Daily Analysis – Oct, 19th 2016

Daily Analysis – Oct, 19th 2016

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Fed tries to weight what is going to cause the less harm at the moment for the economy. Fed has only two options to hike or not. The choice is not as simple as it seems because any of the two choices can create huge implications and uncertainty to the markets. On one hand low rates give a picture that the global economy is struggling to recover, damages Fed’s credibility and create bubbles as the cheap money fly to riskier assets. On the other hand if Fed decides to hike this can create a recession which will force Fed to cut further rates and will destroy the confidence and trust for the entire financial system . So the reality is that Fed has to choose between two options one bad and one worst.
The overnight Chinese macroeconomic data did not give any further clues about the state of Chinese economy but rather confirmed what we already know, that the Chinese economy continue to slowdown moderately . There are many reasons that can make investors nervous at the moment. The slow economic growth, the monetary policy limits, USA elections and a busy earning season ahead. We have today a soft economic calendar. Greater trading opportunities will come tomorrow where the ECB will give the direction of its monetary policy.

Traders should focus tonight in the last debate between Clinton and Trump which is going to be possibly the most crucial and interesting but most importantly we should keep in mind that Assange from Ecuadorian embassy in London has supported recently that the most damaging leaks for Hillary Clinton will come lastly and there is a potential to upend the election. I guess few hours before debate it could be a good moment for some WikiLeaks revelations for someone who wants to damage Clinton effort to enter the white house. Is very important traders to prepare for this scenario and be ready to react if these revelations take place. If we deem that this scenario will occur the first reaction will be on S&P500 where we will see a big drop.. Other riskier assets also will suffer

Key points:
• Turkish lira plunged to a new record low
• UK inflation hits 2 years high as the weak GBP drives prices higher
• Hollande Merkel and Putin will meet later in Berlin today
• Chinese Corporate debt continues to rise and worry markets