EUR 9.24 For Business Accounts Only

The Morning Track guidance

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

Political leaders guide markets – that is the lesson of the day. It maybe the lesson for the year as central bankers go back to the drawing board on monetary policy and its effectiveness. The US President-elect Trump set the tone for markets overnight as he said the USD was already “too strong.” The USD responded with KRW up 1.3%, JPY up 0.9% and CNH up 0.7%, stocks fell in major markets, bonds rallied, gold and oil jumped. In his interview with the Journal on Friday, Mr. Trump said the U.S. dollar was already “too strong” in part because China holds down its currency, the yuan. “Our companies can’t compete with them now because our currency is too strong. And it’s killing us.” But the key point is that Trump leaves open whether the USD is a broad discussion or just about EM and China. The other news didn’t help answer this question -
• GBP goes full circle from Sunday to today. The next shoe to drop for markets is the long-awaited UK May Brexit speech at 6.45am – as its leaks on “hard” leaving of the EU trade zone have spooked the market since Sunday. She has no interest in EU membership that is “half-in, half-out.” But she also doesn’t want the EU to fall apart. GBP was down 2% Monday, up today.
• CNY isn’t falling either. The focus earlier today was also on the Davos WEF speech from China’s Xi where he said no one wins in a trade war. He said that China won’t use a CNY devaluation to gain trade advantages.

The bigger mover of markets before the Trump comments was US rates – gold and its rally seems best correlated to the 10Y yields for now. USD/JPY similarly looks first at rates. The moves in EUR and GBP and others maybe tainted by the election risks and UK May ongoing Brexit plans but the rest of the world seems to be stuck on the level of rates first. The 2.26% 10Y zone is holding and that might be the key guidance for a volatile day as many try to figure out the question of whether the present volatility is the end of the USD uptrend or just the last push in a bigger correction.