I suspect the way the Fed play these games is keep fairly quiet on a 0.75% rise but signal dramatic future rises on a 1.0% rise.
Always interesting to try and second-guess these slippery guys.
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Faded before the day’s end.
Russia’s Putin has made a pre-recorded speech which was apparently scheduled for airing this evening but has mysteriously been postponed until tomorrow morning.
If the rumours prove correct and that there is a general mobilization or even a limited one then that will be an escalation of the war in Ukraine.
We will know in the morning.
I heard someone military saying that if Putin starts to all up conscripts from the major Russian cities rather than the provincial farms he will lose support from the Russian majority as their sons report direct to their families how badly things are going in Ukraine and some fail to get home ever again. In any case, it takes too long to train up new recruits today.
They reckoned mobilisation will never happen - Putin might win the war but would definitely lose the presidency.
Putin has announced a ‘limited’ mobilization - some 300,000 - all ex military.
Has had an immediate effect on Euro - dropped over 60 pips.
Why Euro? - in Putin’s comments he referred to ‘prevailing winds’ which has sinister undertones for Europe.
Stock markets reaction has been fairly muted (thus far) - except Russia’s yesterday which fell considerably - the announcement was pre-recorded so likely some leakage.
Why didn’t markets “price in” Putin’s latest move? - the detail, especially the threats to Europe were not clear.
Edit: forgot to mention oil rose to over the 86 level on the news.
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He is spinning the story of defending Russians under the yoke of nazism - apparently a majority of Russian people believe this to be true.
In Russia schools/media have been told not to use the term ‘war’ but rather special military operation - that narrative will become increasingly difficult.
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I didn’t know Putin is that much skilled propagandist.
There you go - the mini budget had no surprises, the surprise is that the market, even though the tax cuts and extra spending were well telegraphed, has reacted much more negatively than expected - seems like a month’s move in a day.
It’s the increase in borrowing and the rise in the cost of same that’s rattling investors - they are not convinced that the numbers stack up.
In my humble opinion it’s too early to tell - I don’t think sacking the head of the Treasury was a good idea from a pound price pov - investors like continuity and stability.
I wonder if the PM and her team just conclude they’ve got nothing to lose. If they don’t make an immediate and noticeable impact they’ll be out in 2024 anyway. So might as well go all in on Conservative fiscal principles. At least that way they keep their own voters onside.
I too was surprised the GBP fell so heavily.
However, the consolation is that 22 of the 28 pairs are probably going to close in line with their respective prevailing D1 trends.
Plus also I have been short GBP/USD for over 2 weeks…
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I like the short - not a political statement but most guys have been wary of the Truss economics.
Problem is that Conservatives coined the phrase ‘balance the books’ back in M. Thatcher’s days - it was always Labour who liked to borrow and spend taxpayers’ money - this Government is doing both things - borrowing more yet cutting taxes.
Your comment up above is very apt where you hoped that new policy would stimulate growth - this is key.
In business we sometimes take a gamble and borrow in order to grow - I know the Chancellor would disagree with the wording but hopefully it will work.
One other thing - re the US Trade Deal that was promised but that we didn’t get.
I suspect that before the next election there is an increased chance that such a deal will materialize - involves EU/Ireland/US/UK - but more on that later.
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Today the BOE made and announcement of longer term UK Bond buying - they have been due of off load their existing stock but the ‘mini budget’ has changed the dynamic.
It’s an unusual scenario whereby the CB has to act to ‘calm the market’ as a result of it’s own Govt economic policy - most often such action is caused by external source.
GBP initially reacted by jumping up to 1.0820 - but has since fallen back as the news is digested more fully.
Tomorrow apparently the PM and Chancellor will meet with the OBR - also unusual - seen as a further attempt to ‘calm the market’
The OBR confirmed today that they were not asked for a forecast pre the mini budget.
The OBR will give the Govt a complete forecast next week.
The meet with the OBR is a positive step and with the power of hindsight perhaps an earlier meet would have gone a long way to avert the recent turmoil.
That was 2 weeks back
That was 1 week back and a week is a long time in the market.
Then yesterday evening:
All well and good but bottom line is there any way a retail trader can get a sense of what’s up ahead, why did the market react negatively GBP price to the mini budget?
