EUR 8.70 For Business Accounts Only

The Morning Track more-policy

- The Morning Track – More Policy by Bob Savage
http://trackresearch.com/articles/the-morning-track-more-policy/

The world remains in the control of central bankers and politicians rather than consumers and corporations. Markets reflect this with the headlines overnight driving on policy prescriptions – with the key take-away being that technocrats like to deliver “more” money not “less” but when they shift watch out. Ahead of the Powell testimony, there were some key news items to consider. First is the ECB Weidmann speech as a compare and contrast to Draghi yesterday. The Bundesbank head is a shifter of policy – as he notes the role of FX and the level of the EUR doesn’t change his view that rate policy too accommodative. Draghi in contrast had to say there wasn’t a currency war but a FX focus. Second, China PBOC is expected to track the FOMC rate hike in March according to the China Securities Journal – with a 5bps increase in open market rates as it did in December. Third, the Bank of Korea left rates at 1.5% as expected despite better growth. Fourth, the Gree
k economy minister and an alternative minister for social solidarity resign due to the expenses scandal. This along with the Italian election reintroduce political risks to EUR/USD. Fifth, the Riksbank Jochnick comments and weaker economy tendency survey drive SEK to 8-year lows against EUR, 2Y lows against NOK. As for the economic data overnight, Spanish CPI was higher, German in line, French confidence lower, Italian higher. The ECB M3 and private loan data show large increase in TLTRO lending – not a surprise – while the EU Commission Economic Sentiment drifts lower adding to flash PMI reports suggesting the growth rate in Europe is moderating from its 4Q mad dash. Whether its growth or inflation or policy that matters most remains the key for trading markets in the medium term with the EUR/USD relationship clearly the focus overnight amid large 1.2350 option strikes rolling off today. Bias remains to sell rallies.