Macro trades : An eventful week into year end - ECB/OPEC/PAYROLL thoughts!

Marker's picture
Rank: Orangutan | banana points 320

In a normal trading year, December tends to be relatively dull, with markets registering a lower volume and reduced volatility. But this time round it looks rather differed as we seem to be poised for a rather interesting week just before fund managers and real money players head into holiday season!
Watch out for these key risk events:

ECB - Draghi under pressure to deliver (evident from front end euro yields hovering below negative territory, EURO STOXX breaking above consolidation ranges and EURUSD flirting with the 1.05 handle)

Heavily priced in my opinion and unless we get some extreme easing measure by ECB, i suspect we'll see a classic, "buy the rumor, sell the fact" price-action post ECB. That being said though, on a medium-term basis, this is probably the continuation of the previous QE trend. i.e. Fade the bounce, and hold on for the ride if you are a trend trader.

OPEC - Mixed market sentiments on whether oil production will continue to hover around current levels.

I personally don't have a very strong opinion on this, would prefer to stay out on related trades, e.g. energy sector stocks, oil related currencies, inflation linked bonds.
Could see potential for further inflation implications starting to get priced in once OPEC message gains clarity after the meeting. Something worth looking out for.

Payrolls - December rate hike, pretty much a done deal according to fed fund futures (~80% priced in the last time I checked)

Unless we get an absolute disaster here, Its hard to see any major expectation changes for a december rate hike. A slightly lower NFP number could prove to be a short-term entry point to go long dec rate hike trades if you don't already have skin in the game.

As always, Good luck and comments welcome!
Cheers.
Posted by PositiveAlpha.

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