 Okay, very good morning everyone, Wednesday 10th of July, so I hope you are well. I'm going to cover off a couple of different things. This guy you can see to the side of my screen at the moment. Boris Johnson, of course, in a live televised debate on ITV last night with Jeremy Hunt. So we'll have a quick review of that and where do we go from here. We're also going to have a look at some Chinese inflation data from overnight. And then, of course, the main event of which everyone's been waiting for this week, which is the first of the two testimonies from the Fed Chair, Jerome Powell. And we'll break that down. I'll try and give it to you in as simple fashion as possible. But looking at the charts this morning, not going to dwell on these too much. I'll leave that to Sam's handy work. But WTI crew, just as I'm speaking, I can just see here just popping up to fresh highs. And that does come after we had a significant drawdown of 8.129 million in last night's API crew door inventories. And technically, you can see we've just broken above kind of a high point of the last two-day session. So decent little technical breach on a catalyst fundamentally inspired by the fact that the draw in the headline crew was so much more aggressive than that of what we had against expectations. Otherwise, looking at other charts, we've got equity index futures just drifting a little south, I think too drastic at this point. And the FX market's pretty much similar fashion as people are very much awaiting to hear from the Fed Chair. But again, I'll leave the charts to Sam. Let's go straight into the news then. And of course, this was one of the final parts, if you like, before the known Tory Prime Minister will be announced. I think it's July 23rd. So still going through the process of the grassroots members of the Tory party voting for their preferred candidate. Not sure if you did or didn't see the actual debate in itself, but I did tweet immediately after the debate. And even though this is an incredibly small sample size, of course, of 39 votes, you can see here that just putting it out there, Jeremy Hunt, 67% thought that he came across better, 33% for Boris. Again, without being too opinionated, I thought Boris was just not good at all to put it mildly. But I don't really think that that matters. This is kind of the state I see, not just UK, but largely politics in general, particularly in the Western world, where just banging the drum on a specific point, irrespective of any detail, and also just trying to out shout your other candidate, has been an effective strategy for many. And you know who, Donald Trump, of course. So does it really change the point? Well, not really, because if you remember, who's going to vote for the Conservative leader is not the British public. But the 160,000-odd Conservative members, which I think is a representation of an incredibly small amount. I can't remember what the percent was of the UK population. But they, you know, the odds would say giving internal Tory polls that Boris has still got this very much in the bag. I'd be interested to see the bookies odds this morning, because prior to the debate, Boris was at about 95%. Perhaps he's come back a little bit, because I thought Jeremy Hunt came across way better than Boris yesterday, just my two pence. But where do we go from here? Obviously, lots of different options. I mean, you know, the most incredible thing, I don't know if you saw a tweak I did at the weekend, but I did a picture combined on a layout of Boris Johnson at the heck sausage factory with sausages around his neck, while Jeremy Hunt was playing cricket with some small children. There's just this small issue, of course, that we've got to sort Brexit out. But obviously this whole kind of drama and the razzmatazz around trying to just generate interest in their own candidacy is kind of detracting from the point that there's a highly complex trade and economic situation to deal with. And once all of this drama finishes, we've got to revert back to this kind of decision tree, which is what exactly is this outcome and where exactly are we going? And obviously the two candidates represent two different approaches, one being more Boris on the no deal front, but even if you persevere with a no deal, a very interesting vote actually happened last night. So the House of Commons yesterday voted to pass a measure proposed by the pro-EU Conservative Dominic Grieve to make it harder for Parliament to suspend or basically to suspend the Parliament current session, this proroguing idea that we discussed yesterday. Now the vote was incredibly close, it was 294 to 293. Now this is important because this is one of the things that Boris has not said he's going to do, but is not equally taking it off the table because one of the strategies to force through a no deal credible threat against, let's say, to really put it out there against Europe that you're being serious would be to shut Parliament down so Parliament can't block it in terms of taking that option away. But the vote last night was meaningful to counteract that. Subsequent parts of Grieve's deal were voted down, but it definitely just goes to show that there's still appetite within the Lower House of Commons to block a no deal option. So as much as, again, the drum can be banged by Boris, ultimately is his hands going to be tied and we remain in a similar situation that we had with Theresa May. But if we go through that, let's say a no deal is pursued, Parliament says no, forces the PM back to Brussels, let's say this is Boris, and then you go back to the renegotiation, EU says no, we go back in circles, does this then ultimately need something like a general election or a second referendum to kind of break the impasse, or