, let me see if I can zoom in— one of the comments that Draghi made back in March in Frankfurt, I imagine he will be probed on here, when he mentioned if necessary the ECB would consider measures to preserve the favorable implications of negative rates for the economy while mitigating the side effects. So basically suggesting that the government— governing council could at some point introduce a tiered interest rate system on similar lines to the BOJ and SMB. So I imagine that's going to be one of the first sort of questions. So eyes, uh, on that conference is open as well to, to see how, how that plays out. But out of today, I would say that's not going to be one of the most important drivers as well. Into the afternoon, we have the, the core CPI month for month and year-on-year figures for March. 2.1 expected for the core, for the, the flat inflation, 1.8. The ranges are relatively tight, so you know, the market pricing in this. So any push higher or lower for, for the US would be, uh, quite interesting. I think if we were to get, uh, a big beat on, on expectations, if we just flick back to the charts to have a look more technically now Certainly the euro over the last few days has looked like it might be bottoming out. So if we were to have the opportunity where we had really strong numbers come in, well, then the, the short back, uh, below, uh, this key area of, you know, last week high and then this week low as an area of support, uh, you could see, uh, the worries of, of new lows for the year for the euro come in. Gold as well, one to keep an eye on of course for these numbers, helped by a further push in dollar weakness up to, uh, almost— well, yeah, the high of the day just as we speak now is being tested. So it could be worthwhile just have— obviously having a look closer to 1:30 where the dollar is in terms of what asset may be the best one to trade, uh, it's off of the dollar strength or weakness. But at the moment, euro and gold look the most enticing as they've recovered quite significantly from those lows. So a really strong number, we could absolutely see a further push down. Interestingly, uh, yesterday we had— and then not really confirmed today, this is more due to the recovery we've had in, in stocks this morning as well— but Aussie dollar yesterday afternoon coming down quite strongly. So it just confirms the, the idea to be aware of the, the impact that the S&P, that China, that trade talks all have on the, the Aussie. So 2:30 yesterday, global growth was in there, in the, in the headlines there. US, the EU trade talks, um, the implications of that as well were all negative sentiment. Stocks came down on 2:30. When did the Aussie start coming down? Right on 2:30 as well. If we put this down to a 5-minute chart, right on the US cash open, the Aussie came down. So that correlation really is a key one to focus on, um, uh, due to of course the, the relationship that the Australian economy has with the Chinese one. It'd be something I'd be focusing on massively throughout the day. However, we had had a recovery overnight, and like the Euro is, is fairly high off those lows, uh, but stuck in a range. So US data, just to go back to that calendar, for now I'll be focusing on the, the euro or gold. Also, we have the, the DOE figures out again, uh, Wednesday 3:30. So the, the API, as mentioned, 4 million barrels on the build, just over 1.5 more than expected. But gasoline, that drawdown 1.7 to be the focus there. Having a look how oil trades right now, I know we've talked a fair few times about the longer-term view of this market, or the longer-term picture of this market, and saying that 65 or around 65 is not a bad place for there to be a brief pause, for there to be a top. I think it would really struggle to confirm a break above 65.72 from a purely technical point of view. Uh, but you can see why we're just finding a bit of resistance here. Key level going back to August, May and June last, uh, in 2018. So that brief pause yesterday and, uh, that correlation again with S&P proving strong, uh, one to keep an eye on of course for the remainder of the day. European equities this morning, uh, up from their lows of yesterday but relatively fat. The DAX obviously just going through that 8 PM increase in volume. That's going to start picking up, as you can already see. So worth keeping an eye, uh, on how that trades, uh, just coming up to its higher point of the day. However, you do have some strong resistance just a bit above where we are trading. As usual, guys, any questions, please do let me know. It promises to be a good trading day with, with plenty of, of opportunities. Uh, the pound 9:30, one to keep an eye on, along with all the, the Brexit developments that could happen late into the evening. The ECB, 12:45, 1:30. First few questions at the press conference would be my focus before we go into the US session and the CPI numbers out at 1:30 as well. So same time as the press conference. So that initial flurry of volatility will be one to, to be careful of. Cash open last two months, the last two days, the Monday, Tuesday, have been net with met with a negative push right on the open, uh, and then the, the oil numbers at 3:30, uh, to sort of wrap up the European session. Any questions, as usual, please do let me know. Hope you'll have a good trading day. We'll be on the mic throughout, of course, but if I don't speak to you, uh, good luck and enjoy Super Wednesday. Thank you.