Week to Feb 26th

Markets pull back, Powell Humphrey-Hawkins testimony, Bonds and Gold also collapse

MY CALL THIS WEEK : BUY EURGBP

In a week that saw nothing surprising in the news, ie no changes in the stimulus plan, the vaccine rollout or The Fed’s stance, as expounded in the Humphrey-Hawkins testimony from Chair Powell, we got a chance to see underlying sentiment.

It is easy to believe the market is bullish, as Gold, bonds and JPY made new five-month lows this week. However, there was a clear underperformance in NDX this week, which never improved on its opening gap down and DJI which actually made new highs. The danger is that the pullbacks in the last couple of weeks may mean investors are moving to cash, perhaps expecting a ’no hiding place’ pullback, a general collapse in sentiment across all asset classes, reminiscent of March 20, and unlike Q4/18, where conventional havens were available. It does of course also mean with uninvested cash, the recovery from the correction will be swift. The problem with trying to interpret haven assets in March 20 is that equities fell first.

This week saw USD move up suddenly, but not buy much and well within the 89.20-91.60 (2.7%) range it has run all year. Note that moves to dollar cash from dollar instruments (such as ETFs), the majority of transactions, do not of course affect the dollar itself. The V-shaped (or inverted) charts for the currency and foreign indices confirm this consolidation.

Mon Feb 22

Markets fell today, as the pullback continued. The general feeling was that this is the start of a correction after the election to January rally, and NDX fell further than SPX, although FANG, in general didn’t fall as far as NDX in general. USD was down across the board meaning Gold was up 1.50%. The equity pullback did not affect Oil which continued this week’s rally making a new 13-month closing high. Unusually, bonds were also slightly up on the day.

Tue Feb 23

Today was a wild ride, with NDX down as much as 3.9% at one point, before recovering most of the drop. SPX followed a similar path and ended 0.13% up. All part of a correction. The dollar was surprisingly quiet, flat with little volatility. Gold was similarly flat. Bonds were up and Oil was down in line with risk-off mood.

Wednesday February 24

Chair Powell today reiterated his dovish stance in the Humphrey-Hawkins testimony, and markets rose late in the day after falling at the open. Bonds followed stocks inversely, ie the yield chart looks much like the SPX chart. The dollar was flat overall, but this was composed of a general upward dollar (hence Gold down) but a notable strong rise in JPY, showing the markets are far from risk-on. Oil continued its rise.

Thursday February 25

The general mood we have seen all week and elevated prices trigged a sharp fall today with SPX down 2.5% and NDX losing 3.5% its worst day since October. The bond market also sold off with yields hitting a new 12m high of 1.6140%, in fact almost synchronously with equities, so not a flight from risk to fixed income, a flight to cash, as Gold also fell, and even Oil was only flat.

Friday February 26

There was some recovery today from yesterday’s sharp sell-off, with bond yields down 10bp and NDX up 0.6%, although DJIA and SPX were down. Much more action on USD which was sharply up following a sharp reverse in bond yields, down 10bp on the day. Gold was sharply down on the rising dollar, and Oil pulled back on the weaker equity position.

WEEKLY PRICE MOVEMENT

A second week of pullback, with NDX the biggest loser, down 4.94%. The largest forex mover was AUDUSD down 2.09% Cryptos continued to fall sharply after their super-rally, and FANGs broadly followed NDX down.

I was.a week too early last week with my AUDUSD sell. I made 0.34% on my EURGBP taking my total this year to a measly 0.58% with 6/8 wins. I will learn from my AUD mistake, and buy EURGBP again.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• New Month
• Trend is down
• RBA Rate Decision
• Canada, Australia GDP

Mon Mar 1

A new month with five Markit Manufacturing PMIs, speeches from Fed Williams and Brainard, and ECB De Guindos, and President Lagarde at 1610, although this is only a pre-recorded event for German SMEs.

00:00 Aus TD Securities Inflation

01:45 China Caixin Mfr PMI(Feb)

08:55 Germany Markit Mfr PMI(Feb)

09:30 UK Markit Mfr PMI(Feb)

13:00 Germany CPI (e1.6% p1.6%)

13:30 Canada Current Account(Q4)

14:30 Canada Markit Mfr PMI(Feb)

14:45 US Markit Mfr PMI(Feb)

15:00 ISM Mfr PMI (e58.9 p58.7)

23:30 Japan Jobs/Unemployment Rate(Jan)

Tue Mar 2

Another heavy data day, and CB speeches from ECB Panetta and Fed Brainard again.