do we go down the route of minor concessions out of the EU, is that an prudent strategy to kind of show that we're being serious by having this threat of no deal, a concession comes, the deal's then passed and we have a smooth orderly Brexit, or negotiations drag out and we go to a general election in 2022. I see that as incredibly unlikely that we're going to last until 2022 in the current status or composition of Parliament the way things are going at the moment. I'd imagine if we did have that, it's much likely to be a more a snap election route. So yeah, more of these decision trees to be aware of I think, but how importantly is the Pound reacting this morning? Well, you've looked at the charts already, it really isn't, and that's really to do with the point that I'm saying, even though I think Boris's performance wasn't particularly overwhelming, it doesn't really detract from the point that he's still the odds-on favourite, and so nothing's really changed too much in that regard. The Dominic Grieve vote I think is quite interesting, particularly that as well, coming with, although still slightly uncommitted, but more of a push towards potentially second referendum option on whatever state of the deal or no deal from Labour, that could start to, if anything, fundamentally support the Pound, because either a second referendum or a blocking of the ability to push through a no deal would all be Pound positive things. It's definitely worth keeping an eye on this, how it plays out, but this morning, fairly tame reaction. Remember, in the intraday market, people are not focused on so much the Pound now, they're focused on the dollar, because we've got such a big event looming this afternoon. Elsewhere, just a quick glance at this, this is a graphic of Chinese producer and consumer prices, the latter in blue, and as you can see, a little bit of a divergence, consumer prices moving higher and above 2% at the moment. This comes after what you've had in China, really, swine fever has impacted pigs, and subsequently the price of pork, which has direct implications then for food in prices and consequently inflation, so hence the reason why consumer prices are higher. One of the more things that has drawn some attention though, is if you actually look at the white line, the white line, although flirted with zero, when you remember we're having that big stock market route in Q4 and fears about the escalating trade war, although we recovered in Q1, we're now back at that kind of flat line zero. So almost moving into deflationary territory for producer prices, which does go to show a bit of a reflection of the global state of things and this pessimism about global growth where demand could be waning on the industrial side, which is obviously very important for China. So there's some interesting developments there overnight, but again, read across for overall markets I would say is fairly tame. Going over to the main event then, this is Jerome Powell, and I'm going to be doing a, I'm going to go over this if I just bring it into the screenshot. I'm going to run through very, very briefly what we're looking at for today from Jerome Powell. So first of all, just understanding the, you know, I need to, I think the spacing hasn't worked because I've squeezed my screen here, so you'd have to apologize for the solitary E here. It wouldn't be like that if this was full screen without the video feed. But the point being is Congress is divided into two distinct chambers. As you know, you've got the Senate and the House. Now, you know, the same thing, I don't know if you caught that Bank of England documentary on the BBC last night, but the Bank of England, much like the Federal Reserve, they are accountable to the politicians about what it is that they do. So if you think about it, politicians, existing governments are in place to, because they have been through a democratic vote voted by the people to deploy various different ways and means to manage the society and by net result the economy of which we all live in. Now, what they do then is they have a central bank who operates independently, who they choose the people who run these institutions, but they know that these people are better equipped and more skilled at doing that job, given the complications there are with trying to manage an economy and how complex monetary policy is. So what happens is then these are supposed to be independent. The Fed, in this case, goes away, does its thing under the leadership of Jerome Powell, but just like Mark Carney and the Treasury Select Committee to the Treasury in the UK, this happens, this is a semi-annual testimony where the head of the Fed, Powell, the Fed chair, has to speak to the politicians of the House and then needs to repeat that process speaking to the Senate Banking Committee the day after. So this is what's happening over the course of the next two days. Very important point here for any of those new to this situation or this event. One, this is a very important historically speech that he delivers because it acts as a platform outside of the regular eight Federal Reserve meetings that the Fed use typically to communicate their latest feelings about current economic conditions and forward monetary policy going ahead in time. Now, the second point that's really important here is that basically he speaks in front of the House Financial Services Committee first, that's happening today, and that is the most market-moving. He then copy, paste, repeats that speech to the Senate Banking Committee on Thursday that is not market-moving at all. So even though the event went itself and he's still saying the same content, this is the idea about fundamentals and the impact of news, the market will have fully