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EUR 9.28
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http://track.com/articles/the-morning-track-carrots-and-sticks/
Focus today is on the extension of the risk-rally post the FOMC minutes adding little to modest rate hike expectations and balance sheet shrinkage. The overnight focus was on OPEC and the doubt that a 9-month extension will change the price dynamics enough – so oil is lower. The Bank of Korea left rates on hold but saw it better economic outlooks and that helped spur a big rally in Asian shares with KRW up 0.8% as well. The USD in general is lower still with rates the major driver but capital flows to EM and Europe clearly at play as well. The China/US relationship is in focus with China warning on a US warship near its artificial island in the South China Sea suggesting it may derail progress on trade and other talks. Carrot and sticks are at play in the NATO summit today as UK May will need to talk to Trump about intelligence leaks after the NY Times posted pictures of the bomb just 12 hours after MI5 gave it to US intelligence. The threat of curtailing other intell
igence sharing hangs over the US post the Russian/Israel story from last week. The biggest drivers of markets continue to be central bankers rather than politicians and so asset prices are bid with stocks running to new highs and the USD lagging as many see the FOMC promising to be late to the party and unwilling to take away the punch bowl of easy money. This puts the quiet European markets on track again despite early profit taking for a thin Ascension Day market. Trading in the US session revolves around 2nd tier data – making weekly jobless claims important along with more talk about the Trump budget and the 7Y auction. Expect rates to remain the driver and the focus to be in the consolidation of 10Y yields between 2.31% and 2.18%. Unless we break over the 55-day at 2.355% there is little that can happen to change the view that the FOMC and other central banks offer more carrot than stick.
The Morning Track carrots-and-sticks
- The Morning Track – Carrots and Sticks by Bob Savagehttp://track.com/articles/the-morning-track-carrots-and-sticks/
Focus today is on the extension of the risk-rally post the FOMC minutes adding little to modest rate hike expectations and balance sheet shrinkage. The overnight focus was on OPEC and the doubt that a 9-month extension will change the price dynamics enough – so oil is lower. The Bank of Korea left rates on hold but saw it better economic outlooks and that helped spur a big rally in Asian shares with KRW up 0.8% as well. The USD in general is lower still with rates the major driver but capital flows to EM and Europe clearly at play as well. The China/US relationship is in focus with China warning on a US warship near its artificial island in the South China Sea suggesting it may derail progress on trade and other talks. Carrot and sticks are at play in the NATO summit today as UK May will need to talk to Trump about intelligence leaks after the NY Times posted pictures of the bomb just 12 hours after MI5 gave it to US intelligence. The threat of curtailing other intell
igence sharing hangs over the US post the Russian/Israel story from last week. The biggest drivers of markets continue to be central bankers rather than politicians and so asset prices are bid with stocks running to new highs and the USD lagging as many see the FOMC promising to be late to the party and unwilling to take away the punch bowl of easy money. This puts the quiet European markets on track again despite early profit taking for a thin Ascension Day market. Trading in the US session revolves around 2nd tier data – making weekly jobless claims important along with more talk about the Trump budget and the 7Y auction. Expect rates to remain the driver and the focus to be in the consolidation of 10Y yields between 2.31% and 2.18%. Unless we break over the 55-day at 2.355% there is little that can happen to change the view that the FOMC and other central banks offer more carrot than stick.
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Robert Savage
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