EUR 9.38 For Business Accounts Only

The Morning Track cut-and-wait

- The Morning Track – Cut and Wait? by Bob Savage
http://track.com/articles/the-morning-track-cut-and-wait/

There are two ways of trading news today – first is from a domestic lens, second from an international one. The correlation of the two has been high ever since 2008 but that maybe changing – making the year-end push for risk-on that much more confusing. How the rest of the world reacts to a Trump Presidency matters more than how Americans react for where we close stocks, bonds and FX. That makes central bank rate decisions everywhere important. The RBNZ cut rates 25bps yesterday and signaled it was done for now. The Philippine central bank left rates at 3% - as expected – PHP lower. The notable drop in machine orders in Japan, weaker industrial production in France and Italy – both highlight the global policy divergence issues ahead. We are in a cut and wait mode across markets as the momentous shift in US politics sinks into markets around the world. China’s Foreign Ministry refused to comment on speculation about Trump trade tariffs, while the MOC denied it
wants to depreciate the CNY as it dances near 6.80 with larger interest to hold 6.85 likely.

The balancing act is one of rates and the USD against fiscal policies that support growth and inflation. The FOMC returns as a key player in the next move in risk – with the data dependency likely returning to matter post the election. The focus on the market is on how risk-on plays out everywhere outside the US. The best guide remains Japan where AUD/JPY and other carry trade crosses lead. USD/JPY looks to be breaking out as well with 107 a key barrier in play.