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http://trackresearch.com/articles/the-morning-track-after-pi/
Yesterday was Pi day, 3.14, so what is today? The ides of March? Is this the day that Goldilocks joins Caesar and dies? Most of the news overnight centered on the ongoing fear that the US/China relationship will turn with a trade war brewing. The other headlines are likely more real and more important – New Zealand growth missed expectations, Australian inflation expectations rose, RBA Bulletin casts doubt about such surveys mattering, China confidence in 1Q rises, while the SNB and Norges bank both kept rate policy unchanged. The key point about the Swiss is that they see higher growth and lower inflation – making the output gap being filled less important than the FX rate. They didn’t change their path but their forecasts. In contrast, the Norges Bank – plans to raise rates – and that led to an immediate gain in the NOK (the best performer of the G10 this year) – as markets price 100% chance for higher rates by September. FX appears to be the tail of the d
og for central bankers these days. As for the overall mood, equities are up in Europe and in the futures for the US but they seem less sure and the rally up in bonds isn’t seen as the same support as it was over the last week. Bonds are rallying because the news on growth is weaker and so the outlook for earnings will moderate and that won’t help risk. The world of believing in tax cuts driving up growth and inflation is changing thanks to global trade fears and the ongoing doubts about sustaining the pace of growth at multi-year highs. They are also rallying because the US isn’t the only one with political doubts – Abe faces a tail-risk with the ongoing scandal, Italy reminds the world that Europe is in the midst of a populist shift, Russia/UK relations are worse now than in the cold war. Uncertainty drives investment doubts and drags down prices. For risk of deflation, look no further than Japan. This puts the JPY back as the barometer to watch today in FX with 1
05.22 the March 2 lows key.
The Morning Track after-pi
- The Morning Track – After Pi by Bob Savagehttp://trackresearch.com/articles/the-morning-track-after-pi/
Yesterday was Pi day, 3.14, so what is today? The ides of March? Is this the day that Goldilocks joins Caesar and dies? Most of the news overnight centered on the ongoing fear that the US/China relationship will turn with a trade war brewing. The other headlines are likely more real and more important – New Zealand growth missed expectations, Australian inflation expectations rose, RBA Bulletin casts doubt about such surveys mattering, China confidence in 1Q rises, while the SNB and Norges bank both kept rate policy unchanged. The key point about the Swiss is that they see higher growth and lower inflation – making the output gap being filled less important than the FX rate. They didn’t change their path but their forecasts. In contrast, the Norges Bank – plans to raise rates – and that led to an immediate gain in the NOK (the best performer of the G10 this year) – as markets price 100% chance for higher rates by September. FX appears to be the tail of the d
og for central bankers these days. As for the overall mood, equities are up in Europe and in the futures for the US but they seem less sure and the rally up in bonds isn’t seen as the same support as it was over the last week. Bonds are rallying because the news on growth is weaker and so the outlook for earnings will moderate and that won’t help risk. The world of believing in tax cuts driving up growth and inflation is changing thanks to global trade fears and the ongoing doubts about sustaining the pace of growth at multi-year highs. They are also rallying because the US isn’t the only one with political doubts – Abe faces a tail-risk with the ongoing scandal, Italy reminds the world that Europe is in the midst of a populist shift, Russia/UK relations are worse now than in the cold war. Uncertainty drives investment doubts and drags down prices. For risk of deflation, look no further than Japan. This puts the JPY back as the barometer to watch today in FX with 1
05.22 the March 2 lows key.
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Robert Savage
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