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http://trackresearch.com/articles/the-morning-track-mood-swings/
Day two and the search for news continues leaving risk-on as the predominate mood. The biggest risk maybe in a mood swing happening when we start to hear from more than politicians and central bankers. Economic data could be far louder than any soft talk promises. Markets have rejected the USD up notion but cling to oil and equities. The USD reversal was first connected to GBP as BOE Vlieghe said, provided headwinds from Brexit uncertainty do not intensify in near term and ultimately fade over the coming years, thinks policy rates are likely to rise by 25bp to 50bp per year over forecast period. Other bits of BOE statements support the GBP as they discuss rate path and transparency in their inflation hearings. All of which, sounds strangely like the FOMC normalization process. The trade war step down seems clearly linked to the Trump desire for a North Korea summit next month but progress shows up as China cuts import taxes on autos from 25% to 15% and auto parts from 8%
to 6% as of July 1. The rally up in Italian BTPs maybe the most logical driver for the mood – the best performer of Europe – as a new PM seems likely to be announced by Thursday. Not everything was rosy in geopolitcs and policy overnight as the US demanded exacting terms for any new Iranian nuclear treaty – making it even more unlikely and pushing EU closer to China/Russia views. This left oil bid and waiting for US supply reports. In fact, the lack of mood swings overnight stands out as the risk-on fervor gathers steam. This makes for some risk that the leadership of the move shifting to oil is a set up for a larger, more volatile fall, as the USD rally consolidates and the US rate move holds with 3.25% 10Y more likely than 3.00% breakdowns. The risk for markets as they cling to hope for full recovery back to January equity highs despite FOMC tightening and geopolitical fears lives in volatility with oil prices the key stand out.
The Morning Track mood-swings
- The Morning Track – Mood Swings by Bob Savagehttp://trackresearch.com/articles/the-morning-track-mood-swings/
Day two and the search for news continues leaving risk-on as the predominate mood. The biggest risk maybe in a mood swing happening when we start to hear from more than politicians and central bankers. Economic data could be far louder than any soft talk promises. Markets have rejected the USD up notion but cling to oil and equities. The USD reversal was first connected to GBP as BOE Vlieghe said, provided headwinds from Brexit uncertainty do not intensify in near term and ultimately fade over the coming years, thinks policy rates are likely to rise by 25bp to 50bp per year over forecast period. Other bits of BOE statements support the GBP as they discuss rate path and transparency in their inflation hearings. All of which, sounds strangely like the FOMC normalization process. The trade war step down seems clearly linked to the Trump desire for a North Korea summit next month but progress shows up as China cuts import taxes on autos from 25% to 15% and auto parts from 8%
to 6% as of July 1. The rally up in Italian BTPs maybe the most logical driver for the mood – the best performer of Europe – as a new PM seems likely to be announced by Thursday. Not everything was rosy in geopolitcs and policy overnight as the US demanded exacting terms for any new Iranian nuclear treaty – making it even more unlikely and pushing EU closer to China/Russia views. This left oil bid and waiting for US supply reports. In fact, the lack of mood swings overnight stands out as the risk-on fervor gathers steam. This makes for some risk that the leadership of the move shifting to oil is a set up for a larger, more volatile fall, as the USD rally consolidates and the US rate move holds with 3.25% 10Y more likely than 3.00% breakdowns. The risk for markets as they cling to hope for full recovery back to January equity highs despite FOMC tightening and geopolitical fears lives in volatility with oil prices the key stand out.
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Robert Savage
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