Will the Trump-Xi Meet, NFPs, Eurozone Summit Leverage or Hobble Volatility?
- A laundry list of high profile event risk lays in wait for traders through Friday's session
- The greatest potential rests with the US-China Presidents' meeting, but NFPs, EZ meeting, trade data and more pose risk
- Navigating these choppy waters necessitates extraordinary conviction, absolute caution or short duration exposure
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Thursday proved a holding pattern for the markets, but Friday is looking to be a day of sensory overload. Where there was plenty of event risk this past session, it wouldn't hit the cadence necessary to pull market participants' attention for what lays ahead. The high profile meetings that were scheduled the past session didn't produce actionable change in risk trends, trade policy or any of the other systemic themes. The NATO foreign ministers' summit, G-20 economy ministers
meeting and first day of President Trump hosting President Xi passed with few official remarks. Data in the meantime touched upon few of the critical interests of the speculative rank and sentiment sought little change in tack of its own. With the high profile list of event risk due the subsequent day, that provided little impetus to throw caution to the wind.
Now, we head into a deluge. Event risk includes trade, credit and housing statistics; but the listing that draw the biggest interest will be the US labor report. Nonfarm payrolls (NFPs) for March will find its influence resuscitated by the FOMC's indication that a change in stimulus policy may come towards the end of the year. This data can touch upon a few themes. Monetary policy is a direct route, but its translation to price action may not prove as capable as many have grown accustomed to. Certainly a hawkish outcome between net jobs, jobless rate, participation rate and earnings could further the speculation that stimulus will start to drain; but the Dollar is already buoyant on its hawkish views. The more dramatic move would come should the data significantly disappoint. That would undermine the bullish/hawkish view and could further feed risk aversion. Most scenarios are looking at limitation due to the run of competing fundamentals for market attention, but the USD/JPY is arguably the most concentrated expression of a sharp response. Pairs like EUR/USD, AUD/USD, EUR/JPY and AUD/JPY can shape opportunities of their own.
If the NFPs were the only high profile event risk on the docket, we could be facing a good chance of volatility, a medium-term trend and perhaps even a deeper move that picks back up over the weekend. Yet, as it stands, we may struggle for more than a short-term jolt from the Dollar and risk markets. There is too much conflicting fundamental risk interfering with the signal. Most prominent are range of meetings on Friday's docket. The most threatening event is the second day of Trump-Xi's meet. Given the scale of these economies, their financial influence and the tension between them; there is great capacity for promise or trouble. Other events that can prove systemic include the Euro-area Finance Ministers meeting (Greece, Brexit, EU unity) and day two of the G-20's economy ministers gathering. Add to that recent news that President Trump approved a missile strike in Syria, and it is important to be cautious into this final session. We discuss the event risk and trade approach for Friday's session in today's Trading Video.
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