digested and traded the information from today's event meaning that when it gets recycled and repeated the same speech but to a different collection of politicians it has zero impact. So that's what's happening today. Looking at obviously the order of play, I've checked this out this morning. So Powell himself doesn't actually start speaking until 3pm London time but that doesn't really matter because when he speaks you're already going to know exactly what it is he's going to say. That's because the text of Powell's speech released under embargo will be at 1.30 London time. So forget 3 o'clock, 1.30 is the main event for today. That's when this speech, when all the financial newswires like Bloomberg will drop all of the predefined chosen comments that have come out and that's when the market will go into a high flux of volatility and we'll get all the information that we need to ascertain what the Fed are going to do in the future. He speaks at 3, he reads out the fixed statement, he then goes into and this is a broad approximation but typically every member of the House Financial Services Committee will have an allotted time to ask him questions. The Q&A is very different from a central bank caught inflation report or a summary of economic projections from the Fed. Very different in the sense that it's not say financial press who are a bit more savvy about the type of questions the markets want to know and therefore potentially more market moving the Q&A. The Q&A in this event in a semi-annual testimony is nearly always non-market moving because the politicians basically just have a go at Powell and it's all very political led or politically led rather than being anything of real substance for us as market participants. What are we looking at? Well, the whole basis of what we're looking at today from the testimony is not so much are they going to cut in July. We know they're going to cut in July. That's not up for debate. Markets are still 100% convinced of that fact. What you can see here though is quite a distinct divergence between the pink and blue line at the end of last week and that was because the prospect of a 50 basis point rate cut at the end of this month dropped severely on the back of the fact that the jobs data in non-farms was so strong on the headline figure and so we're anticipating 25 basis point rate cut. So that's fine. I have always been of the belief that 50 basis points wasn't going to materialize. It never was the base case but that now has been very much priced off the table. What are we looking for then? Well, a couple of other different things particularly in the language of which Powell and his statement and also potentially some of the answers when he gets questioned from politicians is the impact of the trade war. The ongoing trade war that the U.S. government is having this protectionist policy aiming at predominantly China but also the Europeans, countries and Mexico and Canada and so on. What's the impact and the view of that on what the Fed think about the economy or the impact on the economy and the subsequent policy that's going to be needed in the future? I think that Powell is a very savvy character now in the way he responds to these questions. I think he's unlikely to really commit or comment specifically or directly. To give you a bit of context though when asked before whether a trade deal between U.S. and China would diminish the case for cuts he stated that the Fed does not just monitor one development citing global growth as another factor that the Fed is cognizant of as well as inflation and jobs growth. So again this is very central banking 101 very uncommittal but also keeping it on the table with your options there to respond as you see fit to incoming developments so in this case highlighting not just to trade war but inflation and jobs at the same time. Although G20 ended positively there was no obviously implementation of the risk of further tariffs on the remaining goods from China it still does remain a sticking point one of the big headlines we've had just in the last couple of days it's been a bit mixed actually I read this morning that the U.S. are loosening some of the conditions around this idea on the specific sanctions on Huawei which was one of the big things a few weeks ago which is a positive however we've also had China being very upset by the agreement that the U.S. are going to sell over $2 billion worth of military arms to Taiwan which is a very hot topic domestically in China about the sovereignty of that particular island. So the bottom line here as I've defined in that bottom bullet point is how much risk does Paul place on the trade war the more he almost talks about it almost the more dovish that's probably likely to be interpreted i.e. the bigger risks that there are one of the big things here and again to summarize this is it's not so much about the July rate cut what the market really is zoning in on when this event unfolds is what do we get out of the communication that gives us guidance for how severe a rate cut cycle and how aggressive and quickly the Fed are going to cut rates so for this year obviously we're priced for about a 75 basis points worth so that would be in a usual cycle about 25 basis point cuts so three rate cuts you know is that appropriate remember the market has nearly always over extended or over reacted to Fed communication i.e. typically the Fed now from what they're saying to what the markets are saying is the market in overly dovish positioning and therefore is there a potential for a hawkish reaction today and a lot of that could be defined by his assessment on the trade war this is one thing to be aware of as well and you know why are we cutting rates in the US well as I've put here in the