Trading Plan – Monday 26th September 2022: UK Chancellor trashes market confidence

Mark NugentSept 2022, Trading Plan

Trading Plan – Monday 26th September 2022: UK Chancellor trashes market confidence

Good afternoon.

Last week was busy.

On Monday we had the Queen’s funeral.

Wednesday saw a hawkish Fed increase rates by 75 basis-points and signal recession may be the price to pay to tame inflation.

On Thursday, the Bank of England hiked rates by 50 basis-points, with some members of the MPC wanting more.

Then the poo hit the fan on Friday. UK Chancellor of the Exchequer Kwasi Kwarteng announced a mini budget. Through various measures, he will pump GBP161 billion into the economy over five years, mostly paid for by debt. The government insist these measures are not inflationary, when they patently are, and Britain already has the highest inflation on earth. The markets reacted badly. The GBP sank like a stone, halting just before reaching parity with the USD. UK gilt yields rose. Equities dived. This looks like politics, not economics. I do not think it is hyperbolic to say the markets have lost their confidence in the government’s economic competence.

In order to steady the ship, the Bank of England may take additional measure (more and greater rate hikes) but it is the Exchequer that needs to wrestle back confidence. Kwarteng’s comments on Friday that there are more tax cuts to come would indicate that confidence-building is not at the top of his to-do list.

As you know I traded GBPUSD short on Tuesday. By the time I got out at the close on Friday, the trade had made 8.7 percent and was the most profitable trade in over two years.

This week should provide less drama.

As always, I go through my trading themes for the week in the video.

VIP Club members can see today’s video, all brief trading videos, the Monthly and YTD Performance videos, the Trading Video Course and download the MTM Indicators software HERE