 Okay, very good morning to you from myself and Christine. We look forward to dealing with you later on this afternoon Myself we're going to be covering the whole event live by the Amphire Trading YouTube channel So all we need to do is subscribe hit the bell icon and you'll get a notification as soon as we go live And then we're going to be monitoring for the full release So 1245 for the statement from Lagarde and then followed by the press conference as well So I'm going to focus on that really for the morning briefing We'll go into it a lot more detail before we do the live event But as you can see here for a relatively pensive looking ECB president and she has a tricky job to manage Giving some market expectations around some sensitive wording particularly about the management of the currency at the moment Which we'll discuss in more detail But yeah, we'll go into that shortly the first things first though Let's just jump over and have a look at where we closed on Wall Street last night and obviously quite a decent bounce Just given the progressive Size of what we've had of three days of cumulative selling really North American lead From last Thursday and their return from holiday on Tuesday It's a bit of a bounce that was seen yesterday some of the mega cap tech names Which had been beaten down just recovered somewhat around four percent gains for lights of Microsoft Apple and Amazon Also, we had that news as well from the FT sources talking about astro may resume trials as soon as next week And that was one of the things that caused that initial low price that we had in the overnight session about 24-hour hours ago or so. So having a look where we are at the moment on the charts equity index futures Continue to remain fairly buoyant for the time being Both in the Nasdaq and the S&P both have seen a respective strong bounce yesterday off their 50 DMA Let me just move my my camera so we can look at that in a bit more detail The S&P won probably much more clean in respect to right on that level And where we've moved back up to at the moment, which is having recaptured the 3400 mark Means that we're right back up there back settling around the previous all-time high In February prior to the the epidemic and pandemic status of COVID-19 And the actual low them on the 50 DMA in the bounce from yesterday Doug coincide roughly as well around that initial gap down that we saw between the 21st and the 24th of February And if you remember that was when we had the first emergence of coronavirus outside of mainland China and and that was when it was spreading to northern Italy I think it was Iran and South Korea at the time So quite a significant technical level for the turning prices a lot of people talking then this morning and Kind of I guess curve fitting a little bit of the narrative around the fact that you know A healthy correction part of the necessary process for those still of a supportive nature of what Fed policy and And fiscal stimulus will provide to markets going forward and yeah, I think that For the time being I think we found a bit of a low I'd be surprised if we we punch back down through those previous Not last night previous nights astral lows. I don't think we will do today So perhaps then the selling for the for the meantime is over But elsewhere attention obviously turns to the ECB You can see in the both the major currency pairs in the top left euro dollar and cable both have held on to the pop yesterday Which was largely inspired by some source comments related to the ECB and what we might hear today was some of the latest Forecasts which really bumped the euro higher and so de facto then the Dixie weakened and cable also took a bit of a lift at The same time in sympathy with that move elsewhere gold tea notes very quiet And oil has found a bit of a recovery from the low that was seen just above the 36 handle From yesterday, and we're trading back at 38 15 Just short of the highs that was seen Yesterday afternoon just as UK were going home. So around 30 cents shy of that 38 45 on the upside to keep an eye up All right, well, let's get straight into the ECB and see what we're talking about one of the main things here is the Euro dollar exchange rate and obviously this has been a real bone of contention given how quickly you can see here If we go back only really a couple of weeks Just two or three months. We were trading all the way down and if it goes back to beginning of the year we were trading around 107 type levels and obviously we've picked up as the ECB of over delivered with their with their stimulus and that's come in kind with national governments in Europe topped up by the European wide coordinated recovery fund and that in the context of the weakening dollar on the continuation of Fed easing and various different policy tools has resulted in this euro dollar with Technical breaks of course of key levels helped accelerated the appreciation of the single market Currency and that has caused some complications then about the strength of that and how it could impede and The the economic recovery in the euro zone given the heavy waiting towards being somewhat export dependent as a marketplace And so obviously in the last week or two, we've had a number of ECB speakers come out They've tried to kind of control and talk that down None other than the chief economist Philip Lane talking about his concern for the rate And that was when really we peaked at around 120 120 and a half if you're looking at euro futures And the market