There are 2 opinions right now on BOE rates - one it will be a coin flip either way or the second is that the BOE will do the same as last month, i.e. keep rates on hold.
Coin flip believers will stay out or use buy and/or sell stops and the second cohort will have already faded this morning’s rise in GBP/USD in line with the above quote.
Hate fence sitting so my own opinion is that the faders will be ok.
Update: - faders’ SL hit - they have raised - end of dithering.
While since I posted here - the one item on current affairs that has the potential perhaps to have the greatest effect on the market for many years is currently being played out in Moscow and Kyiv.
I mentioned the other day on Dennis’s BTC thread here that the market has an expectation of success or at least a glimmer of hope - based on the fact that M Macron decided to put his reputation on the line despite election in April coming.
Sound bytes coming from the Kremlin this morning are more positive than they have been of late - the focus now shifts to Kyiv today.
Resolution of this disagreement will naturally have a positive effect on all risk assets.
Edit: The US is playing the role by keeping the pressure up - Pres Biden affirmed yesterday evening when referring to Nord Stream 2 and the result of a Russian invasion of Ukraine - “I promise you we will bring an end to it.”.
Russia stands to gain financially when the gas begins to flow via this pipeline to Europe.
That hint of optimism actually came from the French side - latest coming from Kremlin is more bleak -
Copy of Reuters report:
- The Kremlin denied on Tuesday that Vladimir Putin had promised French President Emmanuel Macron that Russia would stage no further manoeuvres near Ukraine for now, pouring cold water on a tentative French assertion of diplomatic progress.
Here’s a real interesting take on the rising tensions with Russia. Talks of how while the world is focused on UKR how there’s so much more development in the Scandanavia, like the undersea cable disconnection in Svaalbard and troop buildup in Gotland, and a possible war that’s already begun but in the non-traditional sense we see war.
Latest from M Macron today;
“I secured an assurance there would be no deterioration or escalation,” (to reporters before his meeting with the Ukraine leader.
The Kremlin are say no specific guarantees were made so likely somewhere in between lies the truth - the market seems reasonably assured that war is not imminent with the indices rising steadily.
Later the Presidents of France and Ukraine gave a joint press conf - main message is that the problems can be resolved peacefully.
The world awaits.
My two theories on the matter.
Putin doesn’t like all the attention China is getting, because of the current US Administration’s focus on China as being the top threat to US global leader standing.
Putin has bigger issues at home, maybe the economy, maybe COVID, so he’s generated a distraction for his people and the world in the form of war games and a potential invasion of Ukraine.
Perhaps its a mix of both, wanting to stay relevant on the global stage while minimizing any thoughts of protests from the locals.
Aye there are many possible motivations.
From a market pov why this is so important even if there is a limited invasion is the economic consequences.
US, UK and EU have declared emphatically that they will respond with massive sanctions against Russia - those sanctions will come at a cost to all countries.
There is of course the likely cost to human life which can never be quantified from a market perspective - so we hope and pray that common sense will prevail.
Biden has come on record to say the Nord Stream 2 pipeline also hangs in the balance. Invasion means a halt to the pipeline’s operation, possibly in the form of sanctions against the pipeline’s operator. It’s actually already full of gas. Just waiting for a go ahead from EU regulators.
Scholz hasn’t mentioned it specifically, most likely because he and Merkle agreed to and pushed for it’s development, when discussing what Germany could/would do in the event of an invasion of Ukraine. Germany definitely needs Russian gas.
However, Scholz has stated, ““You can be sure that there won’t be any measures in which we have a differing approach. We will act together jointly.””, when discussing plans with the US…
Twitter chatter is re an invasion next week - Pres Biden today asked that all US nationals leave Ukraine immediately - will not be sending US troops to evacuate them if invasion happens.
Current drop in risk assets including BTC is in response to a tweet from Geoff Bennetts - whether it’s correct or not the effect on price is pronounced.
Update to that; UK now saying the same - use all commercial means - likely not available next week.
Sounds ominous - long time ago I heard the words “where there is life there is hope” - so we now hope.
