By Michael Brown, Senior Research Strategist at Pepperstone
DIGEST – Trading conditions were unsurprisingly subdued yesterday, with US desks away for Thanksgiving, and fresh catalysts distinctly lacking. Similarly tranquil trade is likely today as the week draws to an end.
WHERE WE STAND – With yesterday having been Thanksgiving, and most US-based participants away from their desks today as well, I don’t have especially much to say this morning.
As is typically the case, trading conditions were very thin indeed yesterday, with those markets that were open doing absolutely nothing of interest whatsoever throughout the session.
I guess the most notable market move was some softness in Gilts, with yields having ticked higher by 3-4bp across the curve, though we remain some way off the wides seen in the aftermath of the OBR’s shambolic leak on Wednesday morning. That said, this pressure on UK debt makes sense, as the Budget continues to be digested, and as participants increasingly notice that almost all of the spending increases in said Budget are front-loaded, while almost all of the tax hikes are back-loaded.
That’s not only an unsustainable policy mix, but also not really a credible one, given that those tax hikes are pencilled in for either the year before, or the year of, the next general election. If you seriously think government will hike taxes into an election, then I’ve got a rather nice bridge that I’d be happy to sell you.
Outside of the Gilt complex, trade was very much akin to watching paint dry, which at one stage I was tempted to do, instead of staring at a terminal full of prices going absolutely nowhere. The overall vibe of trade was, as expected, one where participants were happy to sit on their hands, doing little more than bide their time, before coming back on Monday to a market that is, hopefully, a bit more exciting – though I’m not holding out especially much hope on that front, to be honest.
LOOK AHEAD – US desks will, by and large, be out of action once again today, likely leading to conditions remaining very thin indeed as we drift into the weekend.
In any case, the data docket doesn’t provide much by way of inspiration, with only the latest ‘flash’ German CPI figures, as well as Q3 Canadian GDP on the slate. Neither of those are likely to be especially market-moving, with the former not going to move the needle for the ECB, and the latter being very stale indeed.
It’s also worth noting that the FOMC’s pre-meeting ‘blackout’ period starts at close of play, giving officials one last chance to massage market pricing away from the current 9-in-10 chance of a December cut, if they so desire.
Besides that, and me providing my usual reminder as to the potential for gapping risk on any unexpected weekend headlines, all that is left to do is to find somewhere suitable for a beverage or three to welcome in the weekend.