Expect slim trading, watch for volatile moves on large orders! ~ Highlights and schedule for November 22 ~
◎ Today's Highlights
1) Thanksgiving in the U.S. and weekend/end-of-month factors
The U.S. markets are closed for Thanksgiving. Tokyo will be closed tomorrow for a holiday. Friday is Black Friday. Since the 25th falls on Sunday, today or tomorrow effectively marks the fifty-day period.
From today, various factors are interwoven in the market environment. Trading is expected to be thin. In a thin market, large orders tied to the 50-day factor such as the interbank rate, FIX, and end-of-session position adjustments may cause volatile price movements. Also, starting from Thanksgiving, position adjustments and profit-taking are likely to begin for the remainder of the year. We should be careful with profit-taking orders as well. For swing and position trades, we will proceed with position adjustments while determining the end of trends. Except for short-term trading, we anticipate the period of profit-taking to begin in early to mid-December.
2)Brexit negotiations and the May Administration
Yesterday, Prime Minister May and European Commission President Juncker held a meeting on Brexit negotiations. However, no agreement was reached, and another meeting is planned for the 24th. An extraordinary EU summit is scheduled for the 25th, and Brexit negotiations are approaching a critical phase.
Between the UK and Europe, Brexit negotiations are nearing a final stage, but Spain is opposing within Europe. Also, it is unlikely that the UK Parliament will approve the agreement. Even if an agreement is reached between Europe and the UK, domestic approvals on both sides will be key points of focus.
Additionally, concerns about a vote of no confidence in the May administration appear to have receded for now. This development may be viewed positively.
3)Italian budget and sanctions
Yesterday, the European Commission announced the possibility of sanctions against Italy and again called for revisions to the Italian budget. In accordance with EU rules, it recommended “excessive deficit procedure” (EDP) to correct the deficit. Under this framework, the Commission could impose sanctions up to 0.5% of GDP. However, sanctions would not be imposed today or tomorrow; the process will proceed and, even at the earliest, likely next year.
Italy has stated in response to the recommendation that “we are satisfied with the budget numbers; we will see in a year,” that “the government's fiscal targets are valid,” and that the suggestion is a sign of disrespect toward Italian citizens, indicating no willingness to concede. A chicken race is unfolding between Italy and Europe over who will blink first.
There are other strategic considerations behind Italy's budget. A summary of the underlying motives is provided below.
Explanation of Italy vs. European Commission: The true motives behind the budget
◎ Today's Event Schedule
11/22 (Thursday)
21:30 EURECB Governing Council minutes
11/23 (Friday)
00:00 EUR Consumer Confidence
01:30 EURBauduin von Wernher (Note: likely a name placeholder) – President of the German Central Bank (Bundesbank) speech
01:30 EUR Knutt – President of the Dutch Central Bank speech
01:30 EURVisco – President of the Italian Central Bank speech
02:00 EURMersch – ECB Executive Board member speech
05:55 GBPThomson – External BoE director speech
