Fundamental View
Given the strength of the NFP data on Friday the move lower in Treasury Yields on Monday was a surprise, even taking into account the slightly dovish tone from the Fed. The move higher in bond prices was lead initially by the bund which moved from 152.59 to 153.82, a move of over 100 ticks as global equities pulled lower. This dragged T-Notes higher through our entry short at 126.025 and stopped short just before our stop was hit, returning to the entry price heading into the close. The Pivot level on the S&P yesterday worked well to cap the upside and this morning European equities are trending lower on the back of uncertainty over Greece and the potential for the left wing Syriza party to win a national election next year.
Today’s View
This morning has been quiet on the data front, apart from a disappointing read on UK manufacturing. There are a few moves of note however. Oil has been supported by murmurings in the market that an emergency meeting may be held by OPEC in quarter one next year. This is a very different slant to prices to the nonchalance to sub $60 a barrel we have seen over the last two weeks. The fact is, many oil exporting nations cannot cope with such low prices and at the same time, they cannot cut government spending already committed to, so they will either have to borrow more, or get prices higher. For today’s strategy we will be short every asset apart from oil. This afternoon the only data of importance is US wholesale inventories at 15:00.
Alternative View
As I type US debt continues to be supported and further dovish commentary out of the FED would render our short strategies invalid.
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Editors’ Picks
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GBP/USD recovers toward 1.2450 after UK Retail Sales data
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Week ahead – US GDP and BoJ decision on top of next week’s agenda
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