Trading Desk Notes - January 26thSubmitted by Polar Futures Group on January 25th, 2019
From the Desk of Victor Adair
The major global stock indices closed on their highs last week...but sentiment soured over the long weekend on a deluge of “economic-growth-is-slowing-everywhere” stories that took the markets down Tuesday and Wednesday with the defining moment the mid-week WSJ headline, “China Risks A Very Hard Landing.” Markets steadied Thursday (indications of more stimulus in China and maybe even in Europe) and then rallied hard Friday as 1) The WSJ reported that the Fed was considering an early end to their balance sheet runoff, 2) reports that China was injecting more liquidity into their financial system, 3) China/USA trade talk sentiment turned for the better, and 4) Negotiations were underway to end the US Gov’t shutdown (they bought time with a 3 week deal.)
The DJIA rallied to its best levels in 7 weeks, the TSE Index rallied to its best levels in 13 weeks.
The US Dollar Index rallied to 3 week highs on Thursday as the Euro fell hard following the ECB warning of “downside risks” to the Eurozone economies...but USDX tumbled Friday on the Fed/balance sheet news...and as market sentiment went “risk on.”
The British Pound rallied to a 3 month high Vs. the USD this week...to nearly a 2 year high Vs the Euro.
The Canadian Dollar fell early in the week but steadied with WTI mid-week (see below) then rallied hard Friday as the USD fell hard. The main “drivers” of CAD values lately have been 1) commodities, especially crude oil and, 2) strength/weakness of the Big Dollar. Interest rate spreads favor the USD but have not had much impact on CAD pricing. I wonder if the prospect of less heavy oil coming to the USA from Venezuela means that the Texas Gulf refineries will “pay up” for heavy Canadian oil. Canadian crude exports the week ending Jan 18 were over 4 mbd.
WTI ended this week ~$54...near a 2 month high...despite the “economic-growth-is-slowing-everywhere” stories and despite strong American inventory builds. The reason for the steady prices may be the possibility of less oil coming to the USA from Venezuela as a result of either American sanctions or a politically inspired breakdown in Venezuela’s ability to export.
The gold market fell to nearly 1 month lows Thursday...a direct reflection of a very strong USD...and then surged to a 7 month high Friday as the USD fell like a stone.