 Okay, very good morning. I hope you are well. It's Friday the 13th of September As you can see the main man Mario to the side of me gonna have a bit of a recap of the ECB from yesterday particularly choppy price action, of course we had that initial spike and sell-off in the first move which was correctly anticipated by None other than mr. Sam North yesterday, so a great call on how he saw that playing out Again really very much if I just bring up the chart a function of how the news comes out when you're trading a monetary policy event I guess for anyone new to this. It was a really good example of why you shouldn't commit Immediately to the first spike that you see in the marketplace This is particularly prevalent when trading something as complex as a monetary policy announcement It's very nuanced it is very complicated and it has many parts which means then that what normally happens is the first Headline that drops down. Let's say a Bloomberg terminal of which say Algorithms are responding to that's the first immediate move that gets hit and in this case If they cut only 10 basis points when the market was more positioned for something potentially more And then they do QE of 20 billion the market was expecting 30 That's when you get an initial very quick spike, but then when it comes out and it's open-ended There's a tiering system. There's more favorable terms around the targeted long-term refinancing operations and everything else That's more dovish market then comes off And so it really goes to show that you really shouldn't and this goes really more often or not for trying to trade More complex economic data sets like non-farm payrolls when then they were not binary events They have, you know multiple numbers and variables to monitor So think a good example yesterday, and I hope if there's anyone new to markets You watch as our briefings that you know, this was an example of you don't need to have that FOMO There can be plenty of opportunity there after and if you actually look at the market as we went through the afternoon You actually had a really quite impressive rally after all, you know is what he's done Enough particularly on the tiering side, which we're going to discuss Shortly to help alleviate any of the tensions in the kind of interbank market that banks can lend and therefore offset this looming downturn That seemingly feels almost inevitable in the eurozone and as such then the euro continues to recover at the moment But we're going to go through and we'll have a look and review exactly what else happened Elsewhere the pouncing a little bit of up would move this morning, and I'm also going to go into some Excuse me articles of interest Particularly in regard to the DUP report in the times overnight That was quite interesting which I'll explain more, but you can see sterling already breaking above yesterday's high Above it's R1 finding some technical resistance at the daily pivots at the R2 this morning Equity markets pretty quiet although European bank stocks off to a pretty decent start on the back of the tiering announcement of the ECB yesterday and Fixed income futures pretty flat in the case of the US 10 year However, the bund trading down a decent amount this morning underperforming in the wake of the ECB Okay, so let's get Into the news and as per usual let Sam go over the charts in more detail. So let's see what this chap Unveiled in his pranultimate meeting before he departs and hands over to Christine Lagarde at the end of October so here is the Kind of summary of what happened. So they cut the deposit rate rates obviously there's three major rates in Europe the one that people focus on the most deposit rate being that the one in negative territory So they cut that by 10 basis points But as Sam was informing you guys yesterday in the briefing There were some outside bets that they could have gone more aggressive 20 basis points. I'm not sure if you saw that ing graphic They're kind of crib sheet infographic And they were going for 20 they weren't the only bank out there with those calls So we only got a 10 cup the other thing then I'm going to come back to the tiering in the forward guidance was here Quantitative easing net purchases will be restarted at a monthly pace of 20 billion as of November 1st Purchases to continue until shortly before the first rate increase very important that latter phrase Basically, they're saying that it's open-ended. It's not until they start lifting rates, which is Way off the cards now Remember we were only a few months ago talking about language that would specify From a seasonal point of view that rates would rise basically in the autumn We're now talking we have seen execution of a rate cut and now the likelihood that QE is going to continue for some time This is a look at QE in its historic form from Europe And as you can see going all the way back to 2014 15 16 when it hit its peak when the ECB were buying an excessive 80 billion net asset purchases per month Finish at the beginning of the year. It's going to restart then in November Excuse me, and this is where we're at at the moment. So back to 20 billion, but remaining at that pace Now couple things around this if you take into account the recycling of the proceeds of existing Bond holdings that mature because you remember there are a number of bonds Bonds by nature hit their end date and their redemption and what the ECB effectively had been doing Like other central banks like the Bank of England and so on Unlike the Fed who have a period conducted quantitative tightening others and ECB will continue to roll over those maturing bonds So other than the 20 billion that they're buying that does also mean that if you take into account the recycling of those proceeds of Maturing bonds they could end up purchasing about 35 billion euros a month So it's definitely a substantial quantitative easing program And is this