Playlist: US Copper July 2019

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08 September 2017 at 7:27 GMT
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28 August 2017 at 9:00 GMT
From the Floor: Dovish FOMC keeps USD on the defensive
17 August 2017 at 8:31 GMT
Video / 01 November 2017 at 8:23 GMT

From the Floor: 'Everything is on a knife's edge' — #SaxoStrats

   • Multiple risk events have US assets waiting and coiled
   • GBP bid on Barnier's desire to 'speed up' Brexit talks
   • Japan stocks rally a further 2% on strong earnings
   • Brent crude gains a foothold north of $61/barrel
   • Core yields a shade higher as correlation returns

By Michael McKenna

US assets and the dollar are coiled ahead of a multitude of risk events, from President Trump's expected announcement of the incoming Federal Reserve chair Thursday to the results of the ongoing Mueller inquiry into Russian interference in the 2016 election.

"Everything is on a knife's edge in terms of outlook," says Saxo Bank head of FX strategy John J Hardy, with the dollar poised to weaken somewhat on the confirmation of odds-on favourite Jerome Powell as Fed chief; we also have a rate decision due from the Federal Open Market Committee at 1800 GMT today.

"This is the least-anticipated FOMC meeting in a long time," says Hardy, but the dollar remains in what must be counted as a fragile upward channel ahead of the FOMC and the release of ADP employment and ISM manufacturing data today (at 1215 GMT and 1400 GMT respectively).

Meanwhile, Hardy points to a developing bid in sterling that came on the back of European Union negotiator Barnier calling for an acceleration in Brexit talks. Overnight, Hardy reports that the NZD put in a relief rally on the release of stronger-than-expected third-quarter unemployment data (4.6% versus 4.8% expected).

Japanese equities continued their rally today on the back of strong earnings, including Sony's release confirming record operating profits. According to Saxo Bank head of equities strategy Peter Garnry, the Nikkei 225 is poised to make a convincing run through its 1996 highs which could put the index at very interesting levels into the end of this year.

"Global equities appear poised for an end-of-year rally," confirms Garnry.

Nikkei 225 (monthly):
Nikkei 225

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Source: Saxo Bank 
The equities rally is being reflected in cyclical commodity prices, reports Saxo commodities head Ole Hansen, with Brent crude finding a foothold north of the $61/barrel level and WTI targeting the January high at $55.25/b. The latest catalyst here was a Reuters report Tuesday that claimed Opec production cut compliance is on the upswing.

Crude was also boosted by an API report confirming an inventories drop with the market looking to today's release from the EIA for confirmation, says Hansen.

Bullish news is also coming forth from LME week in London with Codelco, the world's largest copper supplier, saying that the industrial metal could return to its 2011 record 30% above current price levels.

The headlines out of London also saw bullish nickel usage forecasts from Glencore and Trafigura.

Core bond yields are a shade higher this morning reports Saxo Bank head of fixed income strategy Simon Fasdal who points to contracting Eurozone spreads signalling the potential for fund managers to pile into higher-yielding bonds over the holiday season.

"Is the Christmas carry train leaving early this year? it's too early to say for sure [but the signs are there]," states Fasdal.

For more on gold, emerging market bonds, USDJPY, the Eurocoin GDP tracker, and more, watch today's Morning Call in full.


Japanese stocks continue to rocket past key levels. Photo: SiraFilm /

Michael McKenna is senior editor at Saxo Bank


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