Forex Market Commentary
The Brexit fall out continues and whilst there is considerable political confusion with the UK government the economic repercussions are very clear for all to see and shall continue to affect the currency market price action this year and next year 2016.
London shall lose her predominance as the number one center for FX trades in the years ahead. a massive gravity shift has taken place and will become more visible as the daily, weekly and monthly grinding price action plays itself out in the currency markets. Dominating the currency trading clock for the last two decades with some 60% of all global Forex trades, Brexit shall undermine and weaken this position in the years to come, just as water eventually wears down a rock, we shall see Paris, Frankfurt and Zurich eat away at London's currently towering dominance in the years to come.
Firstly, powerful US and Chinese banks have lost all rationale to use the UK as a gateway to the European market - but tell that to the glorious 'Leave" voters. Tony Blair, the former Labour PM, is well aware of this fact as is every British banker. US companies have a greater trading relationship in Europe than within the UK; so separating the UK from Europe now gives international bankers the headache of recognizing that the UK is no longer a gateway to Europe. The politicians have failed to grasp what the big currency traders have now realized. Watch for European, US and Chinese and Japanese bankers shift their operations to Europe in the months ahead.
Secondly, the corporate exodus has already begun and rumors round the City are rampant. BNP Paribas pulling out 2300 staff, Deutsche bank starting to dismantle certain trading units and more and more trickles of alarming information is hitting the trading community and thereby influencing their decisions on currency investment. London is fast waking up to the realization that international banks have already started to scale back due to the loss of the gateway to Europe.
Thirdly, if the rationale for a Brexit was a currency devaluation that could put a zest into Brit exporters then think again because the harsh economic reality is pointing to the phenomenon of stagflation; that is to say inflation staying high at 4% in 2017 and GDP being knocked back to sub 2.5% even to 1.5% growth for 2017 which increases the case for lower UK credit prodcuts.
Fourthly, a stunning opposite will occur in the property market as the current government weakening currency attract overseas investors to flock into the UK and bid up house prices just when George Osbourne worked his socks off to see prices stabilize so the general population can find accessibility to the UK property market and the new impetus of demand will hamper GNP as capital flows favor foreigners at the expense of local investors and putt further pressure on the Pound sterling to depreciate to the 1.15 as George Soros predicts. With bond yields across the globe so low investors will pile into UK property hence the pressure for UK stagflation and recession.
This weak the US equities gained ground as the Dow closed above 18,000 points and with continuous exhibition of strength adds pressure on the USD to rise. Oil WTI lost 4 dollars on the week whilst gold consolidated but needs more proof in the pudding to hold the currenct level.
The conclusion of the Brexit event brings us a brand new hedge fund global macro concept that large traders are currently examining and we should see play out for the year to come through 2017 as smart traders will attempt - short GBP/ USD to the 1.10 - 1.20 range and long UK property stocks/ REIT.
Buy the Rumor and sell the Fact. The dazzle of a solitary strong UK is fast fizzling out and the rumors that I hear from all my circle of professional traders all points to a brand new stage of trading ideas to work itself out with the GBP the focal point on the stage.
For small traders watch out for a run to 100 point index gain on the USDX as the summer US Q3 data will add great strength to the USD. Watch out also for the EUR/USD to slide back to the all important 1.05 as hedge funds short every spike on the pair. Traders will seek to further the USD/YEN appreciation as Japan encourages currency weakness to help the domestic export sector. Crude WTI oil should now stabilize at the 45 dollar range.
London shall lose her predominance as the number one center for FX trades in the years ahead. a massive gravity shift has taken place and will become more visible as the daily, weekly and monthly grinding price action plays itself out in the currency markets. Dominating the currency trading clock for the last two decades with some 60% of all global Forex trades, Brexit shall undermine and weaken this position in the years to come, just as water eventually wears down a rock, we shall see Paris, Frankfurt and Zurich eat away at London's currently towering dominance in the years to come.
