EUR 9.28 For Business Accounts Only

The Morning Track detente

- The Morning Track – Detente by Bob Savage
http://track.com/articles/the-morning-track-detente/

So many lines are crossed. The net effect on the world markets after the US attacks a Syrian airbase using 59 Tomahawk missiles in retribution for Assad’s sarin gas use leaves more confusion than clarity. The US defense department called this a “one-off” while Russia calls it an act of aggression and wants a UN emergency meeting. The red line on chemical weapon use bred the US reaction and how much more action that could follows also matters but like many other geopolitical surprises, today’s action has already begun to fade. Risk-off moods roll back and forth, with Non-Farm Payrolls, the next big story. Bombing Syria recalls Gulf War 1 reactions and perhaps there are lessons still to be learned about trading on bombs. Today, the first effect is oil higher; the second safe-haven buying - with bond yields lower, gold higher, JPY stronger - and the third the RUB lower as the second cold war with Russia restarts. Trump isn’t going to side with Russia on Syria a
nymore and that puts the entire region back to the drawing board on what brings peace. Chinese comments on opposing chemical attacks in Syria notable as well as the lack of criticism for the US action, which leaves the China-Russia-US relationships unclear just as Trump would like it. As for the other stories that mattered overnight – there was a host of industrial production and trade data today from Europe – Germany is better, France worse and UK worse as well – all of which didn’t really matter as much as the focus on Xi, Putin and Trump. There is a sense that something big could happen for risk again but its not clear if you get it on the jobs report or over the weekend on the actual outcomes from the US/China talks. The chart suggests the USD is vulnerable to another downturn and that would track the US bonds below 2.29% again.