EUR 8.14 For Business Accounts Only

The Morning Track mayday-2

- The Morning Track – MayDay by Bob Savage
http://trackresearch.com/articles/the-morning-track-mayday-2/

May Day – both an international labor day celebration – and an international distress signal for radio communications – greets markets today. The French pan-pan has yet to take off. Holidays in most of Europe, China, Hong Kong and Singapore leave liquidity thin. The USD move up in April has legs into May. But this is more about risk-off than risk-on. The oil bid unwinds a bit even with Iran replacing Korea as the focus for geopolitical fears – particularly after the Israel Netanyahu speech yesterday. Nevertheless, French President Macron is doing his best to keep the Iran Nuclear deal alive. The rate watch higher for the US continues with the FOMC meeting today and tomorrow but 3% 10Y seem less special and the short bond position overdone. Given the host of nations on holiday, liquidity is light and mood for risk fragile even if it’s a new month. Overnight, the US President Trump extended the exemption on steel and aluminum tariffs for the EU, but they remain
in effect on China, Russia and Japan. Italy fails in the fourth attempt to form a government, increasing the risk for a repeat election. UK May suffers ugly politics with the House of Lords vote yesterday forcing some Brexit deal, putting hard exits off the table. UK PMI missed expectations and the drop puts the BOE rate hike fears further back. In fact, the RBA makes it clear that its happy to wait, the ECB/BOJ did the same leaving the rate hike risks outside of the US to emerging markets facing weak FX and sticky inflation pass through. The G7 is all about rates even as they seem to be overdone. GBP and SEK suffer the most overnight with most of Europe closed. The US ISM and the FOMC are the next big issues as we all look for larger moves.