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EUR 9.28
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http://track.com/articles/the-morning-track-one-thing/
Is Draghi the Cat in the Hat? – In Dr. Seuss, the cat entertains two bored children with Thing 1 and Thing 2 which end up wrecking the house and having multiple other things under their hats to drive chaos and eventually create such concern as to force the Cat to bring back order to a rather dull rainy day. This is the world of the ECB where negative rates have left banks unable to transmit monetary policy and where bond buying leaves collateral in short supply. Inflation and growth in the Eurozone has come back but perhaps more because of oil pricing and China than anything under the hat of the Draghi. The news conference at 8.30 am will be the event risk for the day and until then expect speculation more than change in any trend. No one expects much from the ECB – a shift in the outlook perhaps but no rate hike, no further tapering, only a forward guidance for potential change post elections in France. The markets did move overnight and had some significant news �
�� 1) China PPI is back to 2008 highs near 8% while its CPI dropped to below 1%. 2) China M2 and total social finance were lower – suggesting some curbing of credit growth. 3) French 1Q GDP outlook is 0.4% after manufacturing climate improves. 4) Oil is below $50 – reflecting yesterday’s EIA inventory report. 5) French polls continue to show Macron leading with another poll showing him beating Le Pen in first round – that drives French bonds back from Asia selling. These are 5 things that matter beyond the ECB today but likely add to the chaos of the moment with USD uptrend intact, commodities in retreat, equities soggy and global bonds at the cusp of a larger breakdown. The key chart is oil on the day as any ECB move to remove accommodation today will have to deal with the risk of oil going down not up and causing inflation to drop back despite hopes for 2% and more. This leaves Draghi with many things to worry about today and most expect that to come out clearly
making the EUR/USD vulnerable to more than one thing.
The Morning Track one-thing
- The Morning Track – One Thing? by Bob Savagehttp://track.com/articles/the-morning-track-one-thing/
Is Draghi the Cat in the Hat? – In Dr. Seuss, the cat entertains two bored children with Thing 1 and Thing 2 which end up wrecking the house and having multiple other things under their hats to drive chaos and eventually create such concern as to force the Cat to bring back order to a rather dull rainy day. This is the world of the ECB where negative rates have left banks unable to transmit monetary policy and where bond buying leaves collateral in short supply. Inflation and growth in the Eurozone has come back but perhaps more because of oil pricing and China than anything under the hat of the Draghi. The news conference at 8.30 am will be the event risk for the day and until then expect speculation more than change in any trend. No one expects much from the ECB – a shift in the outlook perhaps but no rate hike, no further tapering, only a forward guidance for potential change post elections in France. The markets did move overnight and had some significant news �
�� 1) China PPI is back to 2008 highs near 8% while its CPI dropped to below 1%. 2) China M2 and total social finance were lower – suggesting some curbing of credit growth. 3) French 1Q GDP outlook is 0.4% after manufacturing climate improves. 4) Oil is below $50 – reflecting yesterday’s EIA inventory report. 5) French polls continue to show Macron leading with another poll showing him beating Le Pen in first round – that drives French bonds back from Asia selling. These are 5 things that matter beyond the ECB today but likely add to the chaos of the moment with USD uptrend intact, commodities in retreat, equities soggy and global bonds at the cusp of a larger breakdown. The key chart is oil on the day as any ECB move to remove accommodation today will have to deal with the risk of oil going down not up and causing inflation to drop back despite hopes for 2% and more. This leaves Draghi with many things to worry about today and most expect that to come out clearly
making the EUR/USD vulnerable to more than one thing.
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Robert Savage
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