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The Morning Track change-up

- The Morning Track – Change Up by Bob Savage
http://trackresearch.com/articles/the-morning-track-change-up/

Mood change Monday with risk-off starting the week as central bankers and geopolitics remain center of the game for investors. This week is about central bankers – ECB Sintra, BOE, SNB, Norges Bank, Fed speakers and also about a bevy of rising political concerns from Germany, Sweden, Poland, Greece, Colombia, OPEC, US/China trade and ending with Turkey’s elections on the weekend. What is most interesting about this list is the lack of real market reaction in FX markets – with equities and fixed income modestly reflecting risk-off suggesting that the flows of money are muted still. Or perhaps that the list of fears has already been price. This is a melting of risk rather than a panic except perhaps in EM. See the IFF chart below and read the FT Gavin Davies piece to to consider if its just about FOMC hikes or more.

• Germany - Bild Zeitung reported that Angela Merkel's leadership is under threat after her alliance partner gave her 2-weeks to agree to turn away refugees at Germany's borders.
• Sweden - Sweden Democrats party gain support and propose a referendum on EU membership. Sweden's general election is due in early September.
• Poland – Poised for a battle with the EU power to sanction member states over rule-of-law issues, as Warsaw overhauls its supreme court on July 3 with a firing of 1/3 of judges.
• Greece – The deal to rename the former Yugoslavian region the Repulbic of North Macedonia led to a no-confidence vote against the Tsipras coalition government, which survived with a 153-127 vote – as kist pme ANEL member voted against the government. The Macedonia issue is more problematic in Skopje with the President refusing to back the agreement and ratification in parliament there.
• Colombia – Pro-business Duque wins the Colombia Presidency vowing to loosen regulations and fight the drug trade – with 54%% of the vote. His mentor former President Uribe is being watched for his influence in the new government.
• OPEC - Iran says Venezuela and Iraq will join it in blocking a proposal to increase oil production that’s backed by Saudi Arabia and Russia when OPEC and its allies meet in Vienna this week June 21.
• China – outlines response to US $50bn in tariffs with plans for the same with focus on energy and agriculture.
• Turkey – focus is on the risk of a run-off election July 8 for President and on the make up of the Parliament with the new law allowing alliances it opens up smaller parties a role. If the opposition alliance performs as expected, and the HDP gets over 10% of the popular vote, the ruling AKP could lose its majority in parliament.
The economic data releases were light overnight – Japan trade balance flipped to a deficit thanks to energy costs but exports were robust suggesting ongoing global demand holds. Japan also suffered a 6.1 earthquake in western Japan outside Osaka with hundreds injured and buildings, bridges and roads damaged. Given the relative calm reaction –the key for FX as a risk-barometer is JPY with 109.80 the key for bears with 109.05 the 55-day moving average the hotspot to watch.