EUR 8.70 For Business Accounts Only

The Morning Track dogs

- The Morning Track – Dogs by Bob Savage
http://trackresearch.com/articles/the-morning-track-dogs/

Happy year of the dog – there is plenty of newness to markets as correlations breakdown and loyalty to trends pays off. The analogy of the new year zodiac animal to market characteristics can be fun, but misses the larger point about money flows – if the rest of the world is growing fast, money will stay out of the US, and that means the US deficits will cost something – with bond yields rising to reflect that need and the USD weakness to reflect that inflation risks aren’t yet fully compensated. The USD acts more like an emerging market currency than the global reserve standard. The JPY returns as the front leader for USD weakness. Overnight, PM Aso said there were no plans to intervene. The break of the USD/JPY to US rate yields and to global equity risk has a role in the drop as those correlation breakdowns add to the technical chasm from 106.50. Trouble is that the JPY isn’t the risk barometer that matters today. The EUR break and failure to hold over 1.2
5 seems to matter more. The biggest story about overnight trading isn’t in the data – AUD jobs were mixed thanks to the drop in full-time work. Japan Machine Orders fell but weather remains noise there. European trade surpluses are expected – all that economic news was pushed aside by the key relationship of oil and rates. The commodity currencies were bid up on inflation scares yesterday and underperform today even as the JPY and CHF catch up. The best guide for what matters to the USD and to risk maybe in bond spreads – with commodities second – all of which make the Australian Dollar interesting again as a key macro barometer for risk.