EUR 9.28 For Business Accounts Only

The Morning Track laffer-curves

- The Morning Track – Laffer Curves by Bob Savage
http://track.com/articles/the-morning-track-laffer-curves/

Something different happened today, European equities stopped going up. The US markets bought shares ahead of the US President Trump announcement today on tax reform – with the 15% corporate tax rate leaked yesterday – making this a buy the rumor and sell the fact kind of risk for today. The key contention and talking point for pundits is how the Trump team fills the revenue gap and most think its on the arguments that faster growth drives higher tax takes – dusting off the Laffer Curve to justify the call. This may or may not be acceptable to the Congressional Republicans and clearly not to the Democrats. So politics continue to dominate markets. There was little hard economic data to drive the story today – Australian CPI was less than expected and RBA on hold expectations extend further. There is further worry from the data on the bifurcated economy where housing prices drive inflation by big cities. The Turkish central bank left its main rates unchanged but
continued to tighten monetary conditions hiking the liquidity lending rate 50bps to 12.25% – helping TRY gain on the day. But that isn’t worth much in a market waiting for the BOJ, ECB and Riksbank to see if they change their turn and whether they too believe in the surveys predicting stronger growth in 2Q. The oil market maybe worth watching again today – with the risk in the US inventory data still. The risk of USD/oil correlations shifting remains real. But overall, the markets are calm and prepared for little or nothing to happen today as they wait for something bigger, something huge to shift their fear/greed balance. The wall of worry for investors was long ago climbed and now its up to 1Q earnings and Trump to shift the mood. The barometer for risk today goes back to the EUR which failed at 1.0950 as it was supposed to – making the risk for 1.0830 into the ECB even more likely – with consolidation of the recent trends the main expectation.