title what about after July we know that rate cuts happening well this is a look at US GDP now the US economy grew by an annualized 3.1% in Q1 of 2019 that's a healthy number but if you were to kind of this is backward looking of course to Q1 think about where we are now I keep reading more and more articles over the last few days about downplaying corporate earning season and about how it's going to be quite a tough earnings era at the moment particularly with forward looking guidance and how the global economy is slowing and we've seen this materialize in the PMIs and so on so the question mark is not so much that Q1 was quite strong 3.1% what does Q2 look like in America so what people look at is this this is the Atlanta Fed GDP now model and in summary the Atlanta feds what they do is they basically mimic the BLS model in its various different component weightings that generates this GDP forecast the quite neat thing though about this particular model and the reason why the market follows it at the Atlanta Fed is because it basically recalculates and updates almost in real time whenever there's major US economic data so if anything you're getting a rolling mathematical calculation of what then should be the outcome for Q2 GDP and the point being here is that I think the latest estimate and this is the Atlanta Fed GDP now estimate is down at 1.3% I think the last time I checked which is the green line so if you were comparing this by numbers just look at this this is Q1 GDP 3.1% if the GDP now model is correct and we drop to 1.3% in Q2 don't forget that puts us down at the lowest level of growth in the US definitely in the last couple of years hence the reason why Trump is so vocal about trying to talk the market up hence the reason why Trump is so critical of drone power and the Fed's policies that they should be cutting more aggressively to prop the market up because on the balance of the economic data Q2 GDP is anticipated to be the worst in definitely going back to prior to 2016 so it will be the worst US growth since the Trump era of being US president and he's fully aware of that so definitely the conditions warrant not just one but possibly further rate cuts to come from the US so policy options questions here that the market will be looking for clarity on will be one what is the pace of rate cuts for the rest of the year one and done perhaps two or three is there a possibility of a 50 basis point rate cut at the end of the month maybe the market has misread the idea that just because we had a one big outperforming job creation figure in non-farms a few days ago maybe the Fed want to keep the option there hang about maybe we do need to go big not fast to get it in and show the market that we're serious with our intentions and so I think that that's a very low probability that that will be the case today I think if anything I think that Powell I hate to disappoint intraday traders but Powell is so good now at managing these types of things even though this is quite a difficult balance I feel that he'll manage this quite well irrespective of short-term volatility do think we might finish the day and we'll still be set on the same path which is a rate cut in July followed by the indication of further rate cuts to come with the option being that they will be responsive to incoming data and developments that's my kind of overall summary third point what if Powell delivers a hawkish cut what I mean by that is this idea of they cut rates in July but then they sound quite upbeat that maybe they just want to see how the market reacts to that one event and then look to take action accordingly that would be deemed or classified very hawkish in regard to comparison to current market positioning so the likelihood is there yours would rise, Dolly would rise equity would fall under that scenario an interesting stat for you you've probably heard me say it before but the Fed have never not delivered on a policy change when the market is priced at over 50% remember the market is priced heavily for a rate cut 100% in fact and so for the Fed not to deliver it on the end of July rate cut would be a massive blow to the central bank's credibility that would be an absolute and all-encompassing failure of monetary policy banking and communication the point being then is if they wanted to take July off the table completely let's say as a zero prospect as I think that is then Powell needs to come out and say something super hawkish to realign market expectations that would have the most severe impact on markets today but again I would say that is the most unlikely scenario this is one other thing I want you to be aware of is that after today remember what I said the Senate speech really is a non-event but actually on Thursday and Friday this is the list of Fed speakers that you have this is what I call the Fed protection team and it's a classic strategy adopted by the Federal Reserve when there is a very important big potentially market moving speech from the Fed chair they basically schedule in a whole host of speakers and you've basically got the full spectrum here from hawks like barking and more centre hawk but Williams then you've got the most dovish member of all Kashkari you've got to mix Evans, Kuala, Williams all voters Bostic barking, Kashkari non-voters the point being here is that what you might get is that if there is a large bout of movement these guys will come in and look to realign market expectations forward guidance very classic strategy in central banking the other thing to be aware of as well is that later on tonight even though I think that the minutes will be dwarfed by the release at 1.30 from Jerome Powell what is also coming out this evening at 7 o'clock is the Fed minutes of the mid