EUR 8.84 For Business Accounts Only

The Morning Track next

- The Morning Track – Next? by Bob Savage
http://track.com/articles/the-morning-track-next/

The big day for volatility ends with a fizzle. Markets are like children after the amusement park – what is next please? The sugar high of uncertainty is over…. almost. We end the week with US inventories and Canadian jobs – hardly the stuff that stretches the current ranges. The echo of yesterday will be still the dominant theme for now. Remembering the roller coaster of politics isn’t easily forgotten. The UK election had the worst possible outcome – a hung parliament – leaving UK PM May wounded but not dead as she will be tasked to put together a coalition Government. BBC forecasts 318 seats for the Conservatives – 8 short of a majority - making the Irish DUP the most likely partner. There are 2 weeks to go before “Brexit” talks start and the specter of a leadership change to punish May for this result seems likely with Boris Johnson seen as the first alternative. UK hard or soft Brexit seems silly to debate with no certainty over the cabinet and the
likelihood of a new set of election before the next 5 years. Stalling for a better deal would be a simple path for the EU to take and one that the UK opposition will encourage. All of which leaves markets playing for the long-game and yet stuck trading now. The question of the day is not whether the UK election matters or the former FBI Comey testimony changed US politics or if the ECB dropping its threat to lower rates shifted rate outlooks – all that matters but not sufficiently to change the trend of higher equities, lower USD, stable bonds - is what is next becomes essential and that is the FOMC next week, French legislative elections and Italian local elections. All of which leaves the world happy the week is ending and looking forward to more political drama and less policy prescriptions. The focus on the day is GBP but the selling from overnight makes it clear that unless 1.26 breaks today, risk is 1.30 again.