backed all the way down to around 117 and a half as a low since that point until yesterday's source comments came out Now the FT has been reporting this morning That for the first time in two years the ECB is expected to include a reference to the exchange rate in its Introductory statement the introductory statements the part that comes remember It's a two-part event the statement at 1245 It's going to publish the results of its monetary policy meeting then with that statement Although it's likely to be a very bland reference to the euro remember the nuanced kind of nature of central bank forward guidance or communication You know one word out of place could cause quite a dramatic reaction So obviously instead of being definitive they do fairly quite the opposite But just the fact that it's being mentioned could be enough then to pay heed to the fact that yes indeed on an official Line the ECB are watching the euro. They are they are somewhat concerned about it and Therefore the wording and what specific wording is going to use will be heavily scrutinized today and could be one of the most market-moving features of the event that's coming the other things that the market is looking for is So any updates or intonation towards their their pandemic emergency purchase program or otherwise known as the pep We know that they're expected to keep that at a kind of an envelope or a ceiling amount of 1.35 trillion euros however, expectations according to a Bloomberg survey last week were that Expectations for an increase of this around 350 billion euros will come in the future Probably be a by-year end which will include then an extension as well of the entire program through to the end of 2021 rather than the summer of next year The other thing then to look out for is their forecasts as per similar to the Fed Every calendar quarter Alternating we get ECB or Euro system staff projections and Economically the ECB leaving most of its dream projections unchanged and this was some of the information that moves the market yesterday Some policy makers have been or become more confident in their forecast for the region's economic recovery According to people familiar with the matter the latest projections for output and inflation will show only slight changes to the June outlook We GDP for this year set to be revised up according to that report last year And again just going back to a fresher memory here with the euro move that we had yesterday This was that move when the when the information came out now couple of rules or Things to be aware of for anyone new to to markets or indeed tracking this kind of information ECB sources or as they refer to in this case from Bloomberg people familiar with the debate This is the ECB. So the way it kind of works is a source isn't like a rumor A rumor is quite simply what it says It's just hearsay a source is very different a source is a qualified contact within the central bank now The central bank uses this as a set procedure outside of kind of normal fixed Protocol and what I mean by that is instead of using set speeches which definitively then put out official commentary from the bank What they sometimes do and remember those central banks adopt a kind of blackout period of particularly the Fed that Doesn't detract them from the point that the ECB are fully mindful of market positioning and market positioning is always really key as to ascertain how a Product like the euro might react upon when something is said as we've seen with the euro currency the euro has come off Quite sharply since the ECB have been kind of talking it down And so what one of the major risks? I think of this meeting was going to be is that the ECB Generally toe the line and don't really say too much But those wanting a more dovish delivery would have been disappointed and therefore you could have seen quite an aggressive hawkish reaction a bid way more aggressive than what we saw yesterday So for me I think that and as we normally see with source comments from these major financial news Agencies they come very close to the actual event and it's a backdoor way of the ECB managing market expectations. So It's almost heightened my expectations that today. We're going to see a fairly Uncommitted, you know, no extension of PEPP no more greater detail on that a very bland approach to talking about the euro and Something which perhaps without the source comic yesterday would have caused the euro to aggressively appreciate But now we've already factored a lot of that in if you think about it They've kind of preempted and managed the situation accordingly a little bit better So even if we were to see any marginal upside on a less than dumbish delivery then We won't see such volatility that then perhaps then the ECB might have an envisaged So in their sense, it's a way of getting ahead of it and trying to to not spook the market So it's very common These types of source comments to come out and remember they don't come out a week before days before they always come out a day before The same thing can happen in reverse If an essential about meeting there was ever something that was really shocking and a big surprise for markets And you see a really big day of Market movement not uncommon to see source comments come out the day after as they try to Calibrate kind of market thinking in order to bring them back on point to the kind of guidance on the messaging that they have Intended so this is quite common practice But I think yesterday was very telling in my mind