Christmas time is coming and toward the end of the year activity normally slows - if youre ahead of the game you dont want to do anything foolish and those behind dont want to exacerbate. So what would this mean if the Fed hikes in December. I think a more muted response would be in order. Sure it would be bullish for the $ but as this conversation has been running for the entire year, one would think a hike has been priced in - perhaps not fully but last payrolls was a good test. Eur continues to be on a downward path and CAD has been beaten up along with WTI. Cable has been a dissapointment of late and whilst we started the year with discussion on when BOE would hike, the latest numbers coming out from the UK would suggest another long drawn out debate. The antipodean currencies on the other hand are having a little bit of a fightback but will need China to show improvement before anything sustained. Saxo notes that the SilkRoad impact could be massive on the upside for China. Keep an eye on diverging monetary policy is probably the key message here as the market continues to hang of every utterance. Why am I starting Christmas chat already - well its time to be careful of declining liquidity and expect to see some low volume high volatility moves in the coming month or two. Becareful and think about trade notionals as we get closer to the silly season and lets see if Yellen delivers the Christmas present that the market has been waiting for !
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