enough then as they have aimed to do in previous years to counteract the economic deterioration that's been happening at the moment QE though wasn't completely I Mean there wasn't a cur a consensus here as you can see Countries which you would imagine the likes of Germany Austria and the Netherlands All were against and opposed what draggy wanted which was to go into this QE announcement to restart in November Estonia and France were actually the other countries which also opposed But as you would imagine this kind of north south divide Italy Spain Greece, of course Ireland the other country bailed out over the last couple of years or backers of Restarting the quantitative easing program. This does though have ramifications I feel for the fact that draggy is not going to be there for much longer And if you're Christine Lagarde at the moment, you've got an absolutely divided Eurozone about what they feel is the best course of action to manage this Economic environment at the moment So she's definitely got a work cut out as soon as she comes in but the stall has been set now from draggy And we are expecting continuity and approach It's whether or not she can appease then Her former country of finance minister. She used to be back in what? 2007-09 In France and then the others as well mainly being Germany The other thing of course that the ECB announced was this was tearing now Me and peers are actually talking about this At 10 o'clock last night so You know how ridiculous it does get at times, but the tearing system is Incredibly complicated. I started reading some research reports last night and I thought do you know what? I'm just gonna go to bed because I need more time to figure this out, but from a top level I can express it as far as traders are concerned because there's a big difference in markets And I try to express this to a lot of our interns newer traders That what economists write And these are certainly the research reports that I'll read. It really doesn't hold much Use for an intraday short-term speculative trader. It really is too complex What the economists write are really to satisfy more Hedge funds for example portfolio managers who are investing much more in the long term and really need to get under the bonnet to Understand what are the ramifications for different sector out and under performance? What's the overall medium long-term picture from a trading point of view? It's very different In in the short more volatility environment and from that there's a couple of things that I can definitely go over So to counteract the idea of negative rates if you think about it The banking sector this has been very prevalent overall since we've hit this zero interest rate policy era Banks have really struggled because their margins are getting squeezed and particularly if we go into this negative rate environment That's only going to hurt banks more But if you think about the transmission of monetary policy into the system It's not the central bank that goes straight into the consumer The central bank must operate and lend and add liquidity to the interbank market the big banks who then lend amongst each other Which then artificially then lowers the lending rate for us the consumer as well as having a low interest rate environment direct from the central bank, so Managing of this this this these intermediaries these banks is critical but the problem you have in the eurozone at the moment is a lot of disruption in Italy Banks there have been under incredible amount of stress as to in other countries like Spain But then you've got cut you've got banks like Deutsche Bank Which have been absolutely under pressure at the moment and are Systemically important to the functioning of the financial system. So the central bank like ECB. No, they cannot risk having any type of Concerns around these big banks. So how can they counteract this but keep the the negative rate in place? So what they did what they've done is they've announced a tiering system to exclude Some of the banks excess deposits from negative rates now in theory some calculations From some analysts say this would cut banks costs of negative rates I eat the banks amount that is being penalized by negative rates from nine billion euros a year to six billion That's a substantial decrease to add then and kind of release more liquidity into the market We should effectively help then lending conditions to offset then this looming economic recession if the inversion of the yield curve Does it ever to be proved to be correct? Now while tiering will help northern European banks because they have generally large excess deposits Cheap loans will also help southern European lenders who obviously face higher Funding costs given that they're generally seen as a lesser credit worthy place To part your cash. So All of this I think that's probably the singular most important thing that actually came out yesterday I think that's the first time that they've moved into this tiering system They're not the first central bank to do this. I think Japan and this follows. I think the Swiss model This dates back a couple of years ago when obviously I dropped the floor on protection of 120 in euro Swiss They went negative in rates, but they also adopted this tiering two-step tiering system So yeah, very important that development. The other thing of course that they did was down at the bottom This is targeted long-term refinancing operations or otherwise shortened to teltrose Now what they did here as you can see on the right hand side They came out and confirmed plans to offer cheap loans for banks under their third Teltro Sweetening the terms by cutting the cost of borrowing and extending lengthening maturity to three years from two years So another particularly dovish move and again this in combination with the QE open-endedness With the tiering system all offset then the initial spike on