03:30 RBA Rate Decision/Statement (e0.1% hold)

07:00 Germany Retail Sales (YoY e5.0% p1.5%)

08:55 Germany Unemployment Rate/Change(Jan)

10:00 Eurozone CPI (Core YoY e1.1% p1.4%)

13:30 Canada Q4 GDP Final (QoQ e47.6% p40.5%) 

22:00 Aus Commonwealth Bank Svcs PMI(Feb)

Wednesday March 3

The data keeps on coming. Four ECB speeches today: Weidmann, Panetta, De Guindos and Schabel.

00:30 Australia Q4 GDP Final (QoQ e2.5% p3.3%)

01:45 China Caixin Svcs PMI(Feb)

08:55 Germany Markit PMI Composite(Feb)

09:00 Eurozone Markit PMI Composite(Feb)

13:15 US ADP Employment Change (e168k p174k)

14:45 US Markit Svcs PMI(Feb)

14:45 US Markit PMI Composite(Feb)

15:00 ISM Svcs PMI (e58.7 p58.7)

19:00 Fed Beige Book

Thursday March 4

Key today is the US Initial and Continuing Jobless Claims. Chair Powell speaks at the Wall Street Journal Jobs Summit.

00:30 Aus Imports/Exports/TB (TB e6.5B, p6.78B)

00:30 Aus Retail Sales (MoM e0.6%, p0.6%)

09:00 Eurozone Economic Bulletin

10:00 Eurozone Retail Sales (YoY e-1.3%, p0.6%)

10:00 Eurozone Unemployment Rate(Jan)

13:30 US Jobless Claims

15:00 US Factory Orders (MoM)(Jan)

17:05 Fed Chair Powell speech

Friday March 5

First Friday so it’s NFP day with little else on the calendar.

07:00 Germany Factory Orders s.a. (MoM)(Jan)

13:30 US NFP/AHE/UnEmp (NFP e148k p49k)

13:30 US Trade Balance(Jan)

15:00 Canada Ivey PMI

Week to Jun 12th

Markets fall 6% after Fed, Uptick in COVID cases in TX, CA, NDX breaks 10000

MY CALL THIS WEEK : SELL AUDCAD

In a week where sentiment changed yet again, primarily driven by the Fed on Wednesday afternoon, which precipitated a sharp fall in equities and reversal in the dollar and yield slide. However signs of a possible second wave in Texas and California, and the consequent fear that this will slow the ending of restrictions and thus economic recovery. Notably haven assets (Gold, JPY and bonds) had been rising all week, and actually stalled on Thursday, when SPX fell over 6%. Notably NDX managed new all-time highs until the pullback. Technicals also come into play, as indices move into overbought territory.

Next week, we have two days of Fed Chair Powell giving his semi-annual ‘Humphrey-Hawkins’ testimony to Congress. You can sure the extent of COVID-19 economic damage will be the primary topic, and traders will be looking for any variation of last Wednesday’s message. There are rate decisions in the UK, Switzerland, and Japan, which all come with central bank messages.

In a busy data week, we also have a lot of inflation data : CPI for UK, Eurozone, German and Canada, PPI (wholesale price inflation) for the UK and Germany, and Retail Sales for the US, UK, Canada and Canada, and jobs reports from Australia and the UK. All are expected to be bad, but crucially, not as bad as last month. A second wave of declining data would be as damaging as that of the virus itself.

Mon Jun 8

Last week’s re-opening’ rally continued today, with SPX turning positive for the year, and NDX making a new all-time high. Travel stocks were the leaders. The dollar continued to fall, and in a sign that this rally is uncertain, the haven trio were also up and Oil was down.

Tuesday June 9

The pattern of this recovery has seen certain stocks gain at the expense of others, and the move today was tech stocks, so much so that DJIA was down 1.09%, but NDX was up 0.66% (breaking the 10000 barrier briefly). SPX was in between, down 0.78%. Once again, the haven trio all said ‘risk off’ and rose, and Oil was roughly flat. Another down day for USD (after a brief rally in Europe’s morning). The move was not universal, with GBP sliding, and the antipodean duo down over 1%.

