Trump helps safe havens and puts pressure on the dollar

19 nov 2019

Yesterday against the positive comments from the US and China regarding trade negotiations, safe-haven assets were under pressure. That is not surprising. Recall our position on gold and the Japanese yen – is to buy, however, now we should trade with an eye to a possible surge of optimism in the financial markets against the background of breaking news from Washington.

Nevertheless, such descents of safe-haven assets should be tried to be used for short-term speculative trading with small stops. Yesterday is a vivid confirmation of this. The meeting between Trump and Fed Chairman Jerome Powell provoked the sale of the dollar in the foreign exchange market and led to an increase in gold prices. The reason is Trump's comments on negative rates and a strong dollar, which were discussed at the meeting. So there is nothing new: Trump consistently opposed the strong dollar and ultra-low rates. So nothing extraordinary happened yesterday.

Another important news is the information about the IPO Saudi Aramco - on the one hand, it is the largest public offering in history (company's capitalization), and in addition, this event is important for the oil market. So, $ 2 trillion of capitalization seems to remain in the dreams of the Crown Prince of Saudi Arabia. Preliminary estimates are $ 1.6- $ 1.7 trillion. Which, however, will still make the company the most expensive in the world.

Regarding the situation in the oil market, despite the desire of the Saudis to conduct an IPO in the most favorable conditions (rising oil prices), as well as the continued decline in the number of active oil wells in the United States, we believe that current oil prices are close to extreme for of these conditions, which means we will sell oil both on the intraday basis and in the medium term. But do not forget about the stops. A breakthrough in negotiations between the US and China could provoke not only sales in safe-haven assets, but also an increase in oil prices.

Our other trading preferences are unchanged - the Russian ruble can and should be sold. The US dollar is also interesting enough to open short positions, especially after yesterday's sales. The pound feels rather confident in the foreign exchange market in light of the growing confidence of the markets in the victory of the Johnson party in the elections, but we are interested in its purchases on the slopes, and not along the way. So we will wait until the pound is substituted, and only then buy it.