Daily Alert: For Thursday 10th December 2015

Mark Nugent2015 H2, Daily Alert

Today’s slides are HERE.

Today’s Economic News

The People’s Bank of China (PBoC) today announced the cessation of a programme called RQDII which was designed to bring capital into the country. This is seen as a sign that the Chinese economy is doing worse than feared. This led to weakness in AUD and NZD, and some safe haven flows into EUR and JPY (especially vs the USD) and in terms of sentiment, swamped the relatively good Chinese CPI result of 1.5% (y/y) vs the expectation of 1.4%.

We await the RBNZ’s rate decision at 8pm GMT.

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Current Trades

My GBPNZD trade benefitted from the NZD weakness and is now in profit. There has been little or no selling of NZD into tonight’s rate announcement so I expect the pair to rise on NZD weakness if the rate is reduced. Alternatively, if there is no change there could be a pullback down as GBPNZD buyers (like me) sell. However, my stop is so far away (as I trading fundamentals and don’t wish to be taken out by short term sentiment) that I will do nothing.

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Euro sentiment

The Euro index is up again, showing there are still some traders unravelling their short positions (by buying Euros).

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NZ Rate Decision (sell NZD)

There are no good NZD setups at the time of writing. If you are not in a trade you could consider selling GBPNZD after the announcement if there is no rate change, or buying it if there is a reduction. This should work equally well with NZDUSD, where the preference is to buy on no rate change and sell on a rate reduction. Having said all that, it may be even better to read the statement and plan a longer term fundamentals-based trade with a big stop. I will comment on that tomorrow once I have seen the statement.

Swiss Rate Decision (sell CHF)

The Swiss franc index has been up all week and the USDCHF is down, accordingly. This could really accelerate a rise in this pair should there be a rate reduction tomorrow at 0830 GMT. I still think it unlikely as the EURCHF rate has not really moved since the Euro strengthened after Draghi let us all down last Thursday and it is this rate that the Swiss National Bank (SNB) like to see steady.

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GBPCAD (as per Weekly Outlook; CAD weakness due to oil price)

There’s more life in this yet. Looking good.

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Major Issues for tomorrow

The SNB rate announcement at 0830 GMT and the Bank of England rate announcement at 1200 GMT.