Tariffs and FOMC - Tradable Events this Week
Tradable Events this Week

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The week ahead will be defined by two cornerstone events. First, at 12:00 am ET on Monday, Washington will impose a 10% tariff on $200 billion worth of Chinese goods and China is expected to retaliate with $60 billion on U.S goods. Second, the Federal Reserve is expected to raise interest rates at the end of their two-day policy meeting on Wednesday at 1:00 am CT.


Did you catch Friday's Midday Market Minute?

Click the image to watch.

In our Morning Express on Friday, we argued that the market has not properly priced in the risk of an escalating trade war. Yes, we believe that once these new tariffs are implemented, this is the official start of a trade war. Relations between the U.S and China have deteriorated over the weekend with China calling off the next round of talks planned for this week. Adding to angst in Beijing are recently imposed sanctions against Chinas defense agency while China has approached the World Trade Organization about imposing anti-dumping sanctions against the U.S. All in all, these are the true symptoms of a trade war. The S&P set a record high on Fridays session and the market has ignored last weeks escalation. The main reason being; the pending wave of tariffs is a watered-down version of what the market had anticipated. With the U.S upping the tariff tab to a total of $250 billion and China to $110 billion, these next 24 hours should prove to be critical.


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It is a forgone conclusion that the Federal Reserve hikes interest rates on Wednesday. However, with what appears to be a complete fallout in U.S and China trade relations, today hike probabilities for this week, December and March have retreated by a couple percentage points. Still, they will hike Wednesday but what will be most important is their tone in doing such. What does their tone do to the probabilities for December and March? The 10-year U.S Treasury yield closed at 3.067 on Friday after trading to a high of 3.096 on the week, the highest since hitting 3.128 in May. With massive supply hitting the market two weeks ago amidst fears that China is selling or at least refraining from buying as much U.S debt, this was a tremendous catalyst in rising yields. However, there was a less notable catalyst; Fed speak. Two weeks ago, both Fed Governor Brainard and well-known dove Chicago Fed President Evans took a more hawkish tone and Fed hike probabilities and Treasury yields took sharp notice. This is important to understand because the pendulum of Fed perception swung one way upon this. It is important to remember though that the Fed likes to keep things even keel; they did not want perception getting too dovish before they announced an interest rate hike with a cautious or dovish rhetoric. Anyways, this is our belief and we expect the pendulum to begin a swing back. Regardless, traders must prepare for Wednesdays announcement.


Have you seen Oliver Sloup's "2-Minute Drill" covering the grains and livestock markets?

Click the image to watch

Other notable events this week:


OPEC and non-OPEC officials met today and left production at its current levels. They made a promise in June to add 1 mbpd in order to offset Iranian Crude coming off the market and other geopolitical disturbances; they are halfway to achieving this goal. OPEC expressed a firm belief that demand will begin to tail off and for this reason the Saudi Energy Minister said it is highly unlikely they will increase production next year. Furthermore, he expressed they must make sure the market does not become oversupplied next year.


German Ifo Business Climate 3:00 am CT

ECB President Mario Draghi speaks 8:00 am CT


U.S Consumer Confidence 9:00 am CT


U.S Durable Goods and GDP 7:30 am CT

Central bank leaders from around the world speak throughout the day

Caixin Chinese Manufacturing 8:45 pm CT


German Unemployment 2:55 am CT

U.K GDP 3:30 am CT

Eurozone CPI 4:00 am CT

U.S PCE Index 7:30 am CT

Canadian GDP 7:30 am CT

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.