the more dovish disappointment on the 10 cut and the 20 billion So that's where you had that mixed move overall though these latter Measures as well as the ECB keeping a little bit left as ammunition by not going as big on the first two parts Means that actually is this a positive thing? Does this mean then that this is a good measure to try to counteract this eurozone downturn therefore? Medium-term outside of that initial volatility. This is a euro positive development This is a European equity positive development and therefore net negative European fixed income And that's what you're seeing in the market this morning as far as the asset classes are concerned so hopefully that gives you a bit of a summary of Why the market did what it did and the importance of the announcements that they made all right Let's jump over to the US. I did see that all three major US indices closed a positive territory yesterday Not only at ECB Stepping up in terms of their monetary toolbox being unleashed You've also got more positive news on the trade side and of course this still remains the biggest Threat to the global economy But this was something which has kind of developed further from headlines from the day before Trump administration officials have discussed offering a limited trade agreement to China that would delay But most importantly and for the first time the trade war has kicked off They would even consider rolling back some US tariffs according to five people Familiar with the matter in the Bloomberg article from late yesterday. Now that latter point I feel is very important if they start to roll back US tariffs I think that is a meaningful shift in a more positive direction for these trade talks interestingly, we've been seeing activity based economic data in the US like Manufacturing PMIs started to weaken the consumer so far data has remained robust However, if manufacturers and corporates start to suffer Inevitably this starts to lease then to potential threats for unemployment to rise Wages then to decrease which inevitably means the consumer becomes less confident And then that consumer data starts to weaken Trump knows this and that's a risk to the US economy going into an election year He can't allow that to happen. So rolling back US tariffs Is it inevitable at some point if he's to fulfill his mandate of securing a second term now One of the things then this follows of course what we had on late Wednesday Trump tweeted that would be putting off 5% increase on tariffs on Chinese goods This comes ahead of working meetings between the teams of US and China, which are going to take place next week so all positive signals and There was an article if I flip over to this one in Reuters privately run Chinese firms bought at least 10 boatloads of US soybeans on Thursday the country's most significant purchase since at least June Beijing this week renewed a promise to buy US agricultural goods such as pork and soybeans and of course That is the most valuable US farm export where agriculture is Absolutely pivotal to the performance of not only the US economy from a revenue stream, but Importantly and what will be key for the political popularity for Donald Trump where farmers are becoming increasingly Frustrated by the fact that the trade wars are now having a meaningful impact on their ability to perform So all of this again quite positive this in combination with the ECB equities did finish positive And all things remain equal at the moment. I'm feeling quite bullish again But as we know headline risk is key just because they are You know looking positive at the moment We've seen this many times before and if there's one Distinct pattern of behavior Donald Trump has had If they are going to have any type of meeting whether next week or potentially face-to-face in future Trump loves to then just remind them via Twitter Who's the boss and he comes out and says something just the day before a meeting That's quite critical of China just to appease the kind of domestic Electra that he's being really aggressive going in and strong-handed for the best interests of America. So I Do feel quite bullish from the moment though All I would say is there's always headline risk Associated though to these things. So you need to be quite responsive to keeping on Twitter for anything out of Trump Okay final stories before I hand you to Sam if I just have a look at the Pound this morning the pound is actually out performing cables up 57 pips Breaking a bit of a range here of the price activity of the recent days You can see here. We've broken the high that was seen on the 9th breaking some of that range as well from the 10th We've already tested the R2 Now a couple things I'd like to stress here One is this story came out overnight It's coming it came out of midnight the DUP open store to new Brexit deal for Boris Johnson Party agrees Northern Ireland could take some EU rules. This is according to advisors close to Arlene Foster Now that report has already been refuted the BBC have quoted her as saying the DUP denies the report It would accept Irish C checks. So that came out overnight one minute past midnight So a couple of important points here as the way of news is released Just given the fact of the job that I've always done. I'm aware of these kind of mechanisms. So The times often have a an important article that they released by an automated fashion at one minute past midnight If you were to Look at the Sunday Times website at one minute past midnight You'll see that all of the major articles initiate on their website live at one minute past midnight Now that's fine. It's not really important that we can but definitely if you're gonna get a breaking piece of news to get some edge Potentially on a move just what be aware that that's the mechanism of how the news is released When it comes to the times of what I've seen over the years now