June meeting so not only have you got Powell you've got the Fed minutes tonight remember that statement that Powell said giving that guidance to markets he did also mention that inflation is to be monitored closely in terms of their decision making that is part and forms part of their dual mandate and so US CPI in fact is due at 1.30 tomorrow on Thursday and that will be a particularly important point as well to have a look out for by the end of this week given what Powell says the CPI data comes out as well as the Fed minutes we should be in a much better position for a fairer reflection of the current status of what is it that the Fed are going to do by the end of the year so with that being said the likelihood is that probably the most market movement of the week is going to come over the course of the next 48 hours alright that's it from me quick look at the calendar and then I'll hand you over to Sam so that's your Fed wrap but I'm sure we'll go over that again closer to the time at 1.30 here's the calendar for today do be aware for the UK you've got the release of UK GDP coming out a bit later the GDP estimate 3 months on 3 month figure expected pretty flat excuse me the month on month estimate here for May 0.3 so yeah UK GDP alongside though manufacturing industrial output goods trade balance and construction output so a couple of things there to keep an eye on you kind of know the state economically of the UK as we've seen with the PMIs last week things are kind of gradually feeling the bite of the Brexit blues if I can put it that way and so things have been slowly is the general theme so if manufacturing output industrial was to spike higher let's say GDP was surprisingly strong these would all have quite short term positive reactions in the pound given the overwhelming short bias fundamentally for sterling at the moment otherwise other quite interesting things this afternoon Bank of Canada have got their interest rate decision not actually expecting any change in rates there rates currently reside at 1.75% then you've got the DOE oil infantry numbers so just quickly I know Sam will look at the charts himself in a second but the numbers as I mentioned right at the beginning of the briefing and we had a draw down last night of 8.129 million way bigger draw down than what we were expecting cushing a draw of 754,000 gasoline 257,000 draw distillates build 3.69 million crude is up about a dollar as I am speaking helped by technical levels being breached and the capitalists being obviously an aggressive draw down on the infantry situation alright that's it for me have a good day good luck for power if you're trading that event thanks very much hi guys good morning hope we're all doing well have a quick look over the charts how we're trading just 40 minutes now through the European open and the DAX which came under a bit of pressure brought US equities down with it we're now below the pivot but found a bit of support as we neared towards the S1 was also a couple of previous resistance levels from yesterday which of course we hadn't really tested since breaking through those around 10-11 yesterday so that's just found support so keeping an eye on the DAX obviously the key level now remains to be that pivot point which offered a bit of support this morning before we broke through it at 7 if that is to break the US equities which well with the DAO underneath the pivot the NASDAQ the NASDAQ the code right you can see never actually made it through but also the S&P similar to the DAO was just below there so this is the key level here for the S&P and then of course we're keeping an eye on 29 79 free quarters the area of support before we push lower in correlation with the DAX there so not of course out the words I'll be keeping an eye on what the DAX does around its pivot level we'll come back onto the S&P shortly but that is a key point key zone if you like the retest here just below the pivot as well you were stuck in a tight range yesterday just doesn't really want to move at the moment it seems however we did have a nice spike higher this morning up towards the R1 retests of different trend lines from yesterday which you can see offered a bit of an opportunity on that breakthrough was also retested late last night 6 and then again this morning so that would have been a good trade back towards the previous high of the day that we had broken through however if we were to drift back up towards that another test of that you'd perhaps start to get worry but definitely as a line in the sand you would still want to have this on other than that to the upside the R1 and those highs from yesterday and the day before from the evening on Monday obviously remain quite important you can see that coming in a zone just above the R1 so even a break of that trend is too carried away that this market is going to push higher to the upside obviously to the downside I should say those lows from yesterday and today all quite key S1 marking up pretty much bang on yesterday's low as well the pivot while chopped up could be a bit of a guide if you're looking for a place to go short if we can clear that area you might feel we then get a better test of those lows from yesterday this trend line spiked through around 7.15 but still well respected and that could give you the opportunity to get short on the break of the pivot and that later on the pound let's bring this into picture now 125 an area of resistance of course we do have numbers out at 9.30 though so just bearing that in mind to the upside as well the pivot remains key like it was yesterday morning but you've got some nice resistance from yesterday afternoon as well trend line from yesterday's lows I mean it was broken I guess early this morning we've had a retest