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Justin’s Cause and FX – 12 Dec 18

Overnight Developments:

• Canada frees CFO of China’s Huawei on bail; Trump might intervene
• Trump says Fed shouldn’t hike rates, but calls Powell ‘a good man’
• In heated on-camera clash, Trump fights with top Democrats on border wall
• After Brexit vote delay, leadership challenge looms for May
• Australian consumers more confident on spending-survey

Top of Mind Drivers:

  • Risk-on after Huawei’s CFO has been released in Canada, and Trump is being supportive in an attempt to curb trade war strife.
  • Brexit vote posponed, May to renegotiate on Thursday, GBP under pressure.
  • US Yields and less hawkish FOMC keep the USD under pressure. Watch inflation data this week and Powell’s testimony.
  • Trade issues and weak China data continue to dampen risk sentiment.
  • ECB Decision

Market Comment & Potential Opportunities:

It has been a somewhat volatile drop but GBP remains under pressure and into today I like the looks of GBPCAD shorts compared to other GBPs, as WTI is pressing yesterday’s highs. If you do take this on a break of the asia low, be weary of 2-way action. IN any case I’d play this with an intraday objective.

UK PM May is not receiving any love from European leaders. As the Guardian reports, Merkel, Junker, Rutte and Tusk all said “no” to a renegotiation. May will most likely face a confidence vote soon.

Elsewhere, President Trump told Reuters in an interview Tuesday that he could intervene in the Huawei CFO case if it helps nudge the China trade deal along, and also said Beijing is looking to cut tariffs on U.S. cars immediately. Notwithstanding the lack of precedent for the president intervening in a U.S. Justice Department case, markets are cheering the notion that an end to mutual trade tariffs may be in sight. Risk assets are cheering this development although I don’t like the look of the Jpys.

Looking Ahead: US CPI

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