importantly, even though this was denied already Earlier this morning that always doesn't matter Remember if people start to circulate this article Think about the way of which news is disseminated even though this has already been denied by our Arlene Foster It doesn't matter because if people start sharing this news without the rebuttal the markets gonna move and You're just being stubborn if you're not gonna get involved if you're a speculative short-term trader looking to get hold of some momentum If you are a more activist type trader Yeah, you've just got to go with what the market's doing stop using your brain trying to rationalize the situation That's when you've got to go with what's happening on the screen Importantly though, I think from a bigger context here For me personally politically there is no smoke without fire now think about this We are going into a general election all that's happened in my opinion is it's been delayed We are going to a general election The potential outcome of that general election is that Boris Johnson may well come out with a majority government Now there's obviously a lot of risk to this and so on but let's stay with me Let's talk this through if he does get a majority He doesn't need the DUP anymore and Arlene Foster does not matter this lady Who's been absolutely pivotal during the Brexit process now? You don't matter anymore. So step aside. So what does that mean if I'm Arlene Foster? Well, if I'm Arlene Foster, I know this I'm gonna start talking to Boris Johnson I'm gonna start saying to Boris Johnson potentially we could accept a couple of European rules Actually, if it helps you get the deal over the line as long as we can be involved in your government and have some say and Ultimately receive funding and still be aligned to appease that we're part of Britain So again as I say, I don't think you get smoke without fire And I think that this is true even though she's come out and denied it this morning and refuted the report This is the way that journalism works to that so That's just my view. I think the pound is absolutely valid to rally even though. She's denied it this morning The move though in my opinion is done at this point I think if you if you've missed it, I'd be a little reluctant to get too aggressive to you want to get in again At this point perhaps if we come for a little bit of a further pullback Could be interesting. I'd be more concerned then or have other asset classes and general market sentiment for the day Shaping up in that regard Okay, quick look at the calendar. I feel like I've been ranting a little bit with this briefing So let me just wrap things up If I just make this a bit bigger, let's see what's on the agenda for today You've got very light morning Going into the US session import Export prices US retail sales, of course will be interesting We are looking for a slight decrease at point three from point seven in the month-to-month retail sales Remember again retail sales as I was kind of suggesting with much monetary policy events retail sales is quite a tricky one If you actually look at retail sales, it's month-to-month year-on-year ex-auto month-to-month Ex-auto gas and you get the retail control group Now not only that you get revisions to all previous of those numbers. So even with retail sales report on its own Excluding the fact that we also have business inventories Well, that's later. Excuse me including the fact we have import export prices coming out the same time retail sales alone is 1 2 3 4 5 Times 2 10 pieces of data coming up So again, it's not about trying to commit and take a gamble and risk Inappropriately to try and trade this data It's about understanding it and then looking to take action if it should show its hand If there's an outlying number and if it's all pointing in the same direction could then often offer the best opportunity So 130 some data and then you've got the preliminary University of Michigan Not expecting a great deal out of that to be honest I still think the consumer Relatively holding on to some degree of positivity at the moment in any oil traders Baker Hughes Rick count later And then for any sterling traders Bank of England's come lift is speaking at a Eurogroup forum later this morning at 10 15 Okay, that's it from me I'm gonna wish you a fantastic weekend ahead And I'll see you on Monday Thanks very much guys Yeah, hi guys. Good morning Friday the 13th Not too spooky of a day. We have a look over the pounders as you can see breaking higher and You know 124 57 of course the the futures roll over now trading the December Contract as well. So now we're back above the that level that was the night Of course, what was quite a good level 124 technically on the old contract now We are above that but yeah, this headline putting us as through here in some way a quick look on the On that daily, you can just see how important it's gonna be literally where we're trading now was the the low that we had back on the 17th of July of this contract. So where we closed the week the effectively the day as well will be massive for for this market and At the moment it seems that that conversation me and aunt had about the Chance of a lifetime to get long pound could well be right now Looking like a massive mistake 400 ticks Above that low and you can see what happened just psychologically When we failed to close below 120 and we're now All the way up here in what a difference a few weeks has made that The pound obviously this is this is that key level to keep an eye on and focus on for the remainder of the week I'm gonna look euro Euro's loving it as well, of course So what's good for the pound because of Brexit is gonna be good for the euro to an extent as well and euro pound while I was bringing euro pound before we go back to that euro because that's got a Very important area as well Can we for the pound here get below what has been