+210 pips on the day
This chart and a few others this week are going to serve as reminder of the power of flows and month/quarter-end.
It’s all about Brexit and talk of a deal on financial services has the market cheering. The BOE forecast of slightly higher rates post Brexit was also a catalyst.
As for what’s next, Brexit is going to dominate. The market goes through various spells where it’s wildly concerned and then hopeful and there’s no end to it in sight. I think it will end up not being a big deal because it’s 2018 and no one aside from Trump is interested in tariffs but there are plenty of other opinions.
The thing is, it’s going to be tough to be short. There’s always the risk of a Brexit deal headline.
At the same time, you also face the risk of more turmoil. Even on a deal announcement, that could immediately be undercut by Boris Johnson (or someone else) plotting a coup.
Finally, there’s the economic data. Here’s a sampling of some recent data:
- Weekly earnings 2.6% vs 2.7% exp
- CPI m/m +0.3% vs +0.1% exp
- House price index +3.2% vs +2.8%
- Nationwide house price index +1.6% vs 1.9% exp
- Retail sales ex auto fuel -0.8% vs -0.4% exp
- Consumer confidence -10 vs -10 exp
So it’s a really mixed bag. We get some Markit surveys tomorrow and we’ll take it from there.