A Perfect Storm: One Big Financial Event

In my time as a market commentator I have only once seen a Financial Event to allow the use of the phrase “A perfect storm”, and I’m not talking about the George Clooney movie. To youngsters this phrase is as foreign, as winter is to a summer child – all of you Game of Thrones fans get me.

I used “a perfect storm” to describe the rarest of trading days, when both the European Central Bank (ECB) base rate announcement and the US Non-farm payroll (NFP) were being released on the same day. That was in July 2014 when the NFP was pushed a day forward due to the July 4th bank holiday. There was so much anticipation that day that the market would be overcome with activity due to two major financial releases. But what happened? Nothing. There wasn’t even a draft of wind, let alone a storm. Ever since I have been cautious to use this phrase.

However, this Thursday the 8th of June may be a new chance to get caught in a perfect storm.

Whether you wish to trade on this day depends on your risk or lack of risk appetite but let’s have a look at the three major events which will collide on this day, and the key trading instruments that could be affected.

Financial Event 1 at 11:45am and 12:30pm GMT: ECB Interest Decision/ Press conference

We start with probably the least interesting financial event of the three, which is expected to have the least amount of impact on the market. Even though the ECB is expected to keep interest rates at 0%, ECB President Mario Draghi’s press conference still has the potential to move the EUR, especially if he is less dovish on when the ECB may finally finish its quantitative easing program. Recent Eurozone economic data has been more on the positive side and Draghi himself has said at his last press conference that “downside risks have diminished”. You can highly expect the Press to push him on giving a more definitive answer of when tapering may begin, but if history is any indication, Draghi is likely to be invasive as usual.

Trading Instruments to Watch:

Following the previous ECB Press conference, EUR/USD rose, when Draghi spoke of economic recovery but then fell once the word ‘inflation’ was mentioned. All the Euro pairs could be of interest, but I personally favour keeping an eye on the EUR/GBP due to a certain event which is also occurring on this day. More on that later.

Financial Event 2 at 14:00pm GMT:James Comey Testimony to congress

James Comey who was fired from his position as FBI Director by US President Donald Trump on the 9th May, will testify before the Senate Intelligence Committee on Russia’s alleged interference with the 2016 US Presidential elections. Following Comey’s firing, it was later reported that Trump had urged Comey to drop the ongoing investigation into Michael Flynn and his connections to Russia. The open session which starts at 10 a.m. et (14:00pm GMT) will be keenly watched as any discussion of possible coordination between Trump’s presidential campaign and Russian officials would. This event will likely fuel the flames of a potential Trump impeachment.

Trading Instruments to Watch:

Back in early May when Comey was fired and the word’s impeachment hit the headlines the USD came under huge pressure along with US stocks. The US Dollar index fell and returned to levels it was trading at before the so called Trump rally, which occurred in November of 2016. More speculation of Trump facing a potential impeachment could lead to further weakness for the USD. Also, worth keeping an eye on is Gold. Since these troubles began in May, gold has enjoyed more of a bullish run due to its safe haven appeal.

Financial Event 3 10:00pm GMT: UK General Election

And we arrive at the main event of the day. To be more accurate the voting actually starts at 7:00am GMT, but the real fun won’t begin till the initial results start to come in, which will be around 10:00pm GMT. The build up to this election has been a roller-coaster of opinion polls with the Conservative Party initially in a commanding lead over its rivals the Labour party, but in recent weeks we have seen that lead drop dramatically. This election it not only about which party wins but also how much majority they can win by. With the threat of a hung party now becoming a possibility. The outcome of this election will also pave the way for more Brexit concerns.

Trading Instruments to Watch:

The GBP of course, and the FTSE100. When UK Prime Minister Theresa May first announced a snap general election back on the 18th of April, the GBP skyrocketed to a 6 month high against the USD, as it was believed that May’s Conservative party would win by a landslide. Clearly, now a landslide victory is no longer predicted, so whatever the result, we could see a big reaction towards the sterling. A small majority win for the Tories or even a hung party could put the GBP under a lot of pressure. With Draghi’s press conference many hours before the election votes, I would particularly keep an eye on the EUR/GBP.

Will the 8th of June prove to be a historic ‘Perfect Storm’?Only time will tell.I do hope the phrase lives up to the expectation, a lot better than it did, the last time I tried to use it.