EUR 8.70 For Business Accounts Only

The Morning Track limited

- The Morning Track - Limited by Bob Savage
http://trackresearch.com/articles/the-morning-track-limited/

Funny thing about limited supply – it begets many to hoard and to drive up the value to levels that impede usefulness. Bitcoin is getting a lot of press about its transaction costs today (see the SCMP on the cost of a cup of coffee) and you get a rush to the alternatives. FX is a limited edition game and today is about the speed bump for the USD bears. Korea looks like it intervened to stop the KRW from breaking to 1050. China saw the CNY flip-flow from near 6.48 back to 6.50. The story is counter intuitive given the weaker US jobs report – growing jobs at 1.4% y/y means either we are hitting the natural economic constraints for the universe of labor or that we are slowing down, neither help the USD story as FOMC hikes and growth will remain in question. Contrast that to Asia where the Xi charm offensive to win over the world as the “stable genius” for alternative diplomacy and money dominates. Of course, the weekend stories about China banning Bitcoin miners an
d Korea investigating banks dealing in crypto currencies reminds us all off the capital constraint stories in both countries and clashes with the need for intervention. Witness the chart from the FT on China household demand for FX with 55% of families wanting to own 10% of their wealth outside of the CNY. The PBOC now caps individuals to $15,400 per year (CNY100,000) on overseas ATM withdrawal, before 2018 it was a per card limit. This seems at odds with the 11th month of rising FX reserves reported over the weekend, but FX reserves at $3.14 reflect more the USD weakness than the CNY strength. Note the CNY rose 6.7% in 2017 while the USD fell 13% in its basket to the G10.

There is a sense today that moves in asset markets are limited like the US jobs market. FX moves have been to sharp and scary for many as it disrupts trade and potentially growth. Weaker USD helps US companies claw back market share but means higher prices. CPI this week on Friday is the event risk for the USD accordingly. For today, focus is on the UK May cabinet reshuffle with the only market moving part being her creation of a “no Brexit deal” minister. In Germany, Merkel is upbeat on the SPD/CDU talks with 5 days of meetings ahead. The South Korea talks with the North are extending beyond the Olympics, helping decrease war fears. Beyond the Trump tweets about the Bannon book casting doubt on his competence, the US focus is on how the retailers really did around the holidays. The National Retail Federation says it expects a 4% y/y rose beyond the early forecasts of $682bn in spending. The start of 4Q earnings season is also in play with the tax charges the surpr
ise risk against expectations for a robust set of profits across all sectors. As for the economic data today, German factory orders missed, while EU Economic Sentiment rose to multi-year highs and retail sales bounced back. All of this puts the focus back on the EUR for some sign of breaking down after positions show a larger bull bet was put on last week. Mean reversion rules today and 1.1900 targets are in play.