going off historical kind of precedence a few other things here to be aware of The guard is likely to be asked about the Federal Reserve's new framework this average inflation targeting or AIT This comes of course as the ECB is in the process of overhauling its own strategy for the first time since 2003 remember the guard came in she made a bit of a splash She was kind of like right these guys have been here for a long time I'm gonna do a whole review because the world has changed and we and it's time that we we started to shake things up a Little bit now the point being here is and we're gonna hear anything definitive like the ECB are gonna copy Average inflation targeting particularly because the fact that inflation in a similar fashion to why the US were doing this in the first place Because inflation has been under target nearly forever the ECB's fairly similar in terms of their track record of managing HICP so You're not gonna get anything soon the the point being is that the timelines are way different from the US For the ECB's overhaul of its strategy, they're not expecting results to be due into the middle of 2021 so will she be questioned on it? Yes, will she give any definitive answer? No So I don't really see that as too much of an issue in terms of a catalyst to create market movement today because it's just too early Another thing here, I just wanted to show This was a Just gonna jump over to here. This is a fantastic crib sheet. I'm gonna recirculate it Again to all of our traders, but you can also find it on my Twitter handle I've pinned it to the top this morning so you can access it nice and easy But you know monetary policy events can be very complicated You know, there's a lot of a lot of nuance as I said to the language that gets used There's a lot of policy tools now in play more than ever given the pandemic response But this crib sheet does a really great job of just breaking it up into four Defineable different scenarios that being no ECB panic IE no urgency or panic expressed by the ECB Which suggests that the bar for further policy using is high and this may trigger a modest hawkish market reaction Being situation one a dovish tilt the ECB signals that more than will be done later this year sees downside risk to near-term outlook Situation number three surprise stimulus ECB front loads the pep expansion and then the kitchen sink is the fourth scenario ECB waste no time as it throws the kitchen sink and tries to boost inflation Expectations and restore confidence post pandemic accurate recovery. So this would be you know an immediate increase of the pep Remember the Bloomberg Consensus the easiest way to think about this is one of the main headlines will be what are the actual wording that? Introductory statement that she says about the euro that will be key number one number two What do they say about the pep? Do they just say that actually? Nothing at all. Well, do they say in a scaling fashion the more higher up we go The more dovish the reaction would be weaker euro properly accelerate that stocks in Europe Would be they're going to signal the pep by the end of the year I think that might be more in line with expectations if they go with 300 billion and they just deliver now I would say that's earlier the market expectations will be at a lower nominal values than perhaps people are expecting So you might get initial quite dovish reaction, and then if they just go 500 bazooka And it's not uncommon for the ECB to go bazooka territory and by bazooka I'm talking about just firing the biggest weapon possible because draggy had a real reputation for this But if they increased the pep by 500 billion and extended out to December 2021 The timelines as expected, but the value is a hundred and fifty above What market consensus is and it's way earlier in terms of its adoption So that is going to be quite tricky in terms of the euro and how to interpret that I was talking with this to a couple of the guys yesterday and the problem for that is is that if they if you look at the euro's reaction and Stocks reaction to every of the last three ECB meetings we've had And you can see this in a right-hand corner here The last three ECB meetings have seen a hawkish reaction with a stronger euro and lower European stocks following the event Now this in my mind is one of the main things that why we had to comment yesterday from the sources Because the ECB are trying to manage that because I think overall as I said I don't think they're going to announce the pep extension as much as now I think they might give a hint towards it coming Later on in terms of this year, I don't think that will come as too much of a surprise They might make a comment But it's not going to be just given all the comments had from an ECB a member on the euro currency that shocking on that front and then the the Forecasts if they get upgraded in terms of this year and growth and the rest remain static Well, we already heard that yesterday. So all in all They've tried their best to try to manage it and that's why I think that will be the outcome Because of here as we said the last few meetings remember when the ECB doubled down and doubled basically the the pep program so it became more accommodative in their their monetary policy stance in The in theory that should weaken your currency However, it did the opposite because in the context of a pandemic situation like we are in now Actually people have perceived more accommodative monetary policy more expansive easing if you