 Very good morning to you. It is Wednesday 19th of August. I hope you're doing well Just a quick reminder don't forget to subscribe to the YouTube channel hit the bell icon and turn on notifications Because we're going to be covering the FMC minutes live from 6 30 London time myself and the team this evening So if you want to join us and it's going to be interactive You can ask questions and so on. We'd absolutely love to have you with us But let's just look at the markets this morning get straight into some of the main headlines and what to expect from the session ahead and Already we've had a bit of a break higher in sterling currency You can see up here. We'll get these up in a bit more detail in a moment But a continuation of the push that we had yesterday in cable and also euro dollar trading marginally higher Of course coming as the dollar continues to remain fairly suppressed at the moment We're down Well, it's actually flat at the moment as far as the Dixie is concerned But still within close proximity of yesterday's lows and certainly holding that weakening trend that has seen the Bloomberg dollar index at least down about 10% from the where we were trading in March when the pandemic really Started otherwise elsewhere the other talking point of last night, of course was US Equity indices and that's because in terms of the NASDAQ. I just have a quick look here The NASDAQ back up to record high territory So now carving out a nice area of kind of support 11 283, which was that previous rejection The end of last what two weeks ago now on the Thursday and Friday and then we've seen it rejected on the 13th And then also on Monday before the break that came then yesterday and we've just accelerated up beyond that point now Likewise then in terms of the cash market all-time highs the futures market the S&P just Flirting with that level which was seen prior to the kind of shake out when the epidemic at the time really started to take hold and 33 97 and a half we're just around there in the futures market and the S&P as well at the moment, but Very telling sign I guess on this chart This is one I've referred to of course in all the briefings over recent weeks and you know The annotations on here are the most probably important things as to why we are where we are And underlying a lot of that is when we were right at the base of this big correction in markets globally on the Pricing in of the severity of the economic implications of the pandemic was the Fed Conducting an emergency rate cut launching QE Then going further in just a few weeks later Open-ended QE purchases Large-scale and multiple liquidity measures that were put in place And this led to here I mean this isn't just the US and the Fed, but this is looking at the S&P 500 and tracking that of just generally global liquidity in the system because much like The Fed all the other central banks have had to follow suit in order to ensure that the the system can function under stress and Consumers and corporates can continue to access credit a fairly cheap rate like what we've been seeing exactly in China this week in fact with them in putting serious and Consistently large amounts of liquidity in the system so that commercial banks continue to function and they really are what greases the wills of the economy functioning in a correct and smooth orderly fashion So the other things of course that we've had With this whole equity rise not to go over in too much. We've covered it plenty of times before but the main focal point was the US Covid situation that's continued to kind of I Guess drop down the hierarchy of real pressing macro themes as generally new case numbers have Remain relatively contained particularly in those key Sun Belt regions Some of the recent US economic data has been good But not good enough to then detract from the point of moving the needle for the Fed So you've kind of got this situation of the economy performing perhaps even now a little bit better than anticipated But still with ultra accommodation from the central banks, which is only going to help the equity markets at this point In the FX space then let's just have a look Yesterday and remember the briefing on Monday when we were looking ahead for the week We were talking about these really it's kind of the make or break week for the US dollar and certainly yesterday was Very important because now we have Broken through that long-term trend line. We've been observing for quite a while in the euro I mean that 2018 summer high We've broken there and then that also goes all the way back to that longer 12-year trend line that we've been watching So now you would say the the prospects is we might get a push up up until 120 Sure, really about 55 pips away from there at the moment But then I guess the question is where do we go beyond that point? And I would say one thing to be clear is although early on in this acceleration remember Within about a month. We've gone from a 113 handle up to almost a 120 when we talk about euro dollars It's been a phenomenal move in the in the currency But one of the key things here. Yes early on was Over-delivery in the likes of national government responses like in Germany in their fiscal stimulus obviously European unity to some degree in this further integration with a European wide recovery fund, but Nearly all of the move right now is being dollar-led And consequently then it's not just a euro narrative And as the euro goes up an interesting thing to keep an eye on will be and I think it's contingent of we've got to get well Through 120 up to 125 for this to materialize But that is the ECB coming out and starting to kind of sound ever increasingly more dovish in order to just tame The acceleration in this currency pair Typically this has happened before in many episodes where particularly 140 those who are trading around 2013 14 will remember What we call jaw boning which is the central bank basically trying to talk down the currency because for countries like Germany which are heavily dependent on a lower currency being more favorable for Exports and how competitive that they can be and generally speaking