17.09 - markets are slow at the beginnig of the week
- by Anna K.
Although trading is going to be slow, there is a lot of information to take in.
All of the traders, coming back to the markets after the weekends are expecting to see new picture and new numbers in their segments of the market. And today, although the numbers are less than satisfactory we can see a new picture. But trading this week overall might be quite slow compared to the previous week. And there are several factors to blame for that.
First of all, Japan is closed for the national holidays. United States are too occupied with hurricane Florence that hit American cost over the weekend. At least five people were killed in the state of North Carolina and thousands of people are now hiding in the shelters. With disaster like that all of the national attention turned to the South-East of the country. Philippines are also suffering from typhoon hitting the country. Overall, natural disasters in the world are getting in the way of trading.
But for us it might be a good thing and a perfect opportunity to regroup and rethink trading strategies as the situation in the markets isn’t getting better as weeks go by. Pretty soon New Year and Christmas are going to come and distract all of the world’s society. And although that time is 99 days away and a lot of things can change over this period of time we still have to remember about the distractions it brings.
Opportunity to stop and analyze the situation was never as needed as it is now. We are talking about the hazards in the market every day of the week and we understand that right now in the best time to do so. What is going to happen to China? Will euro die after Brexit? What will pound do after Brexit? Will Russia go into a national financial crisis? When will financial crisis hit? All of these questions are swirling in our heads and we need answers.
The problem with the picture is that there is way too much information and pieces of it often contradict each other. We get confused and doubt everything. That is why a little break is something that can help us with better understanding of the whole picture.
So, our advice for the week – take advantage of the break that might be over our heads this week, or at least the first half of the week.
UK-EU negotiations is the process that we have been watching for a year and half now. And every time there seem to be obstacles in the way of a good deal for both sides. But seeing how it wasn’t a mutual decision for the United Kingdom to leave the European Union but merely something decided by one side there is high possibility that European Union is going to win all the privileges in this ordeal.
Right now those voices that called United Kingdom to hold yet one more referendum on Brexit are as loud as ever. A lot of people and politicians are asking the British to reconsider their decision and vote again. Although we think that such vote was to be held right after the first European company and bank decided to leave UK’s soil after the process is done for.
Right now talks on how to safe at least something of the previous pound stability are very active. But is it really possible? There will be a lot of backup lost for the British pound. Companies that are used to work according to the European Union will all leave to Germany and France, further assisting euro’s growth. Also, EU parliament wants to use the moment of dollar losing all the faith put in it and turn euro into a global currency. If that operation is successful, we are going to live in the entirely different financial dimension. And UK is going to miss out on everything.
But holding one more referendum on Brexit can be tricky as well. That would display both UK and EU from a bad side.
For UK the reputation would be that of a country that can’t make a decision and is cracking under the financial pressure. For EU the impression is going to be is that it is an open club where every country can come and go as they please without any consequence. So both euro and pound can easily lose a big chunk of trust from the investors. And it seems that at this point all that dollar is waiting for is for its counterparts to start losing power themselves.
So we are looking at a very peculiar situation that is to find its end in March 2019.
Over the weekend the plans for $200 worth of goods being imposed on China became even more obvious. There have been rumors about a package as big as this one but now it is clear – sooner or later that package is going to hit financial system of the world hard. Of course we can always hope for the US-Chinese talks to have results but this time it seems that it is either talks or tariffs.
Chinese are tired of talking to a wall. And we fully support them. What use of talking to a person who will never listen? That is why Chinese were very quick to respond to the new tariffs information. In case the package is implemented, there will be no next round of talks. And that would only mean one thing – silent trade war is going to begin.
But Asian counterpart of the United States is not going to be passive in this situation. Although new package of tariffs might be imposed on China in order to get whatever they want at the negotiations table, American predictions may fall through very quickly, damaging dollar.
What does this mean for us? Means that dollar and yuan are not going to be as attractive in the nearest future and in case tariffs are imposed some time after that. It means that for us the time has come to look for some other currencies which are not going to be as damaged and unstable. And if we are thinking that, so are other traders. that means that some currency like euro is going to get very strong in the nearest future and that it is time to turn away from dollar.
We never though that a time like that would come, but it seems that right now is the time for impossible to come to life.