What did we learn this week? – A watched kettle never boils

It’s the end of the week so time to wrap it up

The thing about big risk events is that you set yourself up for them but then nothing happens, or nothing happens the way it was supposed to.

Brexit had some such big events popping up. We finally got the meaningful vote and we had the expectation of May losing. The quid spent most of the day bleeding lower from the 1.29’s to the 1.27’s as no one wanted to carry any additional risk into the vote. On the result, a small 30 pip knee-jerk lower quickly reversed over 150 pips. The result put us squarely back where we started. We then faced another rabbit out the hat moment as the opposition party brought a no-confidence vote in the government, for the very next day no less, so once again we had to sit and wait for that. This time, May was expected to win, and this time the price stayed steady. The vote announcement brought a massive 20 pip pop. Two big events, end result GBP exactly as it was before both of them.

Yesterday, we saw the pound take on a more positive tone and it took a run at 1.30 however that positivity wore thin today and we’ve had another bleed lower to under 1.2900. Here’s where we stand now on Brexit and we have some weekend headline risk again too.

EURUSD has been like a watched kettle this week, which is surprising because looking back, it’s down nearly 200 pips. The problem has been that we got a quick move from 1.1540 to 1.1450 then watched a 40 pip range for two and a half days, then another swift drop to 1.1380, and another two days of a 50 pip range. There’s been no data or messages of note and so we’re back in the 1.12/1.15 box but not in a rush to go anywhere.

USDJPY has had a relatively good week as it sits near the week’s highs of 109.89. As is its wont to do, it’s ground out the gains over 5 days with very little volatility. The US session is becoming quite boring with the lack of US data due to the shutdown and it’s been noted in the trading room that there seems to have been a liquidity shift to Asia hours where there’s the chance of greater volatility. Who’d have ever thought that the Asia session would become more interesting that the UK/US sessions eh?

The US/China trade issue is still bubbling and we were fed a couple of morsels on that too. One rumour had the US considering dropping tariffs, the other had the Chinese offering to go on a $1tn shopping spree in the US to narrow the trade deficit. The former saw a quick risk pop but was soon denied officially, the latter gave cause to think it was all good just for the US only so while USD rallied, other currencies with an interest in a deal (like AUD & JPY) failed to ignite. Even CNH wasn’t bid, and quite the opposite as USDCNH trades at 6.80 from a week low of 6.7380.

The market is remaining positive about a trade deal as the rumours keep dropping and we’re not getting any bad news. It’s setting up for the next round of talks due soon.

When all is said and done, it’s been largely a dull week in most pairs. We’ve either have fits and spurts of activity, or watching paint drying periods. Brexit trading is hard because we’re either facing something big, or nothing at all, there’s no middle ground. It’s like juggling with hand grenades. But, this game isn’t meant to be easy so we plod on, taking the opportunities as we find them, or waiting for them to arrive.

A reminder to finish off with, that we have some big Chinses data out at 2am GMT Monday morning. GDP is the main event and what growth the Chinese will post 6.4% is expected vs 6.5% prior. US markets are closed on Monday too. Shoot, we all need to shift to trading Asia hours. And, we do it all over again with Brexit and the possibility of yet another vote on May’s plan.

To all the readers, writers, roomies, twitterers and squawkers, thank you for coming to ForexFlow, have a great weekend and we look forward to next week when we do it all again, and again, and again.