#85 US troops in Saudi Arabia

FED cuts, BOJ to increase QQE, BOE & SNB remain still, Norges Bank raises

Overnight US repo rate spikes to 10%


The week began with a drone attack on the world’s largest oil producing facility and ended with the USA announcing new sanctions against Iran, this time against the Central Bank of Iran, and the sending of US troops in Saudi Arabia. This report has never been about how markets reacted to what has already happened. This report has always been about positioning in the future. Reasoning and arguments on what is most likely to happen given the geopolitical conditions, the macro economic conditions and the technical levels major forex pairs and equity indexes are testing.

Given the complexity of this week’s repo spike, full reasoning and arguments presented in bullets are published on the USD page of the report (page 6). The truth of the matter is that the risk-on positioning, that managed to survive both the oil market turbulence and the repo rate spike, now seems to be dead.

Major events of last week:

  • USA-China: Preparation talks for the October’s face-to-face negotiations held in Washigton. Tariffs on 437 Chinese products have been removed. Trump said that a USA-China deal should not necessarily be finalized before the 2020 presidential elections.
  • USA-Japan: Reciprocal tariffs reduction is being announced.
  • Saudi Arabia: Attacks on its largest oil facility. Production will reach pre-attack levels within a few weeks. Responsibility was taken by Houthi Yemen rebels. USA and Saudis put the blame on Iran. Central Bank of Iran has been sanctioned. US troops are being sent to Saudi Arabia. The incident was being referred to as an “act of war” yet, Mike Pompeo said that US is looking for a “peaceful resolution”.
  • Europe: So far the much needed fiscal boost is not materializing. 9bn tax cuts in France, a new fund focusing on health and housing in the Netherlands and the 50bn German spending towards green techonologies, do not create the required fiscal space.
  • Spain is heading to elections as Socialist fail to form a coalitionhe government with the Podemos.
  • Cryptos: Total market cap at $266bn +0% w/w. (-30% from the 2019 high, -67% from the all time high). On Monday, regulators in Basel questioned Facebook executives over Libra.
  • Macros: Disappointing Chinese Industrial production and retail sales. Falling inflation in the UK and Canada. Falling housing market in the Netherlands.

Major events of next week:

  • Nothing worth-noting other than the ongoing USA-Iran relations and USA-China relations


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