Playlist: Hedge Funds

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04 March 2016 at 9:53 GMT
Hansen: Fed waiting game may trigger gold exodus
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Hansen: My gold trading strategy post Yellen
Ole Hansen
25 February 2015 at 11:06 GMT
Video / 23 August 2017 at 7:44 GMT

From the Floor: 'Trump trade' making a tentative return — #SaxoStrats

   • Risk-on sentiment drives US, Asian equities higher
   • New Zealand trims surplus forecasts, growth outlook
   • Oil whipsaws on Libyan unrest, inventories up today
   • 'I'd prefer to look lower' on EURUSD: Hardy
   • Gold trade risking long liquidation on high exposure
   • Bond market 'in sleep mode' ahead of Jackson Hole: Fasdal

By Michael McKenna

US president Donald Trump delivered a fiery, campaign-style speech in Phoenix where he excoriated the media for their take on his response to the Charlottesville unrest, threatening a government shutdown over his proposed border wall as well as the termination of the North American Free Trade Agreement.

With nationalist advisor Steve Bannon back at Breitbart and the foreign policy establishment in apparent control of his Afghanistan plans, some analysts continue to prepare for a pivot to the free-market right-wing in the form of tax reforms. This revival of the long-dormant "Trump trade" was among the factors driving US equities higher Tuesday with APAC – with the notable exception of Australia – following their lead. 

In the forex space, NOK traders will be watching Norway's latest GDP and oil investment survey releases tomorrow, while Singapore-based Saxo trader Andrew Bresler points to CADJPY as one pair that might see a significant move lower if the NAFTA talks fail to bear fruit. 

Looking at EURUSD ahead of European Central Bank president Mario Draghi's speech today, Saxo Bank head of FX strategy John J Hardy says he would "prefer to look lower" in the benchmark pair, noting a potential surfeit of stale long positions below current levels.

In terms of Draghi's two planned addresses – today and at the Jackson Hole summit on Friday – Hardy says that he has a hard time seeing the ECB president making too many euro-supportive remarks.

The government of New Zealand faces an election in one month and has downgraded its surplus forecasts and growth projections, pushing the kiwi lower as the Social Democracy Party makes impressive polling gains ahead of next month's vote.


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Source: Saxo Bank 

In the crude oil markets, prices have whipsawed in tandem with the volatility seen in Libya, where major oilfields were reopened before closing again in response to continued unrest. The key event for crude at this juncture, notes Saxo Bank head of commodity strategy Ole Hansen, are the US weekly inventories data due later today.

Hansen also reports that gold has showed some resilience lately, but needs to break higher to avoid long liquidation as hedge funds currently maintain their biggest exposure to the precious metal since October 2016. We are also seeing some investor interest in copper, which is back below $3/lb on record speculative long positions, as well as wheat, which Hansen terms "oversold" after its decline in the face of a record Russian crop.

Today's data calendar brings flash PMIs from the Eurozone and the US, although Hardy tells us that the market has not proved particularly reactive to these numbers recently. In Saxo Bank head of fixed-income strategy Simon Fasdal's view, the market is "in sleep mode" ahead of Jackson Hole, adding that any deviation from the expected muted-to-dovish message could spark real moves in bonds as the market has potentially become "too relaxed" before the summit.

Jackson Hole
Markets expect a dovish consensus to emerge from the 
Jackson Hole conference. Photo: Shutterstock

Michael McKenna is senior editor at Saxo Bank


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