The end of the line for 2016

The Day So Far

An exceedingly quiet morning overall as you would expect now that the dust has settled post FOMC and traders begin to close out positions ahead of the run in to Christmas. The Fed meeting was the last big event in what has been a very interesting year, from concerns over China to finishing with Donald Trump in the White House, what is for sure is that volatility and uncertainty from a political stand point will continue to dominant the headlines for financial markets in the coming year.

Next week our head of trading Piers Curran will be issuing his forecasts for 2017, and with the triggering of Article 50 before the end of March, and French Presidential elections looming, the beginning of next year is littered with potential headwinds for the global economy. Despite these inherent risks I am still confident that equities will remain buoyant at least for the time being and from here US equities will likely consolidate around all-time highs. Underpinning my view in the equity space is the belief that if the US economy performs the way Yellen intends then the underlying fundamentals warrant a continued move higher, but if the worst materialises and populist movements continue to gain traction, Brexit negotiations break down, China has a hard landing etc… I think that the central banks will simply turn on the taps and do “whatever it takes” to counteract any impending downturn. Although US yields have moved sharply higher since Trump was elected the path of rate normalisation will be ‘gradual’ and with the ECB now committed to QE until the end of 2017, we are still effectively in a very accommodative monetary world irrespective of the recent move from the Federal Reserve. More to come on Amplify Trading’s 2017 calls next week!

The Day Ahead

Today is likely to remain very quiet with the US housing data no more than a distraction rather than something to actively consider when accessing Fed policy. As such the session is about identifying the range and sticking with recent market trends. This view is summarised by continuing to pick tops to short EUR/USD and anticipation that US yields will remain elevated given the upgrade in the Fed’s assessment of economic conditions. In S&P and WTI crude both strategies are to look for a short at yesterday’s highs which were at 2267.75 and $51.48 respectively, fitting with our view of consolidation in a lacklustre end to the trading week.