like in whatever shape and form it takes as a net positive then for assuring a Faster cleaner quicker economic recovery in the eurozone and so it's counter-intuitive to its normal move So looking at the euro today if they did throw 500 billion a media at the pep then It's hard to say then originally you would think theoretically actually weaken the euro considerably however If we go off previous meetings and what we've had when we've seen this type of activity from a policy perspective Euro and the backs is actually rallied because it's all about then the economic recovery Rather than it is about such a clear representation of a normal policy reaction in that sense So the euro is a little bit messy in that regard because it's hard to say whether it would have we moved on back to more Traditional times now because obviously in the depths of a pandemic. It's different people are panicking What they want is assurance now the markets are relatively calm comparative to March I'm not so sure that the the reaction is so binary like that And so if you look at the DAX though for example example the German stock market Well, then if you think about it if they Really do 300 or they do 500 if they deliver more pep that's going to be bullish So I think that that's just much more binary in that sense So perhaps that might be a way to look at it not just thinking about the actual event But thinking about what product is actually going to see the most meaningful and clean opportunity to potentially trade one final point is Eurodollar you can see this here in the top left Eurodollar overnight voles for the sep ECB meeting at the highest since March ECB meetings implied break-evens point to a Plus-minus 0.57 percent move suggesting some modest expectations for ECB jaw boning That could spur a notable move in the single currency during the meeting But as I said, I'd say a little bit of that has been taken Off the table given the source comments yesterday, but all in all today should be a pretty interesting meeting and there is potential of course for sizeable reaction given what Lagarde needs to manage today on on multiple fronts, which is a market Which is anticipating more stimulus So how does she guide that and towards timing and then more importantly what type of wording given market sensitivity Over this management of the euro these fairly elevated levels in context of recent price movement So yeah, moving on though, let's have a look at a few other things. This was one of the other big headlines from yesterday in terms of not so much I Mean it has been an added weight to add on the pound but as I say cables found a bit of a footing just given some of the the euro Appreciation from yesterday which which pushed the dollar indexed lower to the benefit of cable But let me just give you a quick summary I've made a couple notes here because I've had had a couple of questions from people about what is going on with this Brexit stuff You know, what is this internal market bill and how do you interpret it? So let me run you through a few things So the European Union as per these headlines here is studying the possibility of legal action against the UK over Boris Johnson's plans to breach the agreement governing Britain's withdrawal from the block according to a document seen by Bloomberg Now this all comes after the UK yesterday unveiled this bill on internal markets now What what's the deal here? So let me explain It's seeking this this bill is seeking power to undo Sections of the Northern Ireland protocol and that part that's part of the legally binding withdrawal agreement It's signed with the EU in January. Remember. This is one of those big things. It was a big contentious area at the end of last year the protocol The one that's in place at the moment is designed to prevent a hard border on the island of Ireland At the cost of creating a customs border in the Irish sea The EU is concerned that goods can enter its single market Unchecked and it's also worried that UK subsidies will put you firms that competitive disadvantage If there's any changes to this withdrawal agreement that was previously Agreed back in the beginning of the year and the two sides, of course, are going to meet For an emergency meeting later today today was actually the table. Anyway, final day of UK European Negotiations for the eighth round of discussions and obviously we still remain gridlocked on the issues of state aid and UK Fishing waters and now we've got this latest Episodes from what the government has done with this internal market bill and talk about ripping up then the breaking of international laws Downing Street is concerned that Northern Ireland protocol now What's their thinking so Downing Street is concerned and Northern Ireland protocol could threaten its plans to provide state aid To British businesses potentially the EU could block a subsidy To accompany in England Wales or Scotland on the grounds that it might help or hurt a business in Northern Ireland Which will still have to follow the block state aid rules after December 31st So remember Northern Ireland as part of the agreement is going to have to continue to adhere to some of the European terms And so you cannot give then the UK certain aid from a state basis to Northern Ireland because of the fact that then it's going to be Not treated fairly then in a competitive sense for other European nations So it can't act in one and then have rules in another so to speak separately How speaker Nancy Pelosi in the US has said