EUR 8.84 For Business Accounts Only

The Morning Track events

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

Some could be so cynical as to say events like today don’t matter. Markets are trading as if they don’t - as stocks rally and bonds sell off. Watching safe-haven flows reverse ahead of events is proof enough, whether it’s the US 10Y yield at 2.18% or the gold to copper spread narrowing. The fear of POTUS impeachment eased ahead of former FBI Comey testimony as his statement was leaked and no “smoking gun” was seen by experts. The polls ahead of the UK showed Conservatives with a 7% lead – and sporting index spread on seat 368-374 - enough to hold the status quo. Most see the ECB today as a tweak with forward guidance on tapering and rates sounding hawkish but inflation risks remaining to the downside. So if that is all the event risk – why not ignore them and trade the trend. Of course, the unknown events continue to nag like North Korea firing another missile today but that was ignored – perhaps lucky 13 rules as that is the number of tests so far in 20
17. Even more to the point is whether anything but easy money and good profits matter to trading risk. But the price action overnight is telling otherwise and worth considering. JGBs were the big mover dropping fast on a Bloomberg article saying the BOJ is prepared to change forward guidance. Then BTPs are the counterbalance, as the local Italian press reports that Renzi would rather have a 2018 election, rather than before the budget. Reuters reports that Italian banks are considering joint intervention to inject E1.2bn into Veneto lenders – adding to the frenzy over BTPs. The viability of the election reform means less politics, and more carry – so BTPs are off 10bps while longer end JGBs are up almost 5bps. Small stuff given the news elsewhere where China trade was better than expected, Japan GDP weaker on the revision thanks to oil, Australian trade worse thanks to coal and Cyclone Debbie, German IP better ignoring orders, and EU GDP revised higher. If growth is
the driver then EUR/JPY would be higher but its not. All of which shows we are still somehow waiting for events to unfold even amongst the cynics. This leaves the USD as a pawn of the UST still with the longer game to the FOMC rather than the ECB.