Wednesday June 10

The Fed rate decision and dot plot today indicated no hikes until the end of 2022, and reiterated the damage to the economy caused by COVID-19. Maybe it was the latter warning, or even the CPI miss earlier, or maybe it was a case of buy the rumor, sell the news. Stocks turned down, although once again we had tech divergence (DJIA down 1.04%, NDX up 1.28%, another ATH).

A similar reversal was seen in USD, although there was not enough time for it to erase earlier losses and DXY posted a red candle for the day. This is not uncommon, as London (the world’s forex centre) is closed by the time of the Fed meeting. Most of the losses were against JPY which was up once again, along with bonds and Gold. Oil was flat on the day.

Thursday June 11

Today was the worst day in the markets since March, with DJIA down nearly 7% (NDX down 6%) as Texas and California reported new spikes in COVID-19 cases, inevitably linked to the reopening, and implying the crisis will take longer to resolve than originally thought. Travel shares in particular fell hard. Oil was also sharply down, losing 7.28%. The Initial Jobless Claims figure was a beat, but only very slightly, and there were still 1.5M new claims.

The dollar reversal continued with DXY strongly up again all currencies except of course JPY which along with bonds, was up for fourth day. Gold however took a breather and pulled back slightly.

Friday June 12

Markets recovered slightly after Thursday’s sell-off, although not by much, as most stocks had inside days, suggesting there was no immediate follow-through to Thursday, although this was still the worst week since March. Oil was slightly up, and the neutral mood saw JPY and bonds down on the day, and Gold rise again. The dollar recovery continued, with sharp moves up (except on CAD), some of this being driven by EUR and GBP concerns as Brexit deal deadlock seems to be back on the agenda, and not helped the worst British industrial production (-20.3% MoM) figures in decades.

WEEKLY PRICE MOVEMENT

The sharp fall on Thursday pushed all markets into negative territory this week, with last week’s top performer (DAX) being the week’s worst casualty, down nearly 7%. AUDJPY was the weakest pair this week, down 3.48%. Cryptos once again hardly moved, and FANG (and indeed NDX) did notably better than the market as a whole.

I knew AUDNZD wouldn’t move much, and so it proved to be the case. My trade paid off, but only by 0.55%, for 9 out of 19 weeks win, and accumulated profit of 7.65%. Not much, but I am tying one hand behind my back with forced entry and exit times. I am tempted to short AUDJPY for some more, but this depends on SPX continuing downwards, so I’ll sell AUDCAD instead.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day. Recoveries in line were seen in most FANGs, but not NFLX, which has not really fallen like the others.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• Powell Humphrey-Hawkins Testimony
• GBP, JPY, CHF rate decisions
• Lots of inflation and proxy data
• Option Expiration Week

Monday June 15

A quiet start to the week, with no significant European or US data. Markets are closed in Argentina and Colombia.

02:00 China NBS Press Conference

02:00 China Industrial Production/Retail Sales

21:00 NZ Westpac Consumer Survey (Q2)

Tuesday June 16

Today is the first day of Fed Chair Powell’s Semiannual Monetary Policy Report to the Congress

before the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate, the first in June since 2016. As well as Japan, there are rate decisions in Poland and Colombia. There is a 10-year UK bond auction. Markets are closed in South Africa.

01:30 RBA Meeting Minutes

01:30 Aus House Price Index(QoQ)(Q1)

03:00 BoJ Rate Decision/Statement

06:00 UK Unemployment (3mo to Apr e4.5% p3.9%)

06:00 BoJ Press Conference

06:00 Germany CPI (YoY e0.5% p0.5%)

09:00 Eurozone ZEW Economic Sentiment (Jun)

09:00 Germany ZEW Economic Sentiment (Jun e60 p51)

12:30 US Retail Sales (May Control Group e4.0% p-15.3%)

13:15 US Industrial Production(MoM)(May)

14:00 Fed Chair Powell testifies

14:30 NZ GDT Price Index

22:30 Fed Clarida speech

23:50 Japan Imports/Exports/TB

Wednesday June 17

Today Fed Chair Powell continues his Humphrey-Hawkins testimony to the Committee on Financial Services, U.S. House of Representatives. There is a 30-year German bond auction. Markets are closed in Iceland.

