ridethepig | BOE & FED Combo

This is a quick update to do with pricing in rates, or what's already priced in rate market ... I wont try my best to keep it short and sweet.

I have been receiving many PM's and comments around how do we know when the Fed cuts are fully priced in? For example the -50bps that the market forced earlier in the week...everybody knew they were coming, they just didn't know it would be a surprise before the meeting.

When it comes to the fundamentals and pricing in rate cuts, the macro is slightly different on each side. The reason it's different is because of timing and placement in the economic cycle. On the UK side, when we walk forward, the further out you go in time, the more relevant Brexit becomes. Why? The market has been incrementally pricing as we've gone along... doing it in small pieces because that's how markets like to move.

https://www.tradingview.com/chart/GBPUSD/vlTOJ9hW-ridethepig-Fading-The-Highs-In-GBP/

The market didn't sit at the highs saying well we've got a new fiscal budget coming with tax cuts on the horizon, the taps on full blast and BOE ready to bend the knee, so lets start selling GBP and suddenly GBPUSD was down 300 ticks. Then markets looked at the 1.275x lows and did another forward walk, this time saying there is no point in going lower because of Fed cuts via coronavirus short-circuit, these are not fully priced so lets take another test of the 1.300x highs as there is more money to be made in the slow train !!!

The macro traders know this, a BOE intervention is only a matter of when and if they can wait till the meeting. We have the budget next week and a very aggressive Fiscal policy may offset the need to act inbetween although, another they will not appreciate another hammer in UK Equities so eyes there to begin the week.

Mostly when talking about whats being priced in, it's on the incremental level. So you will remember the GBP devaluation we are trading via Brexit:

https://www.tradingview.com/chart/GBPUSD/cZEkRhfo-ridethepig-UK-Elections-LIVE-COVERAGE/

This is the future, what the market will try and do is price it all in small increments. The biggest moves, the ones with real volatility will come only sessions before the actual fact of Brexit annihilation. The market is not interested in these small 50 ticks or 75 tick retracement, the further out you go the more relevant the macro becomes. You see here with the PM May resignation:

https://www.tradingview.com/chart/GBPUSD/dosm9daL-April-showers-for-PM-May/

Markets priced in a little before, but you usually don't know enough details until shortly before the fact. Then before the announcement, maybe price moved 100 ticks... then markets expect it to be hawkish ... if that's the case with Boris then it gets priced and if they do not deliver then it will be priced back out.

For the technical