News background & trading ideas for 22/02/2019

22 Feb 2019

Yesterday has been an intense day with a variety of macroeconomic statistics. Europe has traditionally been a disappointment. For example, the Index of business activity in the manufacturing sector in Germany decreased to 47.6 (export orders fell to the maximum value over the past six years). However, it wasn’t all hopelessly bad: the Eurozone composite PMI index in February came out even better than the forecasts (51.4, with the forecast 51.1). So all is not lost, and the euro’s purchases is not a lost cause.

As for the dollar, the data for the United States came out relatively mixed. On the one hand, the PMI Composite Index was much better than the previous value of 55.8 against January 54.4. On the other hand, home sales in the secondary market suddenly dropped by 1.2% (experts expected growth of 0.2%). Durable goods orders were also worse than forecasts, but in the positive zone, which cannot be said about the Leading Indicators Index, which turned out in the minus zone. So there are no reasons for aggressive purchases of the dollar, which means that we stay on our side of the fence and recommend looking for points for intraday sales of the dollar.

But the interesting thing happened yesterday, not with the US dollar, or even with the British pound, but with the Australian dollar. The fact is that yesterday Reuters reported that the port of Dalian in China banned the import of coal from Australia for an unspecified period. This led to sales of the Australian dollar in the foreign exchange market. Even the good data on the labor market in Australia didn’t help the Aussie.

Another portion of positive news came from the negotiations between the USA and China. According to the same Reuters, China and the USA started to harmonize particular aspects of reduction of trade balance surplus of China in relation to the US. Well, things are going to the fact that on the fist of March there will be at least a draft of the deal on the table if not a ready treaty.

Positive signals also came from the Brexit battlegrounds. In particular, the Chancellor of Her Majesty's Treasury, Phillip Hammond, suggested that in the coming days may take place a vote on a new version in Parliament, and this is good news for the pound. So we remind that there is a place for its growth, and it's not too late to buy.

Friday promises to be an intensive and tough day as well. Again a lot of macroeconomic statistics from around the world: Germany's GDP, inflation in the Eurozone, retail sales in Canada, multiplied by the speeches of the heads of the ECB and the Bank of Australia, as well as a number of Fed representatives. All this ensure that it will be an exciting day.

Oil has pulled up since buyers were surely confused by record data on export and oil production in the USA, as well as stumped by the growth of oil reserves in the United States for the fifth week in a row. The USA is now exporting more oil than almost any OPEC member (except for Saudi Arabia and Iraq). However, as long as the asset is above 53.50 (WTI), we continue looking for points for intraday purchases. Recall that our mid-term and long-term position is unchanged - we sell oil in a long time horizon.

The Russian ruble continued to gain. We consider that it is an exceptional opportunity to build short positions on it from more convenient points.