06:00 UK CPI (YoY e0.5% p0.8%)

09:00 Eurozone CPI

12:30 US Building Permits/Housing Starts (MoM)(May)

12:30 Canada BoC CPI (Core YoY e1.4% p1.2%)

16:00 Fed Chair Powell testifies

22:45 NZD 20Q1 Final GDP (QoQ e0.5% p0.5%)

Thursday June 18

Once again, the key weekly Jobless Claims figure is expected to fall, although still five times its long-term average. As well as the UK, there are also rate decisions in Taiwan, Norway and Indonesia.

01:30 Aus NFP/Unemp (Jobs e-125k p-594k, Unemp e7.0% p6.2%)

07:30 SNB Rate Decision/Statement (e-0.75% hold)

11:00 BoE Rate Decision/Statement (e0.1% hold)

12:30 US Initial Jobless Claims (Jun 12) (e+1.3M p+1.54M)

12:30 Philly Fed Manufacturing Survey (Jun)

17:30 BoC Schembri speech

23:30 Japan National CPI

23:50 BoJ MPC Minutes

Friday June 19

Today is June Option Expiration date, which often leads to heightened volatility especially in markets which have trended all month (and therefore options have not been closed early). There is a rate decision in Russia. Markets are closed in Sweden and Finland.

06:00 UK PSBR

06:00 UK Retail Sales

06:00 Germany PPI

12:30 Canada Retail Sales 

16:00 Fed Quarles speech

17:00 Fed Chair Powell speech

Week to Feb 14th

New all-time highs, EURGBP close lowest for 43 month, UK Chancellor resigns

MY CALL FOR THIS WEEK : BUY EURNZD

Markets shrugged off the coronavirus to make four new all-time highs, only faltering on Thursday as the death toll exceeded that of SARS, and a surprise replacement of the UK Chancellor of the Exchequer by an junior minister loyal to Johnson’s Trump-like spend, cut taxes, raise debt policy caused a sharp uptick in sterling, and NZD similar benefited by not following the global trend to cut rates, despite an overall strong dollar as Fed Chair Powell was less dovish than expected, reaffirming the data-driven approach to rate decisions.

The foreshortened coming week has no strong theme, sees British and Canadian inflation prints, and Wal-Mart leads the ‘retail phase’ of earnings season, although there is no key focus event, meaning that coronavirus sentiment is still the principal risk to the downside in a market up nearly 5% in two weeks.

Mon Feb 10

Last week’s rally continued all markets up today, particular in tech, with AMZN up 2.63%, and TSLA adding 3.1%, with no particular news, but crucially, no further coronavirus bad news. The dollar was similarly up overall, except against GBP and AUD which outperformed, both reversing from last week’s continual decline.

Gold and Oil were down in line with the stronger dollar. Yields were surprisingly slightly down.

Tuesday February 11

There was no stopping indices today, which again posted all-time highs, in the absence of US economic news. DXY had a Turnaround Tuesday after Fed Powell stressed that QE was back on the table, with currencies up, except the yen, which along with Gold and bonds pulled back in the risk-on environment, and Oil was also up in line. The only notable event today was a clear front-running of the UK GDP strong beat. The build-up in price prior to the event, lasting about 20 minutes and accelerating strongly suggest an information leak. This has happened before, and only occurs in the UK.

Wednesday February 12

A third positive day after reports that the number of new coronavirus cases had declined, and the dovish rhetoric continued from Fed Chair Powell on the second day of his Humphrey-Hawkins testimony. Markets were up across the board, but the situation was less clear on the dollar, with commodity currencies CAD and AUD firmly up as gold halted its decline and posted a flat day, as did GBP. EUR continued to fall meaning DXY was up on the day. Oil finally moved off its $50 floor and added 3% on the day.

