EUR 8.70 For Business Accounts Only

The Morning Track fathers

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

“Success has many fathers, but failure is an orphan.” – Tacitus

I lost my Dad 15 years ago, but he remains in my daily thoughts. We are extensions of our families, their thoughts, struggles and success. Fathers have a role to play as they guide appropriate reactions – they give us the playbook for uncertainty, after all, we are born without instructions. Oddly, finding blame for the failure of markets to remain calm, or for equities to stop growing to the sky, or for bonds to end a 40-year bull run – all that has many fathers – from Trump trade policy, tax reform adding to the US deficit, to the FOMC talking tough, to wage inflation, to the inverse VIX ETNs, to the USD being so weak as to drive down assets – and that is just a partial list – many also want to blame the machines for bad liquidity, for risk parity selling at the worst moment, for CTAs’ chasing trends and revsering. Today has the twist of trade data mattering in China along with a policy shifts for investment outflow driving the USD back bid, and central banker
s mattering again with the RBNZ starting it suggesting NZD could weaken, which it did, and then the BOE which supported the GBP by suggesting rates will need to be tightened “somewhat earlier,” but staying on hold with rates at 0.5% and QE at GBP445bn with a 9-0 vote. Carney clarifies sooner doesn’t mean more hikes just faster. Volatility is still alive and well and perhaps that is the most important consistent outcome for the week so far. Markets are learning that the bid/ask spread, that liquidity and prices are interrelated with ability to get into a position far simpler than the process of getting out – particularly if under duress. The volatility spike in equities far outstripped the moves in FX, Bonds or Commodities but perhaps today is a catch-up phase.

The success of the day is in the USD rally back – as the NZD started the move, CNY continued it and the GBP tries to cap it. The USD index has the familiar bottom formation building – perhaps that makes it less of an orphan today.