1st thing is understand OBR - Office for Budget Responsibility - Wikipedia
Notice ‘funded by Treasury’ - the 1st act of the new Govt was to fire the head of the Treasury.
The new Govt signalled well in advance of it’s economic policy, it also signalled a disdain for the Treasury - again all well and good - voters don’t need a Treasury.
So came the mini budget - and no input from the Treasury - on Sep 23rd.
Again, the question remains - could a retail trader have even a hint of ‘trouble ahead’?
.this month’s much larger measures, including the energy price guarantee, will raise borrowing significantly through the second half of 2022-23
Quote from OBR Sep 21st
Home - Office for Budget Responsibility (obr.uk)
Finally, today the OBR (and the Treasury) are back in the loop - markets duly calmed - for now.
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Hi @peterma - Look, I realise the focus of the thread is on current events but your own question, “….could a retail trader have even a hint of ‘trouble ahead?…” was answered over a year ago. And the answer has not really changed since 01/06/21.
The charts said then, “Sell the pound”, and all they have done since then is say “Keep selling the pound”.
Events have said alternately - Sell, Buy, Sell, Buy, Sell, Buy - and I expect next week they will say the same.
I’m sorry to be trying to undermine your efforts.
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Aye I’d agree re the long term analysis.
Thing is that the market is very much algo driven which accounts for the often-wild swings on news release - such as occurred the mini budget last Friday.
Oft times you’ll hear “ah it’s impossible to trade against these guys”, or “sure they have all the inside info before news”.
The trick is to trade with them - and believe it or not info is tight - they take up positions more readily based on what retail also has access to - key is where to look.
Back to the mini budget - the OBR were circumvented - they offered the Chancellor (Fin Minister) their services but were declined - that info was in the public domain - then 2 days before the budget the OBR published their statement as linked.
The algos were primed so to speak - I figured on release GBP negative but didn’t expect the rush - more algos on price.
The focus was sell side - but notice re mention of ‘calm the market’ - now the humans took over - the OBR became involved, and price returned up to where it started - the buy side took advantage.
For the long term guys nothing happened - for the short term guys 2 opportunities, buy and sell, - all based on Current Affairs.
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A lot has happened since the above post - in a nutshell the BOE did their best but the UK Govt insisted on no U turns on fiscal policy - .i.e. massive borrowing and spending.
Initially the UK Bond market reacted positively but by Oct 5th investors gave up and the selling resumed.
That selling stalled 4 days back - same time as a new Finance minister, Jeremy Hunt, appointed by UK PM
Hunt immediately signalled a U turn in policy and yesterday laid out the terms - almost all tax cuts gone plus a curtailment on Public Spending.
Stock markets have reacted positively although early days yet for UK Bond market but so far so good.
On the FX front it’s possible to see some selling on GBP in expectation of a lesser hike on rates than has been signalled by BOE - but again early days.
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There is more disruption in UK Govt tonight with resignation of Home Secretary.
Today GBP lost around 120 pips - good chance that Gbp Asian traders will be unsettled in the incoming session - further downward pressure possible.
Important to keep an eye on UK gilts (Govt bonds) in the coming days - price on 10yr has been reaching for the Oct4 highs today - instability has the potential to reverse this.
Edit: the disruption tonight in UK politics has the potential to cause the PM’s resignation - it’s that serious.
So far so good - the 10yr, although gapped down is continuing up and has broken yesterday’s high (before all the political upheaval).
Gbp is holding it’s nerve also - it’s now a case of wait and see what happens in the political arena.
The new home secretary like the new Finance minister was a supporter of the PM’s rival in the recent leadership contest and didn’t support the proposed tax cuts.
Which has just happened.
Markets reaction is positive and will remain so if it is the case that MP’s alone get to decide the next leader and PM.
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Well that’s what happened - no election, just the MP’s got to decide.
The UK Bond market has thus far reacted positively - conversely GBP has fallen - soundbites from BOE are that as long as the Bonds continue to recover the better - implication is that a lesser rate increase than what was feared.
Early days yet - the new PM has worked in the market so he’ll have some ideas on a positive way forward.
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