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It’s half time for the markets with 3 banks on hold but all promising great things ahead. The SNB, Norges Bank and BOE didn’t do anything but their words remain the key tools for hope. The SNB did the least, Norges Bank promises September hike and the BOE saw 3 vote for a hike and lowered its QE threshold. All three saw their respective currencies gain this morning versus the EUR. The similarity to a number of world cup football matches shouldn’t be overlooked. Teams expected to dominate games have frequently done nothing in the first half only to explode with goals in the second. One wonders if this is the path for rates globally in 2018 as the doubts about the steepness of the Phillips Curve, the flatness of the yield curve, the shadow of global trade wars and the ugliness of populist politics dominates headlines. As for the specifics today, its back to worrying about politics with China/US trade in Asia and Italian politics in Europe.
• CNY fell as rate differentials to the US narrows. spread of 2-year swaps has fallen to just 29bps (3.23% for China and 2.83% for the US). Shanghai Securities News reported that China announced it will use targeted required reserve ratio cuts and other monetary policy tools to support the provision of credit to micro and small-sized banks while keeping monetary policy prudent and neutral.
• EUR fell and Bunds rallied on Italy news that Alberto Bgnai, a Euroskeptic, will be head of Italy’s Senate finance committee. Bgnai has repeatedly pushed back against EU budgets. “The goal to balance the budget has destroyed our economy,†Bagnai told Reuters earlier this year.
There is an uneasy feeling today about risk with EUR and CNY weakness dominating over the brief snaps higher in GPB and NOK. The USD is bid and the oil market is offered into the OPEC output decision. There is plenty of news ahead from the US that matters but sinking feeling about how the second half of today works out rests first on trade, second on rates and last on the data. Watching GBP to see if this is the game changer for USD overall – with 1.3225 and then 1.3297 June 15 highs needed to convince anyone that the game for risk can be won.
The Morning Track half-time
- The Morning Track – Half-Time by Bob Savagehttp://trackresearch.com/articles/the-morning-track-half-time/
It’s half time for the markets with 3 banks on hold but all promising great things ahead. The SNB, Norges Bank and BOE didn’t do anything but their words remain the key tools for hope. The SNB did the least, Norges Bank promises September hike and the BOE saw 3 vote for a hike and lowered its QE threshold. All three saw their respective currencies gain this morning versus the EUR. The similarity to a number of world cup football matches shouldn’t be overlooked. Teams expected to dominate games have frequently done nothing in the first half only to explode with goals in the second. One wonders if this is the path for rates globally in 2018 as the doubts about the steepness of the Phillips Curve, the flatness of the yield curve, the shadow of global trade wars and the ugliness of populist politics dominates headlines. As for the specifics today, its back to worrying about politics with China/US trade in Asia and Italian politics in Europe.
• CNY fell as rate differentials to the US narrows. spread of 2-year swaps has fallen to just 29bps (3.23% for China and 2.83% for the US). Shanghai Securities News reported that China announced it will use targeted required reserve ratio cuts and other monetary policy tools to support the provision of credit to micro and small-sized banks while keeping monetary policy prudent and neutral.
• EUR fell and Bunds rallied on Italy news that Alberto Bgnai, a Euroskeptic, will be head of Italy’s Senate finance committee. Bgnai has repeatedly pushed back against EU budgets. “The goal to balance the budget has destroyed our economy,†Bagnai told Reuters earlier this year.
There is an uneasy feeling today about risk with EUR and CNY weakness dominating over the brief snaps higher in GPB and NOK. The USD is bid and the oil market is offered into the OPEC output decision. There is plenty of news ahead from the US that matters but sinking feeling about how the second half of today works out rests first on trade, second on rates and last on the data. Watching GBP to see if this is the game changer for USD overall – with 1.3225 and then 1.3297 June 15 highs needed to convince anyone that the game for risk can be won.
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Robert Savage
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