EUR 8.82 For Business Accounts Only

The Morning Track developing

- The Morning Track – Developing by Bob Savage
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Shake it like a Polaroid Picture. That is the advice for today as markets wait for political clarity on Brexit, more on US/China trade talks and China stimulus plans, more on how emerging markets are going to stop the rising USD trade despite the sharp drop in global rates. The picture on global growth is mixing badly with the policy uncertainties. Back to the headlines for a quick refresher on why yesterday’s risk appetite developed into indigestion – China industrial profits fall to May 2009 lows, RBNZ flips to easing bias, Thai election results delayed until May 9 due to irregularities, Japan Nikkei poll shows 25% of business leaders see global economy worse in 6-months, Italy business and consumer confidence drop – as there is no end to the recession there and the government plans more spending– while Sweden’s NIER sees the economy cooling down. ECB Draghi puts the best spin he can on it all with vows to reach the 2% target, even as he will exit without ever r
aising rates. The pain trade in shorting TRY continues with the overnight rate over 600%. The LATAM sogginess in EM FX shown by ARS closing 1.5% weaker at 42.7 continued with ZAR breaking key levels, MXN over 19.20 and elections for India and Indonesia remain in focus. The pain trade in EM isn’t unique, as the move up in the USD against NZD stands out overnight. Rates matter everywhere and the pushing forward of rate cut expectations there from June 2020 to November 2019 make the NZD carry trade wobble particularly against the USD. This is worth watching in the context of China and Asia growth rebound hopes. The 200-day at .6929 and 55-day moving average at .6824 look important for measuring any such mood shifts, but .70 and .6450 are the big picture levels to watch.