2017 – TIQL Trading

2017: 3 events that shook the trading world

2017 – surprise!

Are natural disasters in the top three?

Mother nature showed her power this year sending Hurricanes Maria, Harvey and Irma across US territory and beyond, a massive earthquake to Mexico, monsoon flooding in Bangladesh. mudslides in Colombia and landslides in Sierra Leone. The human toll has been unfathomable and the markets didn’t like them either, though the US administration seems to think we don’t need to worry. But these weren’t the biggest events to hit the markets in 2017.

Bitcoin shock: a strong contender

December has brought a late contender to event of the year with the Bitcoin surge. Prompted by the cryptocurrency’s ascendency to two major futures exchanges in the U.S., investors flooded to buy Bitcoin though a few days after the launch prices looked like they were subsiding.

Sky-rocketing prices

Bitcoin reached a high of $19,375 on the Coinbase exchange on December 18th as trading launched on the giant CME exchange and its Chicago rival CboE Global Markets. The decision to list the currency legitimised Bitcoin and raised its profile enormously. Since the announcement was made, demand pushed the price through ceiling after ceiling and the media shouted frantic headlines warning potential investors about bubbles. At the time of writing, there has been no crash.

The problem with Bitcoin

The problem with Bitcoin for some is that it is outside the control of the existing authorities. Like the internet under net neutrality is equally accessible by all, Bitcoin is not the currency of one nation or even one region. It has no physical form and none of the established national or international authorities are in control of the supply. They don’t like that.

Bitcoin pros and cons

Bitcoin is limited by design to a maximum of 21 million coins. Supporters see it as a natural global successor to national physical currencies and exchange rates. Features of cryptocurrencies called blockchain will mean they can also securely replace other functions in banking and business so the potential is astronomical. Critics, including Singapore’s financial watchdog, warn that the lack of physical properties mean it is inherently valueless and investors will lose out when they come to withdraw their funds. Some say these critics are running scared.

Should everyone take Bitcoin seriously now?

The short answer is yes. In stark contrast to the doom and gloom of the threatened financial system, Ronnie Moas, the independent analyst who forecast this rise, now says he sees values reaching a meteoric $400,000 in 2018 saying the “mind-blogging supply and demand imbalance is what is going to drive the higher price.” He was right before; will he be right again? Either way, plenty are jumping on the bandwagon.

Brexit: the Brits want out

A review of market-moving events in 2017 has to include the Brexit tidal wave, which continues to punish GBP markets. Brexit is the snappy moniker bestowed by the British press on the British exit from the European Union decided by referendum in June 2016. 2017 has been a battle waged between varying factions in the UK government, who are justifiably concerned that washing their laundry in public puts them at a disadvantage in negotiations over the terms of the exit.

Europe, 20 June 2016
Brexit.
Markus Grolik/Cartoon Movement/Hollandse Hoogte

Who is responsible for Brexit?

In 2016, rampant propaganda, fervent canvassing and decidedly dodgy claims resulted in the United Kingdom agreeing to crash out of the thriving economic and political union that has blossomed since the 1970s. Why would one of the world’s biggest economies decide to commit economic suicide? Good question and it’s one many continue to scratch their heads over. The pound plummeted immediately sending imported product prices rocketing and the beleaguered currency has failed to yet make a full recovery over 18 months later.

What’s next for GBP?

The future for the British currency is unclear. A large part of its economy is funded by revenue from the City of London. However, many international banks are setting up subsidiaries in Frankfurt and other key European cities, all keen to become the new home of passporting. This key facility was located in the UK capital and allowed banks to work across Europe without needing authorisation in each individual country. It is highly unlikely passporting will continue to run from London when it leaves the Union and the banks are likely to cut many jobs and reduce their contribution to the economy in the UK from then on.

Will Brexit be calmer in 2018?

Political news around the exit negotiations are likely to impact both sterling and the Euro. Inside the Union, leaders will be keen to ensure Great Britain isn’t seen to get a good deal in order to deter other nations from making similar exit plans. It will be essential that countries who are in look better off than those who opt out. It’s looking cold outside the E.U and Britain will need to negotiate individual trade agreements with everyone. The deadline is 2019 so 2018 will be a rollercoaster ride through negotiations.

