EUR 8.70 For Business Accounts Only

The Morning Track fading

- The Morning Track - Fading by Bob Savage
http://trackresearch.com/articles/the-morning-track-fading/

Noise and fading enthusiasm dominate the start of the day for US markets. The risk-on mood faded a bit last night with the focus first on the return of North Korea missile risks - Kyodo News and TBS reported Japan detected radio signals suggesting North Korea may be preparing for a missile tests; second on the balance of equities to rates in China – as 1-year swaps rise to 2-week highs at 3.64%, third on the role of extraordinary policy in Japan – as Kuroda says the “reversal rate theory” doesn’t apply to Japan now. The key price action last night in FX was caught between FOMC Chair nominee Powell and ECB Hansson remarks – both surprised by switching their assumed roles as Powell said, “he expects interest rates to rise somewhat further,” while Hansson said the APP (asset purchase program) can be phased out if the economy evolves. The fading of stark black and white, hawk and dove positions stands out as policy-making lives in a grey world where forward gu
idance is a key tool and financial stability a new burden. The assumptions that started the week remain in play that the FOMC won’t hike as much in 2018 as they did in 2017 and that the ECB will be more aggressive in their move to normal policy. However, the EUR approaching 1.20 is clearly not in the interest of Europe just as the USD below 94.50 isn’t in the interest of the Fed as they try to prevent future revolved around Ireland with the Irish Times reporting on the Deputy PM Fitzgerald adding to pressure for her to resign but most expect a motion of no-confidence likely to be tabled today. As for the economic data, Swedish retail sales missed (2.6% y/y rather than 3.3% expected) and hit SEK, NOK is lower on oil while the French consumer bounced back but not enough to change price outlooks. The ECB M3 was as expected and going nowhere despite the extraordinary policy. This leaves today and that fading noise for trends in the USD and rates reflected in the EUR to the
US data, Powell Q/A and the BOC Poloz speech on financial stability. How politics intersect markets continues to haunt with NAFTA, the US Senate on tax reform and the ongoing talk of a Flynn deal on the special Russia/Trump investigations nagging. The barometer today is the EUR with the break of 1.1885 opening 1.1770 risks.