Friday Optimism & the BoE

January 15, 2016

Friday Optimism:
Another day and another terrorist attack that doesn’t even cause a blip in markets. Welcome to 2016!

But hey, how about we keep the tone reflecting US stocks last night and be a little more upbeat to end the week. Remember in Wednesday’s when to get contrarian blog, we talked about the click bait headline from RBS telling us to sell everything?

“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.”

Well Wednesday saw Australian economist Stephen ‘the Kouk’ Koukoulas throw down a $10K challenge (AUD, probably just to be safe) to the RBS analyst that wrote the bearish note. The Kouk has outlined 11 markets that RBS analyst Andrew Roberts has recommended liquidating EVERYTHING in. So confident in the outlandish statement from Roberts, the Kouk has offered the generous terms of only needing 6 of the 11 markets to close lower by December 31 2016 to win the bet and ‘profit’ on his call.

Roberts hasn’t yet publicly accepted or rejected the bet and this saddens me.

Bank of England:
UK interest rates were overnight left on hold by the Bank of England again at 0.5%. It seems a long time ago now that the Bank of England was set to follow the Fed and begin a fresh round of hikes. We’re still quite a way off that yet.

The votes to leave rates unchanged were 1-0-8 (increase-decrease-hold) as expected.

GBP/USD Daily:
Forex chart, GBPUSD Daily, 160115
Click on chart to see a larger view.

Even with Cable getting Pounded (see what I did there?), I’m still looking for a bounce now that stops below swing lows have been cleared out and price is slowing into a buy zone on the weekly chart.

“All members agreed that, given the likely persistence of the headwinds weighing on the economy, when Bank rate does begin to rise, it is expected to do so only gradually and to a level lower than in recent cycles.”

What are your thoughts on Cable from here? Are you expecting a bounce?


Chart of the Day:
And there it is. The very first note that passes across my desk this morning runs the headline ‘Oil bears retreat’.

OIL Daily:
Commodities chart, OIL Daily, 160115
Click on chart to see a larger view.

Just look at that daily candle. Put the bear tanks away, the bulls are in control now!


Other than the non-existent cheap petrol at the pump, the storyline you need to be following here is that low oil prices are heaping pressure on the Fed’s 2% inflation target. Overnight saw known Hawk, Fed Bank of St Louis president James Bullard, answering questions on inflation with not so excitable answers.

“With renewed declines in crude oil prices in recent weeks, the associated decline in market-based inflation expectations measures is becoming worrisome.”


On the Calendar Friday:
AUD Home Loans m/m

USD Core Retail Sales m/m
USD Retail Sales m/m
USD Prelim UoM Consumer Sentiment

Just remember that if you’re holding positions over the weekend, Monday is Martin Luther King Day in the US.

Do you see opportunity trading Forex? Take a look at the Vantage FX MT4 platform and instantly access your own free $50,000 Forex demo account.

Dane Williams – @VantageFX

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