Thursday February 13

A report that the coronavirus death toll had (symbolically) now exceeded that of SARS. Maverick Fed nominee Judy Shelton ran into scepticism in her Senate hearing, and is a long way from being selected. Despite the US inflation beat at 1330, markets took a breather and pulled back early, although they recovered later, with SPX and DAX nearly flat. NKY and FTSE were well down on currency strength, JPY rising along with Gold and bonds, and Oil falling, all in line with equities. GBP rallied sharply on news that that Chancellor (Finance Minister) Javid had resigned and been replaced by a junior minister more loyal to PM Johnson’s populist spending policies. Commodity currencies AUD and CAD were flat, but the further decline of EUR, which closed at a 33-month low meant a green day for DXY. EURGBP is at a 43-month low.

Friday February 14

The rally continued to falter today, after the Retail Sales miss at 1330. SPX had made new highs in futures, but fell back down in the cash session, nevertheless closing up slightly on the day, as did DAX. Once again NKY and FTSE were well down on currency sensitivity. Earnings this week were fairly good, but the dominant factor is the coronavirus sentiment. The haven trio were comfortably up, but otherwise currencies were subdued, with EUR holding a bottom around 1.0840, and none moving more than 0.15% against USD. Oil had another spurt upwards closing above $52.

WEEKLY PRICE MOVEMENT

This was still a risk-on week, so unsurprisingly NDX gave the best performance. The biggest currency mover was EURGBP down 2.3%. Our pick of the week buy CADJPY was only up 0.52%, but still up, the second accurate call (out of two, 100% so far). This week’s call is to buy EURNZD. ETH had a second parabolic week, adding 28.2% after 24.2% last week, an amazing 76.3% in three weeks, against a relatively pedestrian Bitcoin. FANGs had a fairly consistent week, all roughly following NDX.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• President’s Day 4-day OpEx week
• UK, Canada and Eurozone inflation
• WMT starts retail earnings
• Large Fed roster

The foreshortened coming week has no strong theme, sees British, Eurozone and Canadian inflation prints, and Wal-Mart leads the ‘retail phase’ of earnings season, although there is no key focus event, meaning that coronavirus sentiment is still the principal risk to the downside in a market up nearly 5% in two weeks.

Monday February 17

Markets are closed in the US for Presidents Day, and in Canada for Family Day, and there is no significant news today, so markets should run on technicals.

23:50 JPY Japan 19Q4 Prelim GDP (QoQ e-0.9% p0.4%) (Sun)

11:00 EUR ECB Lane speech

Tuesday February 18

The key German sentiment report today should give us some idea about the effect of coronavirus on business confidence. WMT report before the bell, leading us into the retail part of earnings season. Retailers tend to report a couple of weeks after the other sectors.

00:30 AUD RBA Meeting Minutes

09:30 GBP UnEmp/AHE (UnEmp e3.8% p3.8%)

10:00 EUR Germany ZEW Economic Sentiment (e20.4 p26.7)

14:30 NZD NZ GDT Milk Index

23:50 JPY Japan Imports/Exports/TB

Wednesday February 19

Two inflation prints today, but little US news. However there are no less than five Fed speakers today,  Bostic, Barkin, Kashkari, Kaplan and Mester. Here is the useful hawk/dove chart courtesy of ITC Markets. There is a rate decision in Turkey.

09:30 GBP UK CPI

13:30 USD US Core PPI

13:30 CAD Canada CPI

19:00 USD FOMC Minutes

Thursday February 20

Another German confidence reports today, this time consumers, and it will be interesting to contrast it with Tuesday’s business confidence level. Fed Barkin speaks again today. As well as China, there are rate decisions in Indonesia and Egypt. Markets are closed in India for Maha Shivrati.

00:30 AUD Emp/UnEmp (Emp e31.0k p28.9k)

01:30 CNY PBoC Rate Decision/Statement (e4.05% p4.15%)

07:00 EUR Germany PPI/Gfk Consumer Confidence

09:30 GBP UK Retail Sales

10:30 EUR ECB De Guindos speech

12:30 EUR ECB MPC Minutes

13:30 USD Philly Fed Manuf Survey

13:30 USD US Jobless Claims

23:30 JPY Japan National CPI

Friday February 21

A rash of PMIs, and five Fed speakers again today, with vice-chair Clarida and board member Lael Brainard, along with a second showing of Bostic, Kaplan and Mester. Today is monthly option expiration date, so expect some heightened volatility. Markets will also be looking at polling for the Nevada Democratic caucus the next day. Nevada is much more diverse than Iowa or NH, and polls still show a Sanders win, with Joe Biden comfortably ahead of Pete Buttigieg.