Trump

That word has so many meanings. It can be the winning card in a game. It can mean doing better than your rival. It can mean something altogether more foul-smelling connected to digestion. But this year Trump gained a new meaning as Donald became the 45th POTUS in an election that put the Brexit Leavers campaign to shame.

How did Donald Trump win?

Donald won by wooing the electorate that mattered in a battle against Washington insider, Hillary Clinton. While the rest of the world saw a privileged white man; a man with inherited money that he frittered away on poor business deals who was paying his way to the top spot on the Republican ticket, voters in key States believed the nationalist ‘America First’ propaganda and insular rhetoric pouring from his Twitter feed. Despite winning fewer votes than his rival, Donald won the White House. Look up the electoral college system if you’re keen to see how it’s ~~rigged~~ set up.

What did the markets think of Trump?

Trump revealed a change in attitude from the markets towards geopolitical risk. The shockwaves from the election were relatively minor. Although the rising value of safe haven gold suggests they’re not entirely keen.

Markets and politics

Since Trump was elected, the markets have learned to weather the Twitter spats between Kim and Trump, watched the military posturing across the east Asian region with a bucket of popcorn, ignored the implications of Russian interference in key Western democracies, and will see the year out analysing Trump’s ham-fisted diplomacy in Jerusalem and the U.N. with great interest. Interestingly, at no point have any of the indices tanked suggesting there may be a growing separation between geopolitics and market valuation. Or things haven’t got crazy enough to worry them yet.

2017 was characterised by massive geopolitical upheaval that didn’t always translate into market movement. But the biggest upset for the year was Bitcoin. Will other cryptocurrencies now gain value? Will the bubble burst or is BTC finding its true level? Let’s see in 2018.

Your 2017 market-moving political events

Elections can feel like… via GIPHY

If 2016 has taught us anything, it’s that markets get more than a little jumpy when elections and referendums contain surprises. This means chances to make quick gains if you jump the right way. Happily then, 2017 is rammed with political events that are tipped to shake major currency markets to the core. It seems to be a year packed full of elections as governments around the world face the music and hear what the electorate really think of them.

January 20th – Trump’s inauguration

He’s passed the final electoral college hurdle and, major catastrophe not withstanding, Donald Trump will be inaugurated as President of the United States later this month becoming arguably the most powerful man on Earth. China has just appointed a diplomat solely to interpret his Twitter feed so if you don’t follow it, start now. The little gems from this man’s mouth will have USD markets twitchier than day 3 of a junkie’s decision to quit, as he is even more controversial than Bush was in 2000.

January – Brexit court decision
Eleven of the UK’s finest legal minds have been cogitating over their Christmas puds to decide whether Prime Minister May is within her rights to trigger Article 50 and the UK exit from the European Union without getting the okay from Parliament, or whether she’s trying to pull a swift one. They will announce the result of their deliberations early in January and whichever way it goes, the GBP markets will be jittery.

February 12th – German Presidential elections
Populist groups are gaining ground across the country as anti-migrant sentiment grows. The way the vote goes will indicate to the markets the direction of popular sentiment and give the world an idea of how the major Bundestag elections will go at the end of the summer. Chancellor Merkel is seeking an historic fourth term, and Euro-centrists will be praying she gets it. Whatever happens, economic decisions in the largest economy in the EU will be influenced by hopes of portentous political gain this year.

March 8th – UK budget
This will be the last UK budget delivered in the Spring and the first after the world knows what the timetable for Brexit will be. Fiscal policy announcements could see banks and traders changing their strategy for GBP markets.

March 15th – Dutch general elections
The EU’s latest time bomb is potentially ticking in the Netherlands. A worrying rise in popularity for far right Eurosceptic parties mean this election is poised to deliver a further blow to the European project and could destabilise EUR trading.

March 26th – Hong Kong Chief Executive election
After controversial wins by pro-democracy candidates in the 2016 elections, Beijing made some interesting interpretations of the law and prevented many from achieving office. With the Communist party conference later in the year, the central party leaders will want to find a centrist candidate who won’t rock the boat. But that doesn’t mean the voters will choose them. Expect waves through the CHY markets around this time.

March 31st – Article 50 deadline
Prime Minister May could be starting to regret her promise to trigger Article 50 by 31st March. Recent mutterings about banks negotiating with Paris and other central European cities could gather pace in the run-up to the deadline and risk undermining banking confidence in London. While this would have most effect on the FTSE indexes, it could hammer sterling too. What’s most likely is a very bumpy ride, which could be lots of fun for TIQL players.

