Weekly review.
The week starting Monday 20 January was dominated by 'Trumps first week in office'. And the main take away from the infux of news was a 'risk on environment'.
The positivity started even before the inauguration, when a leak suggested 'tariffs' wouldn't be as hard hitting as the election campaign suggested. The leak proved to be true and 'risk assets' remained strong, with the USD in particular coming under pressure.
One thing we learnt from 'Trumps first term' was to expect volatility. And it didn't take long for a 'back and forth tariff narrative' to kick in. To cut a long story short, it currently appears Canada is the country in the main firing line. And for now, it appears tariffs on China in particular are not going to be as severe as first thought (which is very good news for the risk environment).
Another notable talking point from 'the first week' is a commitment to bring the price of oil down, which in turn 'should' contribute to speedier rate cuts (lower energy costs = possible decrease in inflation). All in all, it appears the administration is aiming for a weaker USD. Which adds to the positive market sentiment.
US data, JOBLESS CLAIMS and SERVICE PMI data came in slightly USD negative, continuing the recent run of 'soft US data' and compounding the positive risk environment. High service sector data in particular has been an ongoing concern for the FED, so to see it coming down is a welcome sight.
I'm other news, the BOJ delivered the anticipated rate hike, in what I would describe as a neutral / slightly dovish hike'. And the BOJ inch closer to 'peak rates', which is good news for a gradual return of the 'JPY short' carry trade.
Sentiment for the CAD remains subdued, poor data, tariff threats, a weaker USD and now the possibility of a lower oil price all ensuring the CAD 'should' remain under pressure.
Earnings season is once again drifting under the radar. Long may that continue but it's something worth keeping an eye on throughout the new week. And the upcoming FED meeting has the potential to put a spanner in the positive risk environment, it will be interesting to see the current views of chair Powell.
On a personal note, it was a week of two trades. Both AUD CAD long and both 'risk on' trades of sorts. The first trade was more of an 'in the moment news trade' post 'soft CAD data', scuppered by the aforementioned tariff 'back and forth'. The second trade was placed when I felt the CAD pullback was over done once it reached 'nice 1hr support'.
I'll begin the new week with 'risk on' trades on my mind. I still feel much more confident waiting for 'nice 1hr support' and whether it's AUD NZD GBP or EUR long Vs JPY CHF USD or CAD short, will depend on the momentum and narrative at the time.
Results:
Trade 1: AUD CAD -1
Trade 2: AUD CAD +1.5
Total= +0.5%
Total since start of blog = +32.9% (risking 1% per trade).