Trading with point and figure

- Quiet end to the week features Swedish CPI and UK Retail Sales, Singapore
exports and final Q4 GDP digest along with 'insane' Trump press
conference; US markets looking for an early wind down ahead of Monday's
Presidents' Day holiday

- UK Retail Sales: mean reversion bounce expected after Dec slide; clothing
and auto fuel the most obvious wild cards

- Sweden CPI: expected dip only likely to reinforce resolute Riksbank doves

- US Treasuries resilient in the face of hawkish leaning Fed and solid
data run; combination of factors in play


..........................................................................

********************
** EVENTS PREVIEW **
********************

So to end another week, in which market insensitivity to economic data 'surprises' and to central bank speeches has been perhaps the key feature, there is a very modest calendar featuring UK Retail Sales and Swedish CPI, which will be accompanied by Polish Retail Sales and Industrial Production, and Brazil's monthly Current Account. US markets should therefore be able too wind down into the long weekend in an orderly and subdued fashion. Be that as it may, some thought does need to be given to the US Treasury market's remarkable display of resilience this week in the face of a clearly more hawkishly leaning Fed, and a run of domestic data which underlined that the economy humming along at a very respectable pace, and that inflation looks to be somewhat above the Fed's target and forecasts. A number of factors appear to be contributing to this: a) some quite ingrained scepticism that the Fed will actually deliver, especially if riskier asset markets to take a 'queasy' turn, this being born of the experience of the past 3 years; b) Treasuries very large nominal yield premium over other G7 govt bonds; c) very obvious concerns about this year's elections in the Eurozone, which only serve to elevate point (b); d) and the mounting evidence that regulatory requirements are draining the last vestiges of liquidity from bond markets, particularly collateral requirements for the repo market and at CCPs, which suggests the Trump regime's efforts to roll back some of the Dodd-Frank requirements is perhaps the most urgent issue for financial markets, given that they are clearly strangling market's reaction function, as much as central bank's monetary largesse. The ICMA repo market survey earlier in the week (attached) and last year's BIS paper on "Mobile collateral versus immobile collateral" (http://www.bis.org/publ/work561.htm) look to be required reading on this topic.

Of the overnight run, the largely as expected final Singapore Q4 GDP data were less significant than the as expected 8.6% y/y rise in Non-oil Domestic Exports, which reinforce the much improved export demand picture seen across East Asia over the pat 2-3 months. For those interested in a display of sociopathic narcissism, Trump's press conference yesterday is a prima facie example, which highlighted both his infantile neediness, and his penchant for 'throwing all the toys out of the pram'. But as one person has observed on Twitter, the press conference may have been insane, but he does not care as long as Trump cuts his taxes.

For UK Retail Sales, Tuesday's CPI data helped to highlight where the surprises might come in today's data, namely a very sharp round of clothing discounting should result in a strong gain, while the rise in Petrol Prices should in theory weigh on sales volumes. Eminently the consensus forecast for a 1.0% m/m headline rise is in no small part predicated on a mean reversion to the steep 1.9% m/m slide in December, and the usual caveats about over-interpreting single month readings in the November through February period applies. By extension the 3-mth/3-mth comparison (last +1.2%) tends to offer a better profile of the underlying trend.

In respect of Swedish CPI, the Riksbank was at pains this week to underline that while inflation has recovered considerably, and is 'rising', but does not expect it to rise meaningfully above 2.0%, and as long as that remains the case it will retain an easing bias. Today's CPI is expected to post a seasonal 0.7% m/m drop, which would see headline and core CPI dip in y/y terms to 1.5% and 1.7%, and thus offer a post hoc justification for the Riksbank's policy stance, at least in its eyes.

from Marc Ostwald
 
The US dollar, meanwhile, has tread water. It's up 2% against the euro since the election but down by more against the loonie. Overall, it's in the middle of the pack and the only big gain is the 6.6% rise against the yen. Looking at the data, the US dollar has been blessed. Confidence surged immediately after the election and it's beginning to translate into economic data. Retail sales and CPI were strong Wednesday and the Philly Fed made traders do a double-take on Thursday in a rise to 43.3 compared to 18.0 expected. It was the best reading in 32 years.

Stocks and bonds are saying that economic growth and higher interest rates are coming. In the past week the implied probability of a Fed hike in March has risen from 26% to nearly 40% yet the US dollar is the worst performer.

One reason as to why the greenback's in doldrums is that foreign investors, including foreign governments, just don't believe in Trump. Treasury holdings data from year-end show Japan and China as large sellers. The other reason is Trump's talk on the currency. He's promised action is coming and leaks suggest he's floating various ideas.

Consider where the US dollar might be if the data hadn't been so strong this year and the Fed wasn't so hawkish. It could be down as much as 5%. Right now the good news is disguising underlying long-term US dollar selling but it won't forever.

UK retail sales are due out this morning. Monday is a holiday in the United States so that could mean some clunky flows before the weekend.

from Adam Button
 
You must log in or register to reply here.

Similar threads

Michael Carr
  • Article
Equities Technical Analysis Testing Point & Figure Patterns
Replies
0
Views
3K
T2W Bot
T2W Bot
S
Point&Figure
2
Replies
39
Views
7K
subarashi
S
M
Point and Figure
Replies
2
Views
1K
Dentalfloss
Dentalfloss
A
Point and Figure box size for commodities
Replies
4
Views
4K
TWI
TWI
William Rafter
  • Article
Technical Analysis Point & Figure Gone High Tech
Replies
18
Views
8K
GruntnoWay
G
Top