of that in an ideal world if you're looking for the short at the pivot that would also come in around the same point but for now holding up quite nicely the price action just getting squeezed from the upsides and as long as we stay on this trend you've got to be happy to be short in this market target I guess if you're 125 short the low of the day and low of yesterday of course the lowest we've been for some time but not looking too healthy at the moment for the pound just having a look over quickly again to the Dax which is just trying to extend its legs higher, euro stocks now above the pivot but that key level is literally being tested now, similar to the S&P and that breakdown was just above the pivot so keeping an eye on what happens there for euro stocks Posit dollar, let's have a quick look you can see yesterday was a day where it just drifted lower and lower and that has continued today key support coming in around the S1 you've got the low there from the 21st so keeping a monitor on what happens around there another example of these trend lines just breaking, it's been just beautiful really for the Aussie dollar in the last two trading days wait for the trend line break, go short and you're laughing it seems but looking for an opportunity on a pullback area if we have a look at yesterday's low slightly chopped up it's perhaps a tricky one to really work out where the best place to get in is now for the short if you could get back up to 69.41 you would take it but maybe worth seeing the reaction that we get on this S1 which as mentioned is that key level support from a couple of weeks back as well yen which was relatively choppy yesterday into the afternoon has just hit, well we hit the low from yesterday early this morning and that along with the S1 has provided good support, we're in a bit of a range now so let's bring this rectangle in pivot yesterday's evening's high and today's high as well probably best way for either one of these to get long or short, probably prefer in the short just given the recent trend of this market over the last couple of days however you can see other than that I mean you could argue just above the pivot is still nice other than that I'm not a massive fan of getting into a trade unless we got to the R1 or a break potentially of that S1 but just having a look here, longer term levels below S1 there is a bit of room to go down so while in a range not too sure if we were to come back down to S1 low the day you'd want to go long so maybe prefer to get that short higher up towards the pivot point as well for that market having to look over at goal and then we'll have a look at oil as well after the API push higher but gold which good opportunity yesterday morning on the break of that trend we had a lovely retest of that as well, good opportunity to get short to S1 we then found support on a previous level just before 10 o'clock forward drifting back higher and again another opportunity when we broke the trend to the upside so those trends are working nicely you can see we're just having one developed here just over the last 15 minutes 1, 2, 3 keeping a close watch on that so while perhaps this morning the pivot looked a really nice place to go short if that trendline breaks for me that takes away the idea of wanting to short the pivot especially looking at the reaction we saw every time a trendline broke yesterday to the downside the lows are pretty good in level support that failed break of the low we had at 3.30 still have that marked up chart opportunity wise I think would happen on a break of this trend to be honest rather than looking to go short pivot to the downside if we were to break those lows just be careful a lot of support just below their S1 and then the lows from yesterday as well wrapping up here with oil and we'll have a quick look one more time at what European and US equities are doing oil you can see breaking out of that range from yesterday helped by the API bit of a divergence as you'd expect from those numbers with gasoline gasoline pretty much flat from 9.30 yesterday oil I would have the view that we're going to remain going higher as long as we can stay above this trend we're just finding support on what was the previous high of the Asian session so 58.75 and around that zone here as long as we stay above this I would call that what 69, 10 tick level you would be happy to stay long while the the draw was big the opportunity of a break below that trend isn't the worst idea in the world yesterday's high up towards R1 and that is the highest we've been since last well beginning of the month from the second which you've got quite a lot of resistance around there so even a break higher just be careful in terms of a place to get long lower down I really do like just below the pivot 58, 14 kind of area we had quite a decent bit of price action over the last few days which for me looks like it could be quite a nice place to get in there for oil I'm going to look at equities obviously the dachs just slowing down the euro stops hitting that level perfectly so resistance in Europe just holding US equities recovery here and obviously that pivot as we mentioned for the S&P vitally important so understandably the sellers just coming back in is a pretty good level to have gone short if that was the bias that you had any questions as usual obviously please do let us know data just to run over that one more time you do have some numbers out shortly from UK 930 so we've got what's that 40 45 minutes I think my maths might be wrong there maybe 40 minutes or that comes out so if you're in the pound trade by 915 you really want to start unwinding that position hope you will have a good trading day and good rest of the week if I don't catch up with you