EUR 8.82 For Business Accounts Only

The Morning Track muddling-2

- The Morning Track – Muddling by Bob Savage
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Children play in mud, adults get stuck in it. While markets pause for a breather ahead of the US jobs report tomorrow and despite more evidence of progress in US/China trade talks – as President Trump meets China vice-premier Liu at the White House today – or as UK Brexit expectations shift into long delays with new elections, customs union and second referendum chances. Few look happy to be waiting, as the lack of momentum gives time for economic data, central bank policy and other politics to matter again. The crushing drop in German factory orders remind investors that European growth is weak. Italian papers remind them that politics remain ugly. Here are the stories that seemed to grind through the mud of an otherwise volatility-crushing day with emerging markets INR, MXN, TRY moving:
• Italian Politics and Growth – The Italian paper La Stampa reports that the 5-Star movement is ready to sack FinMin Tria and others around the EU elections as the League seems likely to the first party. Di Maio denies he suggested replacing Tria according to Canale 5. May is setting up for trouble as E23bn hole in 2020 budget has automatic VAT trigger as Italian GDP forecasts get downgraded.
• RBI cuts 25bps to 6% as expected – but keeps neutral bias. The vote was 4-2 for the cut and 5-1 on the bias. The new forecasts for FY20 GDP 7.2% from 7.4%, while they also cut the 6M outlook for inflation to 2.4%. Net result was INR lower by 1%
• Mexican Avocados jump 33%. The fear of a border closing moves Hass avocados to MXN390 per 10kg – biggest move since April 2009. Net result MXN off 0.1% still watching 19.1550 support.
• Turkey basted after yesterday’s US VP Pence warnings on the purchase of Russian S-400 missile defense system as “reckless” and “deeply troubling.” Net result TRY off 0.1% today but holding with 5.65 USD resistance
There is some chance for excitement around the US weekly jobless claims and the ECB March policy minutes as they may shed some light on the talk of rate-tiering. FX is barely moving but EUR and GBP remain the focus with EUR 1.12 the pivot for larger troubles today.