Amplify Weekly Strategy: 10th - 14th December 2018

Amplify Weekly Strategy: 10th - 14th December 2018

Calendar highlights...

Monday: JN Final GDP, CN New Loans, M2 Money Supply (tentative) GE Trade Balance, IT Industrial Production, Sentix Investor Confidence, UK GDP, Manufacturing/Industrial Production, Construction Output, Goods Trade Balance, Index of Services, NIESR GDP Estimate, US JOLTS Job Openings, CA Housing Starts, Building Permits, BoE's Cunliffe, BoC's Lane speak

Tuesday: CN Foreign Direct Investment, AU NAB Business Confidence, JN 30-yr bond auction, UK Average Earnings Index, Unemployment Rate, Claimant Count Change, Brexit Meaningful Vote in Commons, GE/EU ZEW Economic Sentiment, US PPI, NFIB Small Business Index, Weekly API Inventories

Wednesday: JN PPI, Core Machinery Orders, EU Industrial Production, US CPI, Weekly DoE Inventories, 10-yr bond auction, Federal Budget Balance, CA Capacity Utilisation

Thursday: AU RBA Bulletin, GE/FR Final CPI, SZ SNB Rate Decision, SP/IT 10-yr bond auction, ECB Rate Decision, Press Conference, EU Summit, US Import Prices, Weekly Jobless Claims, 30-yr bond auction, CA ADP Non-Farm Employment Change

Friday: CN Fixed Asset Investment, Industrial Production, Retail Sales, Unemployment Rate, JN Tankan Manufacturing, Non-Manufacturing Index, Revised Industrial Production, GE/FR/EU Manufacturing/Service PMI's, UK Leading Index, EU Summit, US Retail Sales, Industrial Production, Capacity Utilisation, Flash Manufacturing/Service PMI's, Business Inventories 

A busy week ahead with focus on the 'meaningful' vote on Brexit, escalation on trade war tensions between the US and China and a cluster of important US economic data points, the latter of which will be key as to formulating expectations on what to expect from the FOMC's Summary of Economic Projections next week.

Crunch time for Brexit talks...

This Tuesday the current schedule would dictate that the "meaningful vote" for Theresa May's Brexit plan will be voted upon in the Commons. However, press speculation has been rife over the weekend that this could be delayed giving the PM more time to bargain with Europe and get Conservative members on side in what is expected to be a resounding defeat for the governments existing plan. Although the government has denied any speculation on the date moving, the delay itself maybe inevitable and in many ways could be a positive step forward if done as a tactical move (More of this in our Morning Briefing HERE).

None the less, the rumour mill will be in full flow again this week and as such if you are considering any set-ups in GBP then you need to take the current conditions into account, meaning that trade durations should be shorten as open positions held intra-day carry increased risk of getting stopped out on headline noise.

One and done....

Next week, the Federal Reserve hold their final meeting of the year and according to FFR futures odds stand at 74.9% that the central bank will execute its 9th hike of the cycle. An on-going trade war, uncertainties over the Brexit negotiations and a dovish sounding Fed have all added to expectations that after the final hike this year the Fed are finally nearing the "neutral rate" in its path to normalisation. 

This week, focus turns back to the state of economic activity in the States with headline figures such as CPI (Weds) and retail sales (Fri) acting as important components as to forward thinking on the rate trajectory from the Fed from 2019 and beyond. Remember the December meet will also be the release of the latest Summary of Economic Projections (SEP).

In terms of the S&P future, data supportive of a dovish Fed stance could be the only saving grace to a stock market that looks increasingly under pressure. A break of the October low and trend channel (below) could spell trouble for the index short-term. However, any further extension of loses down to the February low (2529.00) would arguably be counteracted by an ever more dovish sounding Fed, but importantly a less aggressive stance from Trump on China as he will look to "manage" any sizeable downturn in his favoured asset.

Short-term fix...

So OPEC+ managed to muddle through their meeting last week and agreed to cut production by 1.2mbpd, which was the exact mid-point of the depth of cut speculated before the gathering.

The confirmation of the commitment resulted in a move higher in crude as many were sceptical that the Saudi's would have the political appetite to push ahead. However, as evident in the reversal in price action, I see this as purely a short-term move and focusing back to the current supply and demand fundamentals, I still see the trend line from the YTD low under pressure which could open up a further challenge on the psychological $50 handle. Key catalysts for this to materialise would be rising trade tensions, weak US data and further complication in Brexit talks all contributing to a re-calibration of the demand fundamentals.

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