that there is absolutely no chance of a UK US trade agreement if Johnson's actions Threaten peace in Northern Ireland a number of conservative lawmakers and grandees have also weighed in with their concerns as well So you know Johnson's come under a lot of pressure both internally in the party Against Europe and now some of the noises in the US. You might think well, what's Nancy Pelosi got to do with this, but Got to remember in American politics there is a you know historical strong influence of Irish ties Richard Neil That name you probably wouldn't have heard of but Richard Neil is an Irish American member of the House of Representatives Is the Democratic chairman of both the Congressional Friends of Ireland and the House of Ways and Means Committee? Which does hold the power to approve or block any US UK trade deal and so he's in Substantial position of influence when it comes to them potentially the US the UK brokering a deal with the US So you know Nancy Pelosi saying what she's saying she does have some clout in that respect through his backing In that regard so there's a lot of risk on the table from doing this and meaning between the lines You know is this just a strong-handed move? From Boris to try and just force the hand of Europe perhaps it is but Obviously this game of brinks brinksmanship as much as it might be that does need to be factored in as potential Downside risk to sterling so I'd say for the moment a lot of this has now passed as far as market price is concerned I don't think that this latest piece is necessarily a trigger point to then get short again the pound I think that opportunity now has passed that was at the beginning of the week where we've seen quite a decent run lower in Sterling I think now the folk focus changes now to to euro denominated movement and depending on what happens with the ECB today Will dictate largely then the rest of the movement in other G10 currencies The final thing I wanted to mention was oil prices This was out from the FT Overnight Saudi Arabia to keep pumping despite Falling crude prices obviously crude has fallen below 14 that's accentuated and moved down to 36 bucks, but we have bounced since then to trade around 38 at the moment But relative to recent weeks price action was still a little bit lower Where we have been consolidating All in all this article is saying it's Saudi fears that if it cuts more output to support prices That other countries will take advantage and produce greater amounts Jeopardizing the unity of the OPEC plus group that had that enacted a record supply cuts in April as demand Collapsed so it's just quite interesting here Obviously Saudi Arabia often is found picking up the tab for Uncompliant nations typically Iraq Nigeria and the like and so they don't want to fall into that situation Once again, but what that means then is If they're reluctant to cut prices even further does that give them a little bit further? Potential supply negative to price If they're not willing to do so I'd say it's too early to really come to that conclusion and obviously any Forward expectation of the direction of crude needs to be taken in combination with your opinion As much as well on the demand side, which is heavily dependent on the COVID-19 situation, of course Okay, quickly look the calendar just to wrap things up the morning You can expect things to be particularly quiet Everyone's gonna sit on their hands and wait for what arguably is the main event of this week, which is ECB As I said 1245 is the first part and that that first part will be meaningful If the FT is right in the fact that for the first time in in two years We're gonna get an explicit reference in the introductory statement to the euro exchange rate That'll be a key point to look out for there We're gonna go live on the YouTube channel again at 1230 so I can give you a bit of a further briefing ahead of it And then we'll cover it live as it happens me and the rest of the team will stay on them to cover the 130s at 130 We also get the initial jobless claims out of the US Expecting a similar number to last time around eight to nine hundred thousand Which I don't think would create too much in a way of any type of reaction And I think more market focus will be on the ECB at that time because Christine Lagarde will kick off her press conference press conference normally lasts for about Anything from I'd say 40 to 50 minutes or so She'll read the opening statement will get all of the projections as well And then she'll go into the Q&A of which there's a hierarchy of probably the most Market sensitive types of questions for the more senior members of the press pack will come first So typically then the QA is quite front-loaded Timings wise in terms of where there's any potential trade opportunities that might come the longer it goes on the less likely it is that She'll say something market moving. You've then got the oil in between numbers Remember they'll come out this afternoon Given the fact that there's a Labor Day holiday in the US on Monday Which means that all the data in the infantry is bumped along so don't forget as well That's a slightly later time of 4 p.m. Rather than the usual 3 30 Yeah, that's it. That's all I'm going to cover for now So I look forward to seeing you guys online later for the ECB if you're free Otherwise, hopefully the preview made sense and yeah, check out my Twitter for the graphics and things if you if you need them to Hand. Okay. Good luck, and I'll catch you later. Thanks very much