Meantime maybe not buy any risk assets.
Signs that the meantime could be coming to an end.
Last night there were comments from Russian military that some drills were at an end and that troops involved in those would be returning to base.
No market reaction to that but has happened this morning - risk back on - for now.
Time to resurrect this thread, just read a post that 90% of traders fail and that 90% of education is about ‘price action’ - not sure how such info is gathered and could well be one of these urban myths.
Anyways yesterday was a huge mover in the market - most guys know the reason.
Movers in the market don’t start with ‘institutions’ or ’ big money’ or billionaire car makers - the top of the tree is the Central Bank and the top of the CB’ers is the Fed, and the top of the Fed is it’s Chairperson - currently one Jerome Powell.
So when Mr Powell was scheduled to make a speech at Jackson Hole the market stood still.
Then he announced that despite recent numbers the Fed is declaring war on inflation - and it’s primary weapon is interest rates.
The market was not ready for such a declaration, the sense was that the numbers would stall the Fed, maybe soften it’s approach now that inflation appears to have peaked.
Raised rates good for USD ( better return in USD investments) but bad for stocks (increased costs to the profit & loss)
So Wall St looked like this:
Eur/Usd did a wild flutter - so always thinking ahead - how will USD behave next week - up or down?
Today Xi and Putin have a side meeting at the summit of the Shanghai Cooperation Organisation in Uzbekistan - regarded by many as China’s answer to NATO.
Russian foreign spokesman referred to the SCO a few days ago as “standing for a just world order”.
Expansion of the SCO continues with Iran next in line to join.
There will likely be various anti-western statements but not likely that these will impact market prices - except should there be a huge economic policy shift.
My only Fear:
Yeah, we all have our fears.
Here in UK the market is acutely aware of the new Government’s stated intention of capping household energy bills.
Bottom line is that the Govt will underpin any difference between energy wholesale price to energy co.s and the capped retail price to households - thus guaranteeing energy co.s profits.
Big problem is that it is impossible to put a number on future wholesale price whereas retail price will be set in stone.
The UK Govt does not have the money to fund this (limitless) bill so they have to borrow - second problem is that borrowing costs are on the up - 80% increase on same qtr as last year to be exact.
IN UK the Treasury is not dissimilar to a Central Bank in that they act in the Nation’s interest governed by civil servants and not politicians.
First act by the new Govt was to fire the head of the Treasury on Sep 8th without any stated reason - assumption is that he was not in agreement with the huge increase in borrowing.
Edit: Bloomberg reported yesterday:
Pound Hits Lowest Since 1985… Latest hit to currency is slide in UK retail sales data
My home country imports wheat from Russia if Ukraine and Russia really got cocky wheat prices will go Brrrrr. Any Ideas?
From a UK perspective prices index in general are at a 40 yr high - that said fuel costs took a small decline - but in context of your post food prices continue to rise.
New PM, Liz Truss is en-route to the US and will meet with Pres Biden.
She has told reporters aboard the plane that there is no hope in the medium term for a US/UK trade deal.
That may or may not be the case.
For GBP players this Thursday sees the BOE make a few announcements so need to watch that.
Then on Friday the Fin Minister announces his ‘mini budget’. Usually these are well telegraphed - cut in Corp Tax, cut in Nat Insurance (a health tax) possible cut in Personal Tax, spending plans re energy.
Not likely to have a huge, short-term impact on GBP - unlike Thursday’s potential.
Friday’s news has the potential for longer term direction.
This is all fair enough, thanks for the round-up. I hope the budget is seriously pro-growth, not just cosmetic.
Meantime there’s more possibility for market action from the Fed and BoJ. The Fed could go for a bigger than expected interest rate rise. The BoJ could actually do something: a surprise bumper US rate rise could be the catalyst: it could be a major shock if the BoJ even raised the Japanese interest rate by 0.1%.
GBP is the strongest today - sometimes I’ve noticed a move before BOE and then it’s faded on the actual release.
The WP and others reckon 0.75 for the Fed - will they also signal lots more down the line?
Big week ahead.