This referendum business continues to pay out… The writing seems to be on the wall that “No” will win the day (as far as the market is concerned, I’m not quite so convinced (see earlier posts)), nevertheless, more reassurances from the latest poll released at 11:45 UK time today pushed the value of the pound a bit higher. The quick fingered could have picked up some free money here.
11:45 am, BOEs Carney says BoE rate rise by spring 2015 is consistent with goal… 6B reacts nervously, spiking initially but easing off upon Carney pointing out that any rise will be gradual and limited…
Apologies that I have been unable to record my screen lately. Still, as with the Poroshenko comments yesterday, the 1 minute chart tells the story well enough.
I’ve written a fair bit about “free money” news-play trades here. Well, I’m not one to place scheduled statements or interest rate decisions in that free money category – but the Euro took such a beating today it’s easy to see how a quick-fingered trader could grab some ticks…
Apologies that I have been unable to record my screen lately. Still, the 1 minute chart tells the story – there was ample opportunity to buy FDAX today on the back off comments from Ukrainian President Poroshenko – “Permanent cease fire” agreed with Putin…
While it is always possible to screw up just about any news-play trade, this one is as close to “free money” as you are likely to see.
Extra points if you were able to short on the back of the Russian denial an hour later!
Today Draghi gave a strong hint that the ECB will unleash something at the June meeting. While several major banks have apparently been anticipating some monetary stimulus from the ECB, the way Draghi practically spelled it out for us today prompted the Euro to drop severely.
Please watch this video for the crucial few moments today:
Something I am quite struck by is the general lack of GOOD reason to place a trade, on the Euro, or any other major Futures product. Take a look at this chart for instance. Volume is nothing to write home about, day after day, until at last Draghi breaks the deadlock. I think this underlines how important it is to keep your powder dry for the really good opportunities instead of getting your hands dirty in the constant chop.
Garbage, Garbage, Garbage… and then finally some action.
There was very little news to excite the EU session traders this morning, with not even the publication of a Think-Tank Report to generate interest!
But things certainly started to heat up as we approached the US opening bell:
* The key pieces of scheduled data for the day, US Advance Retail Sales & US Initial Jobless Claims came in close to expectations – although I did notice a serious exchange of contracts on the US Treasuries, with sellers seeming the slightly more urgent.
* Around 13:30 London time, Goldmans and Barclays reduce their US Q1 GDP expectations, and the US Treasury market started to churn higher and higher alongside FGBL, while ES and FESX conversely started to melt. Was this a reaction to Goldmans analysis? I doubt it was and without any specific news item to pinpoint as the driver, I’m chalking these impressive moves up to general market sentiment on the day.
* Perhaps most worthy of a spot on the Harry Hindsight Highlight Reel, was a statement released from ECB’s Draghi, saying real interest rate spreads between the Eurozone and rest of the world would probably fall, putting downward pressure on exchange rates. While FGBL remained very calm in light of release, 6E jerked lower repeatedly – although the move was far from clean and I expect money was lost by some Shorters too!
* By the time the results of a $13bn US 30Year bond auction came out (at 17:00 London time), the Treasury market had already moved far enough for one afternoon session and neither the Longs nor the Shorts had enough reason to shift price.
All in all an interesting afternoon session and a good opportunity to snatch some ticks on Draghi’s words.
Gods. It has been a nightmare trying to produce a reasonably sized (in MB) 3 minute video, but finally I’m more or less content. Note: A time delay of several seconds exists at the start of the video before Youtube finally kicks in with HD, which is necessary if you actually want to see clearly the numbers!
There wasn’t a great amount of key news to review today, and no scheduled data to get excited about either. Some markets did nevertheless put in considerable moves, namely the energy markets, and after the US opening bell, the S&P 500 too, but there was only one small item worthy of a slot on the highlight show tonight I feel (see below). I’d call it a 2/10 on the Hindsight-Impact scale…
ECB Constancio says a few words, suggesting that markets did not fully digest the ECB’s most recent statement, and that further central bank action is not off the table entirely.
I was somewhat surprised by the lack of follow-through on the downside on 6E. After several minutes the market settles and drifts back to a more central trading range.
No doubt some of the slower (human) traders lost a few ticks as they fully expected the market to drop a good bit further.