EUR 9.24 For Business Accounts Only

The Morning Track expected-2

- The Morning Track – Expected by Bob Savage
http://track.com/articles/the-morning-track-expected-2/

Surprises mattered less than expectations overnight – with Austria surprising with a victory for Van der Bellen of the Green Party beating Freedom Party Hofer (51.7% vs. 48.3%) for the Presidency – and with New Zealand seeing Prime Minister Key resign for family reasons. Neither events mattered to the markets much. Meanwhile, the worst case scenario for Italy unfolded - the Italy Referendum on the Constitution failed - as expected with voters opposing change by 59% to 41%. Ironically, this led PM Renzi toresign – as promised – but few see a new government until Feb 2018 with talk of FinMin Padoan or Senate President Grasso replacing him without another election, even as 5-Star Leader Grillo calls for an immediate vote. Perhaps most importantly, banks are holding their share prices despite some risks for a rating downgrade – early selling of Monte dei Paschi reversed from -6% to up 1%. There is a clear sense that the expected outcome in Italy has brought some rel
ief even in its “bad news” as EU officials rally around stability and some see the ECB acting further to stamp out any longer term pain to the periphery bonds. This begs the question of how to trade surprises and worst case scenarios. Selling the EUR didn’t work overnight, buying US bonds didn’t either. The EUR break of 1.07 in Europe this morning opens 1.0815 retests and begs the question about the USD rally continuing and the ECB acting more aggressively Thursday.