EUR 8.82 For Business Accounts Only

The Morning Track big-house

- The Morning Track – Big House by Bob Savage
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In a big house it’s easy to get lost as the maze of rooms lead to many different exits. This is the lesson for the markets today as they watch central bankers and the UK Parliament. The focus of markets is back to rates and the policy prognostications from central bankers as the level of negative yielding bonds rises over $10 trillion. Markets are unsettled still though modestly stable even with economic data less rosy than yesterday - albeit second-tier in status as UK BBA mortgage approvals drop to 6-year lows, with German consumer climate dropping for the first time in 5 months, with the BOJ minutes revealing a concern about the VAT and global demand hits, with French GDP revised to 2% in 4Q but lower for 2018 and with confidence higher for business led by wholesale trade, flat or lower elsewhere. The overall focus is on politics first with the big House of Parliament firmly in control leaving markets in a wait-and-see mode, followed by the central bankers as they pla
y games with markets as they wait-and-see about economic data and market stability.
• UK Brexit – timelines – Letwin amendment passes, Parliament seizes control of process, usurping PM, focus is on cross-party backbench talks, various options for Brexit to be voted on with run-off next Monday, PM May to address 1922 committee tomorrow – with some talk of resignation plan.
• Turkey volatility – 5.50 pivot. The early drive for stronger TRY denied, interest rates O/N to 1 week in FX over 100% as Turkish banks appear to be keeping swaps below 25% central bank limit.
• Hungary rate hike risk – moving from -0.15% to -0.5% expected. The real surprise maybe in the news conference that follows and breaks tradition.
The point of these stories maybe in the fact that rates are moving more than FX markets as the traditional shock absorbers for capital flows and economic policy stress are lost in the decade of QE. The ride for investors will be bumpy and the implications for the G10 FX volatility dire unless something bigger happens in US/China trade or UK Brexit. Until then we all are watching the USD tight range and fear for a melt down from 95.85.