08:30 EUR Germany Markit PMIs (Manuf e44.8 p45.3)

09:00 EUR Eurozone Markit PMIs (Composite e51.0 p51.3)

09:30 GBP UK PSBR

09:30 GBP UK Markit Services PMI (e53.4 p53.9)

10:00 EUR Eurozone CPI

12:00 EUR ECB Lane speech

13:30 CAD Canada Retail Sales (MoM e0.0% p0.9%)

14:45 USD US Markit PMIs

15:00 USD US Existing Home Sales

15:15 USD Fed Brainard speech

18:30 USD Fed Brainard speech

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits, TradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.

Week to Feb 7th

Iowa Caucus surprise, Impeachment Acquittal, Virus fears subside

MY CALL FOR NEXT WEEK : BUY CADJPY

In a week where coronavirus fears subsided, former frontrunner Biden came fourth in the Iowa Caucus, and President Trump’s impeachment ended in an immediate acquittal, both equities and the dollar strongly rebounded upwards, the former to new all-time highs. Only a blowout NFP, reducing the possibility of rate cuts, and a late statement by the Fed on the coronavirus capped the enthusiasm slightly.

Next week sees Fed Chair Powell give his semi-annual ‘Humphrey-Hawkins’ testimony to the House and Senate, and we will be publishing our usual fractal. Also on the agenda is US inflation and retail sales, and a rate decision in New Zealand.

Mon Feb 3

In the absence of any further escalation of the coronavirus, the surprise beat in the ISM Manufacturing PMI at 1500 pushed the market up sharply, reversing some of Friday’s sell-off. TSLA, for no known reason jumped 20%, which was attributed to short-covering. World indices followed. USD also reversed from Friday’s selloff, and all currencies and Gold were down. Bonds were also down in line with the risk-on mood. Oil however pulled back sharply.

Tuesday February 4

News that the PBoC is loosening the Chinese economy, by cutting bank reserves requirements, and ‘fear fatigue’ send markets soaring with SPX up 1.5% and NDX up 2.1%. Airlines, which had been hit hard, rose even further, as did risk darling AAPL, as you can see in the table. The effect was also seen in Europe and Japan. Again the dollar rallied across the board, except for AUD. The yen, gold and bonds were down, in line with equities. However, oil fell again. closing below the psychologically $50 level.

Notably, TSLA rose a further 13%, and at one point hit $968 (24.23% up). This amazing performance, following ten green weeks, when the stock was $329, has been put down to short covering. President Trump delivered an upbeat State of the Union address to Congress.

Wednesday February 5

Another huge day saw DJIA up 1.68% and SPX up 1.13%, erasing the coronavirus losses completely. The mood was best expressed by NDX didn’t fare as well, only up 0.43% as the TSLA bubble burst, falling 17.2%. This was largely momentum, started in Europe with PMI beats, and continued at 1500 with a beat on the ISM Services PMI. Like stocks, the dollar rallied for a third day, although gold outperformed, as did its proxy AUD again, as the currency is strongly linked to coronavirus, and is still 5% down this year. Oil also turned up from the $50 psychological and technical support. Bonds continued to fall in line.

After the market had closed, the Senate acquitted President Trump in his impeachment, as universally expected, after they had voted down the process of calling witnesses. Some commentators say this had an effect of prolonging the rally for another day.

Thursday February 6

After the delayed Iowa Caucus results gave a narrow victory to outsider Pete Buttigieg (who is interpreted as unlikely to beat Trump), a fourth green day saw the rally top out at new all-time highs. The fact that Sanders came second and former favorite Joe Biden trailed in fourth place did not seem to worry markets.

It is notable this week how closely correlated Europe and Japan are. New highs were reached but intraday highs were made early. Oil rose in line. Another clean sweep for the dollar, with all currencies down. However both Gold and bonds reversed and rose, another sign of the rally ending.