such a good area of support going back to June as well? I don't know the test in July and then a couple of days ago You know to focus on that area for the end of the week would be massive massive if we can get a close Below there for the euro pound euro as mentioned pushing higher as well And we're coming up to levels not seen since 29th of August so quite a key point to to keep an eye on there and you know speaking to a couple of friends yesterday Yesterday, and I've told you guys I had a friend who was it was been long silver for quite some time And it was going well and it was a winning trade for him and They were looking to get back in and the idea of you know yesterday with with some dollar weakness and with the ECB cutting rates and Donald Trump within a matter of moments on the Twitter Saying that the Fed should be doing so as well You know, are we gonna get now some dollar weakness into the Fed meeting next Wednesday? And of course silver and gold may like the look of that The dollar already down 0.2 today So a bit of a dollar weakness across the board key level for euro just being tested and of course you'll be looking at any of those other Previous highs as areas of support in terms of looking for a reversal for the euro Understandably we're finding some resistance there. I think it's you know probably We haven't quite got it yet But what has really helped the the euro in recent times when you do get push higher to then get short again is when you can get a build up of a trend line from from the lows as well and Yeah, you can know if we close below say the previous high of yesterday Then we can drift lower of course, but certainly for a more medium term trade I'd like to see a trend line kind of build up Much like the last few weeks and months and that for to break and that give the Q-Turt to get short again But we will see of course with the Fed coming next week you'll be interested to see what stocks do and we're You know a similar day from yesterday away from all-time highs again in in US equities and Maybe go just draw that that line on there at the 45 2945 you see what happens Just technically just technically break above then the good stories make more impact to the upside People that were short don't want to be short anymore and the next resistance we found You can see from the breakdown before the last day of July and then yesterday the lower point of the the day 3000 psychological handle on future. So technically working very well there and you can see the all-time highs about just under 29 30 29 So it wouldn't be too surprising to see us to get that today However, we have hit the the high from yesterday already a one two three four five six times on the hourly So strong resistance there keep an eye on that because a break above there when there's real volume Could be a formality up to the all-time high worth keeping an eye However on the you know the trend that's to start into form from the the lows We're keeping obviously a watch on the Dax what that that does as well this morning But I think overall we've got to be favouring places to look to get long for us Equities three thousands has worked those so to the downside There's some other key points just below the previous highs that we had back on the ninth and the eleventh at 2992 which I'd also like to see hold as support and only really then if we were to get below there Yes, back into no man's land But as a key area of support broken then I guess we could start looking for that real test of 2944 again, which hasn't actually come as of yet. So stocks are higher dollar as weak today Donald Trump will be happier and of course oil a couple of days has finished lower Coming up to a key point I'm just gonna put this back on to a 15 minute chart just to show you how key this area of Resistance could be for for oil price and we're just coming to the lower point of that zone 5526 to 38 We'll take a couple of cent either way You can see we struggled one two three four and now five times to really get back above that area So definitely one to keep an eye on for oil traders and to the downside the the lows of today have been again Tested quite a lot as well. So perhaps a mini range coming in and as good as ever For a line in the sand for oil price there as well If we were to break out the top part of this range Obviously just keeping an eye on the load that we had from Wednesday, which ignited another leg lower around 10 30 Yes, they went that had broken quick look over at gold as we did have a push this morning on that dollar weakness We come back to to test their what's been really key technical level 1508.7 you can see from yesterday Yeah, after noon and this morning and again just now. So just keep an eye on this how well the bulls defend this level back below there While you would still have an area of support on these previous highs. I would just Just be favoring I would say if we can get below 1507.8 so around where I'm just gonna draw this circle That's when I would then be confident. We can then drift lower About the moment the balls are in control and the higher the day you can see Not too far away from where we are trading quick look over at what the Dax is doing as it's gonna be important whether US equities as well can get a break of that five times tested higher from the last 24 hours It's found resistance on its high just coming down The pivot a key area support a bit of a small range Not to unlike the Dax to be contained on a Friday morning Any questions as usual, please do let us know obviously with it being Friday 13th I hope you're all very safe out there But any questions, please do feel free to to contest us throughout the day Couple key levels to keep an eye on as we go into the close of the week just be aware of that contract roll over on the the futures and And when we speak to you all Monday, it could well be that stocks are at new all-time highs