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From the Floor: 'A volatile week ahead' — #SaxoStrats

   • EUR closed higher Friday on ECB hike rumour, but Draghi could squash that today — Hardy
   • Bunds 50bps higher on back of the same rumour
   • Dutch election volatility, Article 50 trigger could see more bonds support — Boye
   • 'USDJPY needs to dip back over 115 if this uptrend is to continue,' — Hardy
   • Dollar sold off, GBPUSD among Asian session's best performers — Lee
   • No indication the needle will be moved on pace of FOMC rate hikes — Hardy
   • 'Look out for treasury secretary Mnuchin speaking any time this week,' — Hardy
   • Global equities remain bullish — Garnry
   • Energy and materials globally weaker in March — Garnry

saxo strats
By Jack Davies

There’s a busy week ahead filled with potential volatility to move the needle on a variety of fronts.

On Tuesday, UK prime minister Theresa May is expected to get parliamentary permission to trigger Article 50 and thus initiate divorce proceedings with Europe. The following day, the Dutch go to the polls in their most contentious and talked-about election in decades, with populist candidate Geert Wilders leading in the polls. The markets have also priced in a rate hike from the Federal Open Market Committee for the same day. 

All of this will be capped off with a meeting of G20 finance ministers on Friday, which the markets will be keeping a keen eye on.

“With all this volatility there’s reason to believe we could see more support for bonds,” says Saxo Bank’s head of fixed income strategy Michael Boye, noting that bunds had already gained 50 basis points on the back of a rumour late on Friday that the European Central Bank will introduce its own rate hike.

10-year German bunds:
Source: Bloomberg

However, both Boye and Saxo’s head of forex strategy John Hardy both feel it’s likely the ECB’s Mario Draghi will squash that rumour when he speaks at 1330 GMT today.

“There was a Bloomberg story circulating on Friday that there had been talk, according to insiders, possibly of eventually unwinding the negative interest rates the ECB has before they are even finished with their bond buying programme,” says Hardy. “This added on to what was already a strong euro rally on the sentiment that the ECB is slowly turning a corner on neutralising its guidance.”

“Draghi is out speaking today and could be very emphatic in stamping out this idea,” says Hardy, while Boye notes that he has already started talking down the interest rate rumour.
Meanwhile, as the euro climbs the dollar could be entering the end of its rally, according to Hardy, having fallen below 115 yen.

Source: Saxo Bank 

“The USDJPY low in the Asia session was at 114.51, that’s the exact lower level of the Ichimoku cloud,” says Hardy. “It needs to go back over 115 if the uptrend is to continue.”

“We have both an FOMC meeting and a Bank of Japan meeting this week, so it’s going to be a very pivotal week for USDJPY, and for all dollar pairs as we have the FOMC this week,” he adds.

Reporting from Saxo’s Singapore desk, Hong Wei Lee says that with the dollar being sold off overnight, sterling has emerged as one of the strongest performers in the Asian session.

“The pound is up close to 0.57% [against the dollar] in the Asian session, reclaiming the 1.22 level ahead of [the Bank of England’s] Monetary Policy Committee meeting on Thursday,” says Lee.

This dollar weakness comes in spite of positive employment data, says Hardy.

“We had expectations notching even more aggressively higher on those non-farm payrolls change, and the earnings did come in as expected at 2.8% but there’s just not enough to move the needle on the Fed taking a more rapid pace this year,” says Hardy. “That will be the surprise this week if the Fed does indicate in some way that it is considering a more rapid pace because that has not been priced in, the market all the way out to 2019 has merely ‘added on’ one rate hike. There’s no indication we could get an extra number of rate hikes in there between now and then.”

The already volatile Dutch election was imbued with yet more chaotic energy over the weekend, courtesy of Turkish president Recep Erdogan.

The spectre of populism is looming over the Dutch elections much in the same way it has been the French. The Netherlands’ answer to Marine Le Pen, Geert Wilders, was already topping the polls in Holland, but Hardy notes that Wilders will likely have benefited from Erdogan’s depiction of the Dutch as Nazis over the weekend. Erdogan’s Justice and Development Party had wanted to campaign for Turkish constitutional reform in Holland, which hosts a sizeable Turkish diaspora. The Hague was not amenable, prompting the president’s Nazi jibe.

Wilders’ platform being one of suit-and-tie Islamophobia, it will no doubt have been a boon to him and his party to have the Netherlands slighted by Erdogan, who has made little secret of his desire to reincarnate the Ottoman Empire in a 21st-century skin.

Meanwhile, Saxo’s head of equities strategy Peter Garnry says global equities have remained bullish.

“We are floating a little high for the year and also over the past six months and year in many of the major equities,” says Garnry. “There is weakness though experienced in energy and materials. Energy we have been negative on for quite some time. We went into the year with a bullish stance on materials – chemicals and mining companies – and that global sector has also been quite weak here in March. But for the time being it’s the only signal right now, otherwise it’s full steam ahead.”

 Could the conservative Muslim leader of Turkey have inadvertently 
given a boost to Islamophobic Dutch election candidate Geert Wilders 
with his 'Nazi' remarks? Photo: Shutterstock

Jack Davies is consulting editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios 


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