then When we start to see sharp appreciation your currency it can lead to then kind of verbal intervention in that way I'd say really that's not going to become a real thing until we get north of 125 Got a breakthrough that 17 2018 high for that really to become a More tangible risk for the euro for now It's being dictated by the dollar is how I would interpret these moves and likewise then for sterling currency Of course for sterling The GDP contraction was heavy that we saw last week you've got Brexit unresolved You've got the end of furlough coming up in October and here we are just racing higher in the British pound and Actually then breaking above a really critical point We've been watching for a while at that 132 handle which was what was capping really the majority of price action both pre and post pandemic now. We've broken above there. You can see almost like the That coordinated break across these currency pairs Exacerbating some of the further dollar weakness and then just pushing up cable What is towards the second of January? It would be the high which is basically a 133 handle here in the futures 32 93 So we're trading around 45 pips away from there at the moment on the intraday We had a little bit of a price action movement on the back of some data We did have this morning UK CPI come out and it was actually Stronger than expected 1% versus the expected 0.6 the core number 1.8 against 1.3 the ONS said clothing rising prices at the petrol pump and furniture and household goods made large upward contributions to the change But the move in itself has been relatively short lived again We are expecting some fluctuation in the likes of CPI as we go through the coming Months some talk about the risk then of deflationary territory, but I mean this data would be in contrast to that at this point in time But I think overall as I said the more lasting narrative I think is the one to watch about the dollar rather than sterling so much on the sterling front, of course the other Political thing we need to be mindful of is we do have Brexit that looming political Story or broken record it almost seems because EU and UK negotiators are going to be meeting again and The latest in the FT last night was that Brussels has rejected UK's opening demands for continued wide-ranging access to the EU for British truckers this just another element then of what has been sticking points on fishery rights and state subsidies and So the expectation for the outcome of these talks happening this week is basically zero so Don't be thinking that right. I just you know, that's the main reason I want to just get short the pound because Brexit talks are not going to progress No one's expecting Brexit talks to progress time is a is a magical thing when it comes to negotiation and Although a deal does need to be really made in Coming weeks really late September October is the deadline if they really want to get it ratified for year-end Otherwise at the risk of this kind of more messy disorderly type of Brexit situation That just means then that really I think Compromise of any type of nature will not happen yet So for the moment as I said, I would continue to look at these major currency pairs on your view about the dollar rather than The individual fundamentals behind the euro and sterling so much All right, well, let's have a quick run through some of the headlines quick look at this and This is an update on the US China side of things and of course comes after we just transition my screen This comes after we had that delayed meeting. So the update is according to Royce's There's no new high-level trade talks now have been scheduled between the US and China The two sides remain in touch though about implementing phase one of the trade deal According to the White House Chief of Staff Mark Meadows. So exactly what we were Kind of alluding to in the briefing. I think on Monday, which is I don't really think there's a need for them to meet You know, interestingly to add to that point before I explain further Trump said last night quote I Pusponed the talks with China. You want to know why I don't want to deal with them now Trump said And where was he when he made that comment? He was at a briefing in regarding to the construction of the border wall with Mexico He then said what China did to the world was not even thinkable They could have stopped this virus is what Trump said. So remember what we were looking at on Monday underlying all of the The kind of bluster if you like in this type of rhetoric from Trump is the fact that over recent weeks China have Substantially accelerated their purchasing of US goods in a variety of different ways soft out of Agricultural energy products and everything in between the idea here, then is that they are now, you know moving Toward trying to fulfill this objective. So for Trump then underlying this he has got Chinese actively importing US goods and Also, I saw yesterday that the US and China have actually Updated I think there was four flights that used to happen previously before yesterday between US and China They've actually doubled that to eight now. That doesn't really sound like to me An administration who's really locking down on China in that sense. So for me what Trump is saying obviously the context is In terms of the framing is just perfect, right? He's he's talking at a conference about the construction of a border wall So you can really hit home the point about immigration about, you know, the Mexican issue About then China and the virus and how I delayed these talks It's all just political Framing and creating a narrative that would be beneficial for him in his political agenda at this point in time No more no less I'd say from that The one thing though that you have got that probably is worth keeping half an eye on though is that The US has warned Some US colleges to divest China stocks on delisting risk The move could hit billions of dollars invested in Chinese stocks. So I know this might sound surprising But when it comes to US stocks, there's an incredible amount of money actually these universities in in the States are big big business