Daily Analysis – 10 oct 2016

Daily Analysis – 10 oct 2016


Wall Street the last weeks consolidates and show us that investors are neutral about the upcoming result. Brexit story is not that old and should give us important lessons of how the people think, react and finally vote despite the pressure they get sometimes from media. The recent tape revelation of D Trump does not mean that will lose the US elections as recently people around the world support from anger the politicians that most of the media blame. With the evidence we got at the moment we give a higher probability D Trump to be the next president of US than Clinton and we warn to expect the unexpected. However keep in mind that as soon as we move closer to elections date we expect that more revelations will take place about the personal and business life of D Trump which can cost him in votes.

All eyes remain on GBP where last week a flash crash created further uncertainty about the future of the currency. Still is not known what caused the last week flash crash on GBP, however a number of different scenarios are over investigation from Bank of England. It can be an algorithmic trading black box or the harsh language that Francois Hollande that Britain should pay hard about Brexit. Most probably will never learn what caused this flash crash as forex market is completely different from stock market it operates globally and is 24hrs and there is not a central monitor where the orders pass as it happens with the New York stock exchange. Many expect that the cost of Brexit will come soon. Europe is not going to give to UK a good deal simply because it will seem like that reward UK for its decision to vote Brexit…European technocrats want the Brexit to become in the future a lesson for other European nations which will think to move out of Europe by referendums.

In the current market we continue to see high probabilities the USD/JPY pair to move higher while the consolidation for global equity market will continue. We see that the global equity market very difficult will move higher before the US elections. Any polls for US elections, Deutsche Bank news and corporate earnings will move the market from this stage and should be followed very closely from traders.

weekly eco calendar

Key points:
• In the last month, the EuroStoxx50 is -2.1% vs. FTSE +3.9%
• Deutsche Bank falls after no deal reached with DoJ
• Financial markets continue to price in Clinton win after debate
• There many policymakers including Yellen, Dudley, George, Rosengren and Evans scheduled to speak the coming week we expect that they will keep their hawkish tone
• Market is discounting about a 7% chance of a hike on November 2

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