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http://trackresearch.com/articles/the-morning-track-growth-2/
The battle for the heart of the market rests on growth, not inflation or policy or geopolitics. For sure, overnight the Korea meeting with Moon and Kim was historic and added to confidence but pursuing peace isn’t the same as an agreement. Sure, the BOJ kept its policy unchanged and surprised by dropping its timeline for achieving 2% CPI. Absolutely, the data from Europe was weaker – GDP in France and Spain, missed, jobs in Germany a bit less strong, CPI flashes missing the mark. Nothing new but all of it suggests ECB can’t ignore growth data if it misses the mark. Doubt about policy and the data revolve around GDP and that puts the US GDP 1Q report into perspective. The equation is simple – higher GDP means less of a global output gap, which brings inflation and higher rates. The UK GDP 1Q proves the point in reverse as the BOE rate hike for May unwinds on weaker growth. Perhaps it’s that simple. The wrench in the works for confidence in the US rests on the d
ata, then on the Trump/Merkel meeting with fears about trade and policy wrapped together. The USD bid in G7 isn’t there in Emerging Market – rather a rebound is underway as the markets reprice the risk mood and rethink the risk of US 10-year rates at 3% as bad. The problem is in the growth part of the story with the US critical to making it all work out. The threat for a much stronger USD remains a cloud again and now its about risk-on trading. The chart to consider is the GBP with the break of 1.3869 the 100-day opening 1.3525. That could happen to the EUR and to the JPY in short order.
The Morning Track growth-2
- The Morning Track – Growth by Bob Savagehttp://trackresearch.com/articles/the-morning-track-growth-2/
The battle for the heart of the market rests on growth, not inflation or policy or geopolitics. For sure, overnight the Korea meeting with Moon and Kim was historic and added to confidence but pursuing peace isn’t the same as an agreement. Sure, the BOJ kept its policy unchanged and surprised by dropping its timeline for achieving 2% CPI. Absolutely, the data from Europe was weaker – GDP in France and Spain, missed, jobs in Germany a bit less strong, CPI flashes missing the mark. Nothing new but all of it suggests ECB can’t ignore growth data if it misses the mark. Doubt about policy and the data revolve around GDP and that puts the US GDP 1Q report into perspective. The equation is simple – higher GDP means less of a global output gap, which brings inflation and higher rates. The UK GDP 1Q proves the point in reverse as the BOE rate hike for May unwinds on weaker growth. Perhaps it’s that simple. The wrench in the works for confidence in the US rests on the d
ata, then on the Trump/Merkel meeting with fears about trade and policy wrapped together. The USD bid in G7 isn’t there in Emerging Market – rather a rebound is underway as the markets reprice the risk mood and rethink the risk of US 10-year rates at 3% as bad. The problem is in the growth part of the story with the US critical to making it all work out. The threat for a much stronger USD remains a cloud again and now its about risk-on trading. The chart to consider is the GBP with the break of 1.3869 the 100-day opening 1.3525. That could happen to the EUR and to the JPY in short order.
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Robert Savage
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