Weekly Game Plan 22 Oct 18

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GBP may come under a bit of pressure as the week opens after a Tory rising star issued a call to arms for MPs to oust Theresa May, saying Britain cannot be led by someone guilty of an “abject failure to govern” at such a defining moment in our history. Indeed, Theresa May’s position is weakening. The EU is trying some last-minute concessions and can-kicking exercizes given the importance of Germany car exports to the UK. Now there’s also talk of a second Brexit Referendum which would be folly. More political chaos coming fourth.

Themes for the Week:

  • The CNH has been weakening and getting dangerously close to the psychologically important 7-mark. This would erode faith in China’s stability and possibly provoke more U.S. ire, adding another layer of worry to world markets — the last thing investors want to see.
  • In Europe the storm is brewing with stock market turmoil, conflict over a contentious Italian budget, high oil prices, sputtering economic growth — which will evidently call for a cautious ECB meeting this week. We also have key earnings this week in Europe in the Automotive sector and Financial Sector…the most troubled sectors. Finally, Moody’s and S&P Global are likely to cut Italy’s credit rating next week to within a notch of ‘junk’ — the sub-investment grade category below BBB-/Baa1 which is usually populated by the weaker emerging economies.
  • The Bank of Canada has a solid case to make for hiking rates in October. Core inflation is on target, but labour markets are tight. Q3 growth is still tracking above the central bank’s estimate for the economy’s non-inflationary potential, albeit by less than a half percent. The market is also expecting a hawkish tone from the BOC but we shall see.

Data in the Week Ahead:

  • Bank of Canada Decision
  • ECB Decision
  • US GDP

On the Radar:

The Canadian Dollar took a hit on Friday and may remain weak ahead of the BOC. UsdCad, NzdCad are the better vehicles. Nzd looks strong against AUD as well. Out of all the US indices, given the volatile conditions, Nasdaq seems to be clearly heading lower again. The next 2 weeks will surely be challenging on US equities so keep positions small. Eur and Dax will be on the radar after ECB I suspect.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

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