«Oссam’s Razor» or chose after elections
The market practically ceased to react and stood waiting for election results in the USA. Even NFP didn't cause essential movement and its data were interesting unless to analysts. Only the pound received the bull drive from revival of hope for soft Brexit, and Euro storms maxima preparing the base for possible fall.
Lawyers were mistaken: May government after all should be on friendly terms with parliament concerning Brexit. The High Court of London decided that the government can't initiate the procedure of secession of the EU without voice of the House of Commons. Discussion of a possibility of a feedback of the notification on an exit became the key moment − both parties came to opinion that if «divorce» can't be stopped, then the parliament shall make the decision about it. It can cause Brexit delay practically until the end of 2019 because of unavailability of the ministries involved in the procedure. The appeal appointed to December 5-8 will hardly change something.
The term promised by the prime minister until the end of March, 2017 looks problematic now, but there is an opportunity to settle accounts with Brussels for control of London of immigration by preserving fees of Britain in the budget of the EU. The judgment together with change of course of BOE gave serious support to sterling, especially as the current economic indicators support positive mood. In such conditions any reasonable investor will think three times before removing the means from the British assets, that is confirmed by dynamics net − purchases of the British bonds by nonresidents (growth to ₤13,3 billion for September). Nevertheless, the EU plans creation of special rules for the market of the derivatives addressing in Great Britain in the amount of ₤440 billion to limit transaction in euro outside the EU.
Behind pre-election vanity the market didn't notice one significant anniversary – November 1 is the date when Mario Draghi works as the head of the ECB for 5 years. The vigorous Italian took the eurozone in a condition of an acute crisis, but managed nearly one phrase (without having spent any Euro cent!) to stabilize a situation: «within our mandate, ECB is ready to make everything that will be required for preserving euro, and, believe me, it will be enough» (a fragment of the speech which entered textbooks on macroeconomic).
Having overcome not the comic resistance of a number of the European governments, Draghi after all started the QE program, but February, 2015 was most remembered to the market, when the ECB disconnected the Greek banks from cheap funding against the background of concerns that Athens won't be able to fulfill a number of the obligations according to aid programs. It was dangerous, but it was necessary. The input of negative deposit rates can also be as unprecedented step, and now if European Banks place excess reserves on accounts of the ECB, then they have to pay extra for it to the regulator. Theoretically, it should stimulate crediting, but the result doesn't please - because of negative rates the profitability on bank deposits practically came to naught.
The ratings of the anti-european parties actively grow against the background of continuous German pressure against policy of the ECB and permanently arising European crises. And only lazy don't criticize an activities of the ECB, but you can`t reproach his head in failure of act. And Mario Draghi still has time for correction of mistakes and optimization of monetary policy.
Passions in a pre-election race of the USA approach the highest point. From the point of view of Wall Street Trump is perceived as political misunderstanding, which can lead to review or correction of trade policy of the USA. If to consider that the market already pledged in the price increase in a rate in December, then increase in risk of election of Trump was forced an index of dollar to weaken and, possibly movement will continue down. The world of big money will «be extremely disappointed» if its stakes on Clinton don't come true.
Last week the rate of Libor increased by 3 times (to a mark of 0.88%) that speaks about deficit of dollar in the market. It is possible to consider that the interest rate already «was raised by the market» - without participation of FRS. Let's pay attention to the last report of the U.S. Treasury attraction of a national debt for the 4th quarter in $188 billion is already ahead of schedule ($247 billion for October), and it is possible to assume that until the end of the year the Treasury will actively liquidate a debt by inventories on accounts of FRS. So we wait for grandiose injection of dollar in the world market.
Several interesting facts missed in pre-election cacophony:
- On October 30 in Brussels the EU and Canada signed the agreement on the free trade area CETA, which provides cancellations of 99% of duties for goods. The agreement can be considered serious breakthrough in integration of the markets of the West and the Old World. Against the background of the forthcoming meetings of representatives of Britain and China it is possible to consider that conditions of the CETA will be very profitable to the British side, which now is forced to develop independently the relations both with the West, and with the East.
- Only one unit of the trade fleet - cargo Blue Marlin - alone «sank» a trading balance of Canada for September (deficit made about 4.1 billion Canadian dollars). Because of freight dimensions (224.8 meters) the vessel had to go from South Korea to the gulf Triniti in Newfoundland not through the Suez Canal, and around Africa. More than 30 thousand tons of the equipment and the technological module created by Hyundai Heavy Industries are delivered, which is planned to use on the offshore field Hebron at the coast of Newfoundland and Labrador (a resource - 700 million barrels). Arrival of the module in the port of destination was reflected in balance as sharp increase in import of a production equipment, but similar inflow of industrial investments to the Canadian economy is perceived by analysts very positively.
- Goldman Sachs invented a new method of receipt of benefit from massive crowd of hedge funds: the exchange fund is started for all comers to invest in the most popular shares for speculative transactions which can show the maximum growth. The new fund began trade at the American trade exchange NYSE Arca on November 3, the amount of its assets made $20 million. It is supposed to track the list of significant hedge funds (Goldman Hedge Fund VIP) and to give to investors the chance to invest in «the most important» long-term shares, thereby «strengthening impact on key market events».
- The Chinese regulators limit transactions of Bitcoin for withdrawal of funds from the country. In 2013 China determined bitcoin as commodity, but not as currency, thereby having excluded it from the sphere of control. Today the cryptocurrency is actively used for purchase at the local exchanges, and then sales abroad to bypass control of capital outflow. A week ago China limited use of the China UnionPay Co cards., by means of which insurance products in Hong Kong were bought, than closed one more method «take away cash» from the country of promptly cheapening yuan.
Current week America kills all information factors on the importance. Those who wants to earn on volatility on Wednesday-Thursday need to track information on results of basic democratic states - Florida, Northern Carolina, Ohio. Analysts consider that if Trump loses in the mentioned three states, then he will lose fight. As soon as everything becomes clear, volatility of basic pairs will begin to decrease (unless Mexican peso can grow). Anyway, the market needs a few time to return to normal dynamics, but, most likely, already at the new levels.
On Sunday FBI has declared that Clinton responsible isn't going to make for use of personal mail in confidential correspondence. It has provided opening of the market with a gap, time for correction - until the end of day. The specified levels are provided with volumes of options.
EUR/USD: supports: 1.1080 - (1.1064/1.1057) - 1.1040 - (1.1019/1.0980) (protection 1.1000); resistance: 1.1102 - (1.1118/1.1163) (very strong) - 1.1179 - 1.1202 - 1.1263 - 1.1319.
USD/JPY: resistance: (105.26/105.40) (protection 105.50) - 106.20 - 106.87 - 107.40 (strong); supports: 103.75 (strong) - (103.00/102.80) (very strong) - 101.70 (very strong).
