EUR 8.70 For Business Accounts Only

The Morning Track lunch-party

- The Morning Track – Lunch Party by Bob Savage
http://trackresearch.com/articles/the-morning-track-lunch-party/

Welcome to December again, with all the noise in the week ahead culminating in the US employment report and a cacophony of geopolitics. There was plenty of tidbits to nibble on overnight beyond the main course of US Tax Reform that passed the US Senate early Saturaday morning. The reconciliation process has already started and how that plays out dominates much of the week and month as risky assets gain in the US but not much elsewhere in Asia and typical bounce back in Europe. The world looks out of synch as politics matter but central bankers matter more.
• Hard Brexit Biscuits - UK PM May, Brexit Secretary Davis, EU negotiator Barnier and EC President Juncker are lunching together, topics for discussion include the Irish Border, the European Court of Justice, citizen’s rights – all with a Monday deadline.
• Begging for War - US and South Korea start aerial drills today, “a grave military provocation that will push the already acute situation on the Korean peninsula to the brink of nuclear war,” North Korea state news agency KCNA reported. Meanwhile the South Korean government is debating what to do about cryptocurrencies.
• By-Election Bliss – Australian politics continue to be a focus as Barnaby Joyce claimed victory in a special election on Saturday, winning back the seat of New England and will return as deputy prime minister John Alexander, also part of the ruling minority coalition, will also face voters Dec. 16 as one of the two lawmakers who were forced to re-contest their seats. Polls show a much closer fight.
• Petro joins the crypto-club – Venezuela announced plans for a new digital currency – the “petro” - backed by oil reserves, in a move to circumvent US-led financial sanctions. As an aside, the curse of Barron’s maybe at play as Bitcoin features on the front page. Futures on Bitcoin are assumed to have a 50% margin (allowing 2-1 leverage). Bitcoin is off 2.6% to $11,249 so far.
The tibbits are good for reading but not for trading – the key is all about rates and if they will dominate equities or FX again or revert back to their prison-like ranges of November. The data today in the US isn’t likely to do it. Instead, its going to be in the relationship of FOMC reaction functions to stocks up, more fiscal spending in a long-in-the tooth recovery and in their fears that they maybe contributing to their own bubble risks from their predictability and gradualism. Watching the US 10Y for a blowout to 2.48% in the US today as more fear creeps into 2018 trading outlooks. The corollary is that its still going to be hard to be short USD here but might be smart to wait for the 55-day to break at 93.59 before getting long again.