EUR 9.28 For Business Accounts Only

The Morning Track boiling-frogs-3

- The Morning Track - Boiling Frogs by Bob Savage
http://track.com/articles/the-morning-track-boiling-frogs-3/

Gradualism in monetary policy changes is like boiling frogs, best to do it slowly or the frog will jump out of the pot. This is how many see the actions of the FOMC and explain away the lack of volatility globally despite clear rate and growth divergence. The other argument for why volatility is low is anticipation of such from the events in the week with the buy-the-dip on any disruption part of the trading plan learned from 2016 and Brexit/Trump surprises. Overnight news is proof of this strategy – China data was mixed with production and investment higher, sales lower, suggesting inventories are going to build again. UK sees GBP at 8-week lows as the parliament gives UK PM May go-ahead to trigger Article 50 and separate from the EU, also BOE Deputy Governor Hogg resigns after a critical TSC report. There are some illogical inconsistencies in play – like higher inflation driving up a currency – just ask Sweden where CPIF touches the Riksbank target for the first
time since December 2010. The point is a little inflation in a nation riddled with deflation fear is a good thing until its not. The overshoot in Europe maybe something that drives the EUR into confusion should the ECB remain accommodative as the confidence game appear to be topping out with weaker Industrial Production and a lower German ZEW economic sentiment today. This is the game for Draghi as he plays with the madness of negative rates and QE while the US moves up the heat. The discussion at the G20 will be worth listening to accordingly as FX plays a key role in inflation everywhere.