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Win some, lose some

Nearly two weeks ago, the cost of overnight Dollar funding exploded higher when numerous cash-intensive events intersected on the same day. Since then, the Federal Reserve has stepped into the market and provided for any shortfall in US Dollar overnight funding. This has resulted in more borrowing moving closer to the desired Federal Funds rate, which is a measure of overnight borrowing cost between banks. 

Today was anticipated to be another such limited-liquidity day because most corporates tend to ‘roll over funding’ at month-end, which results in a requirement for cash. Unlike in mid-September, when the overnight interest rate spiked to circa 5.25%, today the overnight was at a still-elevated but a much more manageable 2.3%, which is 0.3% above the Fed’s target band. Many market participants have remarked that the shortfall isn’t easy to estimate, so only a permanent Federal Reserve presence and continuous increase in reserves will alleviate the cash hoarding which has become the industry’s rationale precaution against unfathomable risk.

Boris Johnson’s indomitable spirit in the face of constant failure is almost mystifying. Indeed, his confident tone and address following a Supreme Court setback was widely remarked upon. In the absence of evidence, his appearance is entirely of confidence. Some theories have it that Messiers Johnson and Cumming’s grand strategy is to pit the entire UK establishment against ‘the will of the people’ and that the Supreme Court ruling supplied the necessary ammunition. That seems at once entirely possible and extremely unlikely given each man’s track record. 

Completely unexpectedly it seems the government may have gotten exactly what they wanted, but not what they anticipated; like a dog catching a house cat only to realise it’s a lion. Dominic Grieve, the former Conservative Attorney General, now believes there is enough broad support for the House of Commons to approach the Queen, ask her to fire the Prime Minister and institute a caretaker PM. Grieve went on to comment: ‘I myself would be willing to support a government of national unity, and potentially I think the numbers are there to deliver it.’ The remaining question is one which has plagued the UK’s various parties for years: who can everyone agree on?

The week ahead


  • On Tuesday and Wednesday, respectively, UK Manufacturing and Construction Purchasing Managers’ Index (PMI) survey data is expected to display further contraction in both sectors.
  • On Thursday, the UK Services PMI is forecast to remain just above the neutral no-expansion territory.
  • Out of the annual Tory Party Conference, we expect the British negotiators will present a further Brexit proposal before the end of the week.


  • Several key Fed policymakers are speaking on Tuesday and several on Thursday.
  • ADP Employment Change on Wednesday and Change in Non-Farm Payrolls on Friday will be under extra scrutiny because the consumer is key to the current expansion.


  • Eurozone and member countries Manufacturing PMI releases come out on Tuesday.
  • Eurozone Services PMI data is out on Thursday.

All content is written by the Global Reach Trading Desk. The opinions expressed are not the view of Global Reach Group and are not intended as investment advice.