EUR 8.70 For Business Accounts Only

The Morning Track betwixt

- The Morning Track - Betwixt by Bob Savage
http://trackresearch.com/articles/the-morning-track-betwixt/

The dearth of new data or new political deals leaves markets between events with the ECB and Merkel coalition talks in Germany dominating the EUR, while the USD remains unplugged with no government funding but hopes for a bipartisan deal emerging. The GBP has had the best run as French President Macron offered up in a BBC interview his vision of Brexit – saying that “full access” to the single market was impossible but the EU could offer “something perhaps between this full access and a trade agreement.” Most in the UK see a “Norway” like deal where UK buys access. Of course, there are other places in Europe that have cash bumps – like Poland and Greece. The Eurogroup meeting this week is expected to give Greece praise but no money. The E6.7bn money expected rests on actual completion of the 113 economic reforms suggested and few see that until February, thereby delaying a bond issue. Poland clashes with the European Commission on the “rule of law” a
s a necessary condition for EU money. Poland and Hungary stand out for their share of EU receipts.

The lesson of the day is that markets are between cash and a hard place in governing to get it. The cost of money isn’t just in the bond yields but also in the FX and the confidence of the voters. In Japan, Abe opens his new parliamentary session with focus on the primary surplus target pushing further back from 2020 to 2025. This isn’t yet a problem but with debt/GDP at 240% it maybe soon – Jan 23 is the fiscal plan date to watch. The point is that while the US suffers the headline humiliation over its funding issues and lack of bipartisanship, the rest of the world also revolves around money and spending with rates melting up along with equities today. The mood is betwixt and between the bulls and the bears leaving risk barometers boldly important. The winner overnight in G7 FX is worth watching for any reversal as it may mean something bigger is afoot – GBP has a lot of 1.3945-1.4000 resistance while the support is a long way away at 1.3740.