FOREX: GBP Resilience Post-BOE Notable, JPM Take Profit on Shorts
Nov-07 10:06
- Following the dovish hold by the Bank of England on Thursday, sterling traded in a resilient manner with cable rising back above 1.31. This resilience was emphasised by GBPJPY ending the session at unchanged levels, despite the significant selloff for major equity indices which saw the Nasdaq drop an impressive 2%. This was in stark contrast to the likes of AUDJPY and NZDJPY which posted greater than 1% losses, and short-term positioning dynamics for the pound may have been a contributing factor.
- Importantly for GBPUSD, the pair respected the initial resistance overnight, holding the prior breakdown level around the 1.3140 mark. The move higher is allowing an oversold trend condition to unwind, and the bear trigger now lies at 1.3010, the Nov 4 and 5 low.
- Additionally for EURGBP, the cross has oscillated either side of the 0.88 handle but remains comfortably above the recent 0.8769 breakout point. Topside levels remain at 0.8835 (held this week) and 0.8875, the April 2023 high.
- JP Morgan sees good reason for GBP to continue to weaken, however, for risk management purposes ahead of the UK budget event risk they have decided to reduce exposure by covering their sterling shorts vs EUR, NOK, SEK and CHF. They note a good portion of the pre-budget newsflow is already in the public domain and they want to avoid any period of broad tactical positioning adjustment before the budget. They will assess how risks evolve and when to re-engage.
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OUTLOOK: Price Signal Summary - EUROSTOXX50 Futures Bull Cycle Remains Intact
Oct-08 10:03
- In the equity space, the trend condition in S&P E-Minis is unchanged and the direction remains up. Recent fresh cycle highs confirm a continuation of the uptrend and maintain the positive price sequence of higher highs and higher lows. Sights are on 6812.29, a 2.382 projection of the Aug 20 - 28 - Sep 2 price swing. Initial support to watch is at the 20-day EMA, at 6700.59.
- EUROSTOXX 50 futures remain in a bull-mode condition and short-term weakness is considered corrective. The recent breach of key resistance at 5525.00, the Aug 22 high, confirms a resumption of the uptrend. Sights are on the 5700.00 handle next, with potential for a test of 5727.18 further out, a 1.236 projection of the Aug 1 - 22 - Sep 2 price swing. Initial firm support is 5527.10, the 20-day EMA.
FRANCE: Socialists Ldr-Cannot Back Budget, No Guarantee On Pension Reforms
Oct-08 09:58
After a meeting with caretaker PM Sebastien Lecornu at Matignon, First Secretary of the Socialist Party (PS) Olivier Faure says that "our party cannot back the current budget plan", claiming that "at this moment, we have no guarantee that the pension reform will be suspended."
- A rollback of the 2023 reforms had been a key demand of the centre-left PS. As noted earlier (see 'FRANCE: Suspension Of Pension Reform Would Risk Intra-Coalition Rancour', 09:04BST), Education Minister Elisabeth Borne had mooted the idea of suspending the reforms to get a budget passed, but this would be controversial within the governing coalition.
- Le Monde reports that the conservative Les Republicains would oppose any reform. A member of leader Bruno Retailleau's entourage said the suspension would be "a red line for the right,". Add to these the objections of former PM Edouard Philippe's centre-right Horizons, and the gov't would lose more seats (a combined 84) if Horizons and LR vote against such a measure than they would gain with the PS coming on board (68).
- While the far-left La France Insoumise and far-right Rassemblement National (RN) both opposed the pension reforms in 2023, it remains to be seen whether they would vote alongside the gov't to suspend them (throwing President Emmanuel Macron a lifeline) or vote against in order to try and force early elections. Speaking in the Auvergne, RN leader in the National Assembly, Marine Le Pen, said she is minded to "censor everything," lowering the prospect of a vote alongside the gov't.
EURIBOR OPTIONS: Large Position in the Call Condor
Oct-08 09:52
- ERM6 98.50/98.625/98.75/98.875c condor, bought for half in 7.5k.
This has been bought in some 50k this Week.