And one of the things here that they talk about is endowment funds for example And how they invest in in equities in general but part of that would include Chinese equities and what this article is basically talking about is that foreign equities make up about 14% of college endowments And we're talking billions of dollars here and Trump kind of putting out the warning that They should be looking to unwind that and obviously there's a risk of a lot of these Chinese firms being delisted in America so again another way of which trying to Put the pressure on China I guess to remain committed to what they have been doing over recent weeks But again on a surface level. It's certainly then as far as being a US based citizen It would appear then that Trump is really you know got the got the His pet pedal to the metal in terms of putting the pressure on which is ultimately a really important thing for him If he's going to come out on victorious in this election later on this year on the US political side the other thing is No, we remain at this impasse at the moment Whereas are they not or are they going to provide further stimulus and probably one of the biggest Barriers for them having struck a deal over the last two weeks has been the fact that Coronavirus is dropping in the US economic data now has been faring better than expected more recently And the stock markets are record all-time highs That's the worst type of setting for people to feel pressure in order to compromise and cut a deal As long as everything is holding up and appearing fine on the surface It lessens the need for any type of immediate response It allows you as a negotiating stance to wait, you know in that respect And then just play this out and so I would not expect really anything Forthcoming of this anytime soon interestingly though House Speaker Nancy Pelosi did say last night that suggested Democrats to be willing to make more cuts to their stimulus proposal To seal a deal with Republicans speed up the COVID-19 relief and then come back after November elections with additional agenda Items so one of the important things here is I don't think either will want to buckle But at the same time they can't appear to the public to be not willing to cut a deal of some sort Because that deal does carry benefit for tens of millions of Americans who are at risk of Unemployment eviction and all these types of things, you know So the Trump executive order is just one element and one area to support in that way that he did what two weeks ago It really is contingent that more stimulus is forthcoming and You know neither party here is going to want to look too passive at risk then that they're not really Helping the public in this kind of troubled situation that is the the post pandemic kind of era Or during this pandemic I should say I elsewhere oil markets the headline run on Reuters this morning slips as demand fears out way strong u.s stocks draw what they're talking about here is we had a Crew drawdown that was almost double consensus 4.264 million albeit do note the gasoline figure Surged the most since april just short of five million Not too much in the way of any lasting reaction to that what they're referring to on the demand side is certainly that Will the economic story recovery in america be somewhat called into jeopardy And subsequently demand by the lack of force coming stimulus in the u.s And also this ongoing tiff attack kind of a slow escalation that we've seen in the u.s. China trade war but I would say offsetting that has been the fact that China have been quite active in in looking to buy energy products in the u.s. So at the moment i'd say we're a bit of an even Situation looking for the next definitive kind of break in some kind of news to push us in either way One thing to remind you you do have the jmmc meeting today So the joint ministerial monitoring committee and compliance with cuts according to reuter sources on monday is that they Currently opec wide Compliance is around 95 to 97 in july which would be as i've said before particularly high any lack of compliance Starts to jeopardize then the potential longevity Or effectiveness of the deal so it's worth keeping an eye out for any comments that do come out if at all any later on today russian energy energy minister alexander novak, which of course is a key player given The size of production that russia represents. He's going to be joining the video meeting And this comes despite him having a confirmed case of coronavirus at the moment All right quick look at the calendar. What have we got? As i said uk cpi came out earlier this morning Was stronger than expected, but no real lasting impacts on the back of that It's really about what does that look like going forward? There's multiple different forces or risks facing the uk economy going forward That's just one so it's not quite the silver bullet if you like And then going further forward into later 10 o'clock. We've got eurozone cpi. This is a final reading You've then got the canadian reading for inflation as well this afternoon US wise it's pretty quiet. You've got the doe energy infantry numbers of course following off in the apis Then you've got the minutes coming at 7 p.m. London. So one in chicago Two in new york, so with the minutes again. I'll be on with the team later Feel free to join us. All we got to do is subscribe to the channel And then you'll get an alert as soon as we go live But we're going to go live half an hour before the event to give you a good thorough preview of what we're anticipating what we're looking for Finally speaker wise barking late in the day non-voting member following on from lights at home home depot and Walmart target that's coming out today for those interested and then from a supplied perspective And you've got a guilt auction the uk a longer dated bund auction And a 25 billion dollars in a 20-year bond auction coming out of the us as their issuance just continues in earnest at the moment Yeah, that's that's it I'm not going to go any further and hopefully I will see you online later for the fmc and I wish you a good day ahead Thanks very much