Firstly, powerful US and Chinese banks have lost all rationale to use the UK as a gateway to the European market - but tell that to the glorious 'Leave" voters. Tony Blair, the former Labour PM, is well aware of this fact as is every British banker. US companies have a greater trading relationship in Europe than within the UK; so separating the UK from Europe now gives international bankers the headache of recognizing that the UK is no longer a gateway to Europe. The politicians have failed to grasp what the big currency traders have now realized. Watch for European, US and Chinese and Japanese bankers shift their operations to Europe in the months ahead.
Secondly, the corporate exodus has already begun and rumors round the City are rampant. BNP Paribas pulling out 2300 staff, Deutsche bank starting to dismantle certain trading units and more and more trickles of alarming information is hitting the trading community and thereby influencing their decisions on currency investment. London is fast waking up to the realization that international banks have already started to scale back due to the loss of the gateway to Europe.
Thirdly, if the rationale for a Brexit was a currency devaluation that could put a zest into Brit exporters then think again because the harsh economic reality is pointing to the phenomenon of stagflation; that is to say inflation staying high at 4% in 2017 and GDP being knocked back to sub 2.5% even to 1.5% growth for 2017 which increases the case for lower UK credit prodcuts.
Fourthly, a stunning opposite will occur in the property market as the current government weakening currency attract overseas investors to flock into the UK and bid up house prices just when George Osbourne worked his socks off to see prices stabilize so the general population can find accessibility to the UK property market and the new impetus of demand will hamper GNP as capital flows favor foreigners at the expense of local investors and putt further pressure on the Pound sterling to depreciate to the 1.15 as George Soros predicts. With bond yields across the globe so low investors will pile into UK property hence the pressure for UK stagflation and recession.
This weak the US equities gained ground as the Dow closed above 18,000 points and with continuous exhibition of strength adds pressure on the USD to rise. Oil WTI lost 4 dollars on the week whilst gold consolidated but needs more proof in the pudding to hold the currenct level.
The conclusion of the Brexit event brings us a brand new hedge fund global macro concept that large traders are currently examining and we should see play out for the year to come through 2017 as smart traders will attempt - short GBP/ USD to the 1.10 - 1.20 range and long UK property stocks/ REIT.
Buy the Rumor and sell the Fact. The dazzle of a solitary strong UK is fast fizzling out and the rumors that I hear from all my circle of professional traders all points to a brand new stage of trading ideas to work itself out with the GBP the focal point on the stage.
For small traders watch out for a run to 100 point index gain on the USDX as the summer US Q3 data will add great strength to the USD. Watch out also for the EUR/USD to slide back to the all important 1.05 as hedge funds short every spike on the pair. Traders will seek to further the USD/YEN appreciation as Japan encourages currency weakness to help the domestic export sector. Crude WTI oil should now stabilize at the 45 dollar range.
Please turn to Bloomberg for global bond yields:
http://www.bloomberg.com/markets/rates-bonds
USDX 96.289 +0.05%
EUR/USD 1.1052 +0.25%
GBP/USD 1.29525 +0.028%
USD/JPY 100.545 -0.320%
USD/CHF 0.98342 -0.49%
10 yr US T-Notes 133.796875 +0.14%
Crude Oil 45.41 +0.13%
Gold 1366.295 +3.00%
SP500 2129.90 +1.50%
Dow 18146.74 +1.38%
Always use your own better judgment and try to build a picture of trade logic combining both technical and fundamental understanding.
http://www.bloomberg.com/markets/rates-bonds
USDX 96.289 +0.05%
EUR/USD 1.1052 +0.25%
GBP/USD 1.29525 +0.028%
USD/JPY 100.545 -0.320%
USD/CHF 0.98342 -0.49%
10 yr US T-Notes 133.796875 +0.14%
Crude Oil 45.41 +0.13%
Gold 1366.295 +3.00%
SP500 2129.90 +1.50%
Dow 18146.74 +1.38%
Always use your own better judgment and try to build a picture of trade logic combining both technical and fundamental understanding.
Pieter Bergli - Trader X16
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