News background and trading ideas for 23/10/2018

Oct 23, 2018

There were a little of macroeconomic statistics on Monday, as indeed, there would not so much of it on Tuesday. However, there is no calm in financial markets than there was.

As already routinely Trump was a troublemaker, who announced about the necessity of next round of the tax reduction in the USA for the medium-sized business this time, not big only. Formally it is a good signal both for the near-correction US stock market and for the dollar in general. But the problem is that this statement caught even the Republicans. Therefore it is still early to talk seriously about the new round of fiscal reduction.

And here we go about Brexit again, especially the British currency has been suffered serious losses yesterday. However, while there are no facts (conclusion of a contract or rejecting it), all these price shots should be considered solely as a “white” noise and used for searching the best points to enter. Bloomberg recently surveyed the world's leading currency strategists with a view to the pound's reaction to the outcome of negotiations between Britain and the EU. So, if the contract is signed, then the pound can grow by 6%. These estimates are close to ours. Recall we are waiting for the growth of the pound in a pair with the dollar in the area of 1.41-1.43

Total, despite the decline of the British currency yesterday, we still see no reason for the panic, and we see only opportunities for buying a pound cheaper. Moreover, the topic of another referendum loomed on the horizon. And this may lead to the even greater growth of the pound than we expect. It is enough to remember where the pound was before the announcement of the results of the plebiscite, in order to understand that this is no longer about 1000+ points of profit, but rather about +/-2000 points.

Saudi Arabia is continuing to release more and more details about the journalist's murder in its embassy. While all are interested to bury this story, the potential risks are much serious for both the oil market and the overall balance in world financial markets. So we continue to monitor the development of events.

Regarding our trading ideas, they are steady so far: buying the pound, selling the oil and Russian ruble, looking for points for gold purchases while it is above 1210. Moreover, in relation to the likely increase in interest rates by the Bank of Canada on Wednesday, we recommend selling USDCAD. But in more detail about this transaction, we will talk in tomorrow's review.