Friday February 7

After four solid days in the same direction, today’s NFP, a blowout 225k (vs 156k estimate), but in line with the ADP print, resulted in a pullback. This could be because of the “good is bad” factor, a good number reduced the change of rate cuts, and certainly this was reflected in USD which continued to rise, although not against JPY which rose along with bonds and Gold. Oil was also down in line. However, the CME Fedwatch cut probability did not move, as you can see from the FFR Futures chart.

The other factor was a warning from the Fed that coronavirus would have an effect on the US economy. This of course had been the reason for the drop last week, but it had not been formally stated before. The Canadian NFP also beat, so there was little volatility in USDCAD.

WEEKLY PRICE MOVEMENT

Partly due to the decline in EUR, DAX was the best performing index in a green week everywhere. My first ever tip, from last week, selling GBPAUD was not only accurate, but at 2.08%, the best forex trade of the week. The tip this week is to buy CADJPY. Cryptos were also up showing that they are not necessarily a risk-off asset, and FANGs outperformed the NDX index, with NFLX the best performer.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• Humphrey-Hawkins week
• New Fed nominees
• US, China, Germany inflation
• Kiwi Rate Decision

Monday February 10

No US news today, as we start a week dominated by CB speakers. Markets are closed in Japan for National Foundation Day.

01:30 CNY China CPI (e4.9% p4.5%)

13:15 USD Fed Bowman speech

13:15 CAD Canada Housing Starts

20:15 USD Fed Harker speech

Tuesday February 11

Not much news today, but lots of CB speakers, the main one of course being Chair Powell’s semi-annual Humphrey-Hawkins testimony. Today is the New Hampshire Democratic primary where Bernie Sanders is expected to win comfortably. Markets will be more focused on whether Joe Biden once again puts in a poor performance, and then start to do the math on a Sanders/Trump election.

09:30 GBP UK Manuf/Industrial Production

09:30 GBP UK 19Q4 Prelim GDP (e0.0% p0.4%)

10:00 EUR EC Economic Growth Forecasts

15:00 USD Fed Chair Powell House H-H Testimony

15:35 GBP BoE Gov Carney speech

17:00 GBP BoE Haskel speech

17:15 USD Fed Quarles speech

19:15 USD Fed Kashkari speech

Wednesday February 12

In Europe we have the UK government's Autumn Forecast statement, a German Bund auction, and as well as New Zealand, a rate decision in Sweden. SEK is 4.2% of the DXY basket. NDX heavyweight CSCO reports after the bell.

01:00 NZD RBNZ Rate Decision/Statement (e1.0% hold)

02:00 NZD RBNZ Press Conference

10:00 EUR Eurozone Industrial Production

13:30 USD Fed Harker speech

15:00 USD Fed Chair Powell Senate H-H Testimony

19:00 USD US Monthly Budget Statement

19:10 NZD RBNZ Governor Orr speech

Thursday February 13

The Senate holds hearings for new Fed nominees Shelton and Waller today. Judy Shelton is interesting, she is a rate hawk, an advocate of returning to the pre-1971 gold standard, and does not believe in Fed political independence. Trump will like the last view if not the first. Waller is a close associate of James Bullard at the St Louis Fed, and shares his dovish views. There is a rate decision today in Mexico. 

00:15 CAD BoC Gov Poloz speech

00:15 AUD RBA Gov Lowe speech

07:00 EUR Germany CPI (YoY e1.6% p1.6%)

13:30 USD US CPI (Core YoY e2.2% p2.3%)

13:30 USD US Jobless Claims

21:30 NZD Business NZ PMI

Friday February 14

Important GDP prints in Europe precede US Retail Sales. Today is the deadline for UK Labour Party leadership candidates to run. Lawyer Keir Starmer is the runaway lead candidate.

02:00 CNY China NBS Press Conference

02:00 CNY China Industrial Production/Retail Sales

07:00 EUR Germany 19Q1 Prelim GDP (QoQ e0.1% p0.1%)

10:00 EUR Eurozone 19Q1 Prelim GDP (QoQ e0.1% p0.1%)

13:30 USD US Retail Sales (MoM e0.4% p0.5%)

14:15 USD US Industrial Production

15:00 USD Michigan Prelim CSI (e99.7 p99.8)

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