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Article / 03 June 2016 at 12:00 GMT

Ineffectual trading week closes with a lottery

Director / Accumen Management
United Kingdom
  • NFP shortfall will see USD sell off, but Fed will watch the bigger picture
  • 'Knee-jerk reactionism' surrounding Brexit keeps pound volatility intact
  • ECB interventions likely done for the time being, but some still want EUR lower

Nonfarm payrolls
It's nonfarm payrolls day... pick your number. Photo: iStock 

By Ken Veksler

We’ve come to the conclusion of what for me personally has been a rather long week. Not long by way of action, but more so as a result of inaction in markets. 

The day, of course, belongs firmly to the US and its monthly lottery print. Much has been made about dulling down expectations of a decent nonfarm payrolls release today and frankly, if your reaction function to the broader macro situation rests solely in the 10 minutes following the release of this data there isn’t any point in us conversing. 

A softer print will by no means signal to me a significant change to the underlying employment situation in the US. 

The market consensus is for something in the vicinity of 160,000 and even if that number comes in another 30,000 or so lower, the broader on trend count of around 200,000/month remains well and truly intact. All this means is that the USD will be broadly sold off in the aftermath to then likely just be bought back as we head into the weekend and positions get squared. A better print will invariably just mean greater expectations of Federal Reserve action in either June or July.

Cable volatility

Brexit remains front and centre elsewhere and the inane quoting of where one-month implied GBP volatility resides is doing my head in. What did anyone expect, complete catatonia and inaction ahead of such a formidable event? Needless to say, every possible narrative surrounding poll releases is being scrutinised to the Nth degree and attributed to where the cable trades or perhaps doesn’t....

I’m sick of it, as I’m sure many of you are too. The real hedging for the event has already been largely done by those that needed to and the rest of the to and fro we’re seeing is nothing more than knee-jerk reactionism from those without a clue and/or intraday punters (largely the same Venn intersect, anyway). 

End of the Aussie bear run?

Australian policy and economy bears still dominate the narrative landscape, but they are increasingly wearing negative p/l on their faces as a result. The futility that is selling the AUD is getting greater (for those attempting it) and in due course (largely dependent on the USD leg) will likely lead to another brief dip in the cross before the inevitable short squeeze (perhaps data-induced) is seen again.

It would be remiss of me not to mention yesterday’s European Central Bank meeting (despite being in the air while it went on). In short, my thesis remains that the ECB is most certainly done as far as further action in the near and medium terms. The effects of what’s been done so far need to fully filter through before contemplation of more can be seen.

Yet there remain as ever calls for further EUR weakness and disbelief as to why we’re still trading in and around present levels. Oh well, I suppose none of these Muppets ever considered objectivity as a viable life choice...

My apologies for the somewhat disjointed nature of today’s piece, but truly it’s increasingly harder to write something of genuine merit when a) there’s little of real note going on from day to day and b) I’ve still got a monthly piece to pen which needs to encapsulate the real macroeconomic goings on.

In the interim I’ll wish you all a good weekend.

As always, helmets on and good luck out there.

London's big boys have already set up their Brexit bets. Photo: iStock 

— Edited by Michael McKenna

Ken Veksler is director of Accumen Management

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