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Man’s Best Friend?

At FXPIG we believe there is always something to say about the market even if ranges are narrow, techs are neutral and Trump isn’t on a tweet storm.

Liquidity. The trader's lifeblood. Don’t be misled into thinking it will always be there. Like your best friend, you will miss it terribly when it's gone!

The advent of tech-led innovation took banks (the suppliers of liquidity) by surprise. Their introduction of technological advances has always been slow, introducing new methods only when forced to.

This PIG lived among the bankers for a long time and saw the protection of voice brokers as almost parental in its severity. The first screen based broker was irreverently nicknamed “the toy” and was never expected to catch on. Now all banks are using platforms to trade, voice broking in FX is moribund and liquidity has gone through the roof.

The moral of the liquidity story is that when it’s there it’s great but when its gone its flash crash time. There has been a herd mentality developed as platforms have become the norm in liquidity provision. Everyone will provide liquidity until one doesn’t want to anymore then no one does.

Sellers trying to find bids see big figures dropping like Autumn leaves.

Remember June 23/24?

Thankfully “Black Swan” events are rare so overall market liquidity has improved, and this has led to the upsurge in retail traders.

At FXPIG we supply liquidity in all market conditions. No, we aren't superhuman, we just pride ourselves on building partnerships with our clients and the market.

So, back to the markets. Last week, the FOMC released the minutes of their latest meeting; the first since they hiked rates. Their discussions seem to have been more akin to a tea party than a meeting of the (supposed) finest financial minds in America. To pronounce that a rate hike in March will depend on the latest economic data betrays the legacy of Greenspan and Bernanke!

Advance guidance is nonsense if it relies on single month’s data. PIGs know, it’s all about the trend.

Trump had a tentative winge (for that is all it was) at the Chinese calling them Grand Champions of Currency Manipulation. Big words but they fall short of the currency manipulator charge that would actually force some action. The President is being characterized by being someone with a lot to say but a little short when it comes to actions. This week he will be addressing a joint session of congress. He will need to get off the campaign trail and start to enact a few policies.

Janet Yellen, Chair of the aforementioned FOMC, also peaks this week to a business men's convention and she will also need to produce a better indication of the Fed’s intentions or abandon her stance and revert to a more “distant” approach. You never know, the markets may quite like having the ability to second guess handed back to them!

We also have the release of Purchasing Manufacturers Indexes (PMI) in the U.K., U.S., and Eurozone. These indices provide a useful guide to manufacturing output and are one of the sole consistent indicators across all economies. A read above 50 is expansion, below 50 contraction. The U.K. is the most at risk of a fall recent readings of around 55 following the huge increase in input costs last month. This could easily follow through into PMI data but a contraction is highly unlikely.Finally, we are approaching the triggering of Article 50 of the Lisbon Treaty when the U.K. will formally give notice of its withdrawal from the EU. There is a lot of chatter about the pound falling once negotiations begin in earnest but this PIG is calling a bottom! The Government has promised the trigger by March 31 so expect a statement confirming this as soon as this week.

At FXPIG we believe there is always something to say about the market even if ranges are narrow, techs are neutral and Trump isn’t on a tweet storm.

Liquidity. The trader's lifeblood. Don’t be misled into thinking it will always be there. Like your best friend, you will miss it terribly when it's gone!

The advent of tech-led innovation took banks (the suppliers of liquidity) by surprise. Their introduction of technological advances has always been slow, introducing new methods only when forced to.

This PIG lived among the bankers for a long time and saw the protection of voice brokers as almost parental in its severity. The first screen based broker was irreverently nicknamed “the toy” and was never expected to catch on. Now all banks are using platforms to trade, voice broking in FX is moribund and liquidity has gone through the roof.

The moral of the liquidity story is that when it’s there it’s great but when its gone its flash crash time. There has been a herd mentality developed as platforms have become the norm in liquidity provision. Everyone will provide liquidity until one doesn’t want to anymore then no one does.

Sellers trying to find bids see big figures dropping like Autumn leaves.

Remember June 23/24?

Thankfully “Black Swan” events are rare so overall market liquidity has improved, and this has led to the upsurge in retail traders.

At FXPIG we supply liquidity in all market conditions. No, we aren't superhuman, we just pride ourselves on building partnerships with our clients and the market.

So, back to the markets. Last week, the FOMC released the minutes of their latest meeting; the first since they hiked rates. Their discussions seem to have been more akin to a tea party than a meeting of the (supposed) finest financial minds in America. To pronounce that a rate hike in March will depend on the latest economic data betrays the legacy of Greenspan and Bernanke!

Advance guidance is nonsense if it relies on single month’s data. PIGs know, it’s all about the trend.

Trump had a tentative winge (for that is all it was) at the Chinese calling them Grand Champions of Currency Manipulation. Big words but they fall short of the currency manipulator charge that would actually force some action. The President is being characterized by being someone with a lot to say but a little short when it comes to actions. This week he will be addressing a joint session of congress. He will need to get off the campaign trail and start to enact a few policies.

Janet Yellen, Chair of the aforementioned FOMC, also peaks this week to a business men's convention and she will also need to produce a better indication of the Fed’s intentions or abandon her stance and revert to a more “distant” approach. You never know, the markets may quite like having the ability to second guess handed back to them!

We also have the release of Purchasing Manufacturers Indexes (PMI) in the U.K., U.S., and Eurozone. These indices provide a useful guide to manufacturing output and are one of the sole consistent indicators across all economies. A read above 50 is expansion, below 50 contraction. The U.K. is the most at risk of a fall recent readings of around 55 following the huge increase in input costs last month. This could easily follow through into PMI data but a contraction is highly unlikely.Finally, we are approaching the triggering of Article 50 of the Lisbon Treaty when the U.K. will formally give notice of its withdrawal from the EU. There is a lot of chatter about the pound falling once negotiations begin in earnest but this PIG is calling a bottom! The Government has promised the trigger by March 31 so expect a statement confirming this as soon as this week.

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Riksbank Minutes amongst market movers today
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EUR futures: rising odds for extra gains
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EUR/USD keeps the tight range above 1.1600 post-ECB
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GBP/USD still expected to test 1.13170 – UOB
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ECB and BoE to be the key event today – Danske Bank
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USD/CAD stays bullish above 1.2997/30
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EUR/USD fails once again above 1.1600, US PPI eyed
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Market Analysis
EUR/USD neutral although a test of lower levels remains on the cards – UOB
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Market Analysis
USD/JPY trades with modest losses, around mid-111.00s
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