EUR 9.38 For Business Accounts Only

The Morning Track no-rewind

- The Morning Track - No Rewind by Bob Savage
http://track.com/articles/the-morning-track-no-rewind/

Some still mourn the death of the 8-track tape, others are still wondering why they have CDs and many fret over giving away those vinyl records back in the 80s. This is the world we live in and there isn’t any rewinding. Technology leaps forward making even the most human of endeavors - looking forward – an algorithmic exercise. November ends with the gains in equities, losses in bonds and the move in USD staggering to record books, Today’s surprise is oil up 5% on Iraq suggesting there really is an OPEC deal, even if Santa Claus remains in doubt. This volatility post the US election of Trump isn’t a surprise but it remains the big story that will linger into December and year-end. The key for markets is to restart their book building and positioning with many wanting to rewind the tape and yet we all know that there are no second chances when it comes to paradigm shifts – just ask the UK about Brexit – something that seems to linger over the entire City and
permeate every news story. The hard or soft, long or short, cheap or expensive separation agreement with the EU will keep uncertainty and volatility in UK assets and the GBP throughout 2017. The US is likely to see the same as the policy choices and economic divergence drives markets. The Trump cabinet is beginning to take shape and the nomination of Mnuchin as Treasury Secretary puts the spot light on whether there is a new approach to USD gains. The selling of US bonds from China and Japan maybe his first order of business. The overnight news is lost by the move up in oil but so far German unemployment was a non-event, Japan IP better but not enough to stop BOJ QE, the BOE Financial Stability Report – as 3 banks failing stress tests - and China drop back in consumer sentiment not shocking enough to move policy. So, we are stuck waiting for more data from the US with ADP the next big event along with Fed speakers and the Beige Book – setting up for the December hik
e and the forecasts for 2017. This leaves markets watching oil but wondering about US rates and US dollar with the correction in both still more hope than fact.

Question for the Day: Does the USD bid matter to other markets? Short Answer - Yes and perhaps food is one to not ignore. The role of a stronger USD to stocks and bonds has been lost in the noise of November. But the move up in 3Q GDP revised yesterday to 3.2% from 2.9% maybe worth noting. Some of the revision is the stronger consumer 2.8% from 2.1% but some is trade with US food exports – notably to China – were also important adding 1.2% overall. The role of the USD in this will be worth studying with the USDA food prices today perhaps an event for those that care about US growth and food exports. Then again, this is a market obsessed by oil and the risk of food prices going up with oil is a correlation not worth ignoring either.