EUR 9.24 For Business Accounts Only

The Morning Track nothing-new

- The Morning Track – Nothing New? by Bob Savage
http://track.com/articles/the-morning-track-nothing-new/

The hopes from the Trump news conference was dashed as he neglected to highlight his push for tax reform and one leg of the Trumpflation trade fell. It’s not what he said about the USD but what he didn’t say about fiscal stimulus that drives markets still today. The bigger lesson maybe to remember what happened after the first Obama press conference in 2008 – he neglected to talk about shovel-ready infrastructure or health-care with his talk about getting a “shelter-dog” for the Whitehouse the headlines. The first 100-days brought both changes despite the short-term disappointment. The focus of the media may matter less than the focus of Congress but news in the post-truth world is about emotions and those are running towards fear from greed with the USD reversal extending particularly in Europe where inflation rather than deflation is the guide. This maybe all because bonds rallied in the US or perhaps, coincidentally, to the move lower in equities. Commodi
ties hold value – particularly gold which is breaking out above the 55-day moving average and flashing yellow instead of green for fiat currency. But don’t expect this to mean the world is giving up on the USD – it’s a correction not a reversal – and that comes out from what happened elsewhere starting with Brazil cutting 75bps to 13%. The gains in BRL have been significant and the central bank is acting accordingly as high real rates aren’t needed to drive capital anymore. The Chinese M2 and new loan data suggests a sly return to shadow banking even in a month usually stuck with tight budgets. The spread of M2-M1 is worth considering in China a measure of how other collateral – real estate, metals, equities, other paper – become leverage. The bets for 7.20 rather than 6.50 in CNY hold. The European news highlighted how Sweden maybe onto something with CPI near target and the central bank minutes highlighting that further easing might not be as helpful �
�� pushing SEK stronger. Currency weakness is contingent on growth and inflation not following and so the focus on the USD alone might be to myopic for the bigger picture today. Support for the EUR and GBP held yesterday so the resistances are in play today. The guide for the deflation trade isn’t going to be in Europe but in Japan where the EcoWatchers survey was less than inspiring and where the price action in JPY with the 115 clean break opens a larger target for 112.70.