April 23rd – French Presidential elections first round
As if the Euro didn’t have enough on its plate, the French are due to start the election process for a new President at the end of April. The integrity of Europe is already under the microscope as the campaigns begin, and there is a growing support for far right anti-centrist groups here, too. Le Pen has already called for France to leave the Euro and if this proves popular with the electorate, the currency could have a rocky road ahead. There is a chance France could become the first western democracy to elect a far-right head of state with executive powers since 1945. And we thought 2016 was insane.

May 19th – Iranian Presidential elections
If you trade oil markets, the developments in Iran will be a key story to follow over the next few months. Some say incumbent President Rouhani, a moderate, may become the first one-term president of the country. Key issues will be the country’s nuclear programmes and their economy. Rouhani has achieved progress in the lifting of sanctions, but internal ructions may lead to his downfall despite the progress made. Recent news shows lots of interest from international companies in oil production in Iran but this could come to a grinding halt if the political wind changes direction.

June – Italian general elections
With rumours of a snap early election dashed, analysts suggest June is the likely month for the next Italian general election after Renzi’s almost too predictable defeat in December’s poll. MPs could push the election back as far as September, but whatever happens, the EU is looking at another political battering in the summer. EUR pairs will go for a ride and safe havens could see a boost.

July 7th – Trump and Putin’s first G20 summit
The arena for what could be the most momentous occasion on the world’s political stage this year. Press releases and conferences will be pored over by traders across the globe during the summit in Hamburg.

Autumn – Chinese Communist Party Congress

Many of the current Politburo Standing Committee are expected to retire at this year’s Congress, and the new leadership will be chosen and announced. However, Xi Jinping, the General Secretary is widely expected to continue. Economic concerns about dwindling FX reserves could lead to changes in China’s international stance and, by autumn, Trump will have set out his stall towards the communist giant. All of this leads to less predicted security for CHY over 2017. But surprises can come from anywhere.

Trends in 2017 – 4 key predictions to affect the currency markets

Now that Trump has secured the electoral colleges and his ascendency to President of the United States is assured, we can look ahead into 2017 with clearer vision. No-one can actually predict the future, but it’s fun to speculate.

via GIPHY

Bitcoin will break $2000

Fears abound about Trump and his effect on the international political stage; investors are split between enjoying the current dollar surge and running for a safe haven. We believe Bitcoin is going to show its strength in 2017 and break the ceiling it’s been nudging for some time as the Trump euphoria dies down and the cold light of day kicks in.

via GIPHY
USD rate hikes in March and November

Yellen and the Federal Reserve Bank of America have strongly hinted that rates will rise more than once across 2017. We think business will change its tune about Trump’s policies once he’s in office leading to a rate rise soon after his inauguration in January. Then, once relations with Chine have dropped off the cliff and the US is again in an arms race with Russia, financial pressure could destabilise the US economy. Yellen could be out of her post in January 2018 so she may feel she needs to take action while she can.

Trump did what?! (Sputniknews)
Italy will go bust

Italy is trying to save its banking system and find buyers for bonds to shore up the debt-laden institutions. The problem is compounded by the precarious state of the country’s finances. It’s debt is second only to Greece’s at a whopping 133% according to one measure. While Greece has now had two quarters of growth, the Italian economy still hasn’t recovered to pre-financial crisis levels and is looking decidedly shaky. There are barriers to the bailout for both the banks and the country, which, if things go wrong, could lead to a massive meltdown. Even if it doesn’t go bust, its downfall will shake the Euro project to its core.

Italy’s economic future
Saudi Arabia will betray OPEC

At the end of 2016 OPEC decided to reduce oil production in order to inflate prices. Eleven other oil-producing countries, including Russia, agreed to do the same. Hooray for rich oil countries. This price-fixing on a global scale is unprecedented (Trump take spelling notes please) and will mean more money in the pockets of many oligarchs and Arabic nationals, who have gotten used to living comfortably off their countries’ natural assets rather than working for it. As the largest producer in the cartel Saudi Arabia has taken a massive hit from recent price cuts and will lose the most from restricting production. This leads us to speculate that they will be the first to sneakily increase production to cash in on the price rises. But will they be caught in the act?