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EUR 8.42
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/articles/the-morning-track-out-of-gear/
Approaching neutral doesn’t mean easy nor does it provide real traction when going uphill. Fed hike expectations for 2019 moved from risk of 3 to 1. Lessons from driving a stick-shift remain in play today as markets continue to digest the turnabout from FOMC Powell on the pace of rate hikes for 2019. If the Fed sees neutral at 2.5% rather than 3.5%, then the rest of the world will have less of a gap to get to normal. The USD should be the frontline of figuring this all out and the drop in the dollar yesterday, stalls today. FX isn’t where the fear trade resides, rather it’s all about equities and the upcoming US Trump and China Xi Saturday dinner. There was a host of important economic data overnight with Japan retail sales better, Australian Capex outlook better, Eurozone economic sentiment better than feared with business climate rising, while flash CPI reading in Spain and Germany were lower allowing ECB flexibility while German unemployment fell to new record
lows. Also good bounces in retail sales in Spain and France help push the story that growth in Europe is back to normal rather than diving off the cliff. There was negatives in Sweden and Swiss 3Q GDP misses, and all isn’t well in China where bond defaults hit new record. Markets are uneasy, climbing a wall of worry with the help of Jay Powell. The pushing back of rate hike speeds doesn’t make the incline of trade and other political worries less important but for now, we wait for the data, the FOMC minutes and the next headline to get back into gear. The EUR has become the new leader for risk watching – with its bounce back yesterday looking for a gear to grind up to 1.15 again. The reality is that the EUR remains in a downtrend and bounces to 1.1475 or 1.1550 are going to be sold. Perhaps that is the foreshadowing for the global equity market up 5% in the last 2 days as it faces the G20 and more data.
The Morning Track out-of-gear
- The Morning Track – Out of Gear by Bob Savage/articles/the-morning-track-out-of-gear/
Approaching neutral doesn’t mean easy nor does it provide real traction when going uphill. Fed hike expectations for 2019 moved from risk of 3 to 1. Lessons from driving a stick-shift remain in play today as markets continue to digest the turnabout from FOMC Powell on the pace of rate hikes for 2019. If the Fed sees neutral at 2.5% rather than 3.5%, then the rest of the world will have less of a gap to get to normal. The USD should be the frontline of figuring this all out and the drop in the dollar yesterday, stalls today. FX isn’t where the fear trade resides, rather it’s all about equities and the upcoming US Trump and China Xi Saturday dinner. There was a host of important economic data overnight with Japan retail sales better, Australian Capex outlook better, Eurozone economic sentiment better than feared with business climate rising, while flash CPI reading in Spain and Germany were lower allowing ECB flexibility while German unemployment fell to new record
lows. Also good bounces in retail sales in Spain and France help push the story that growth in Europe is back to normal rather than diving off the cliff. There was negatives in Sweden and Swiss 3Q GDP misses, and all isn’t well in China where bond defaults hit new record. Markets are uneasy, climbing a wall of worry with the help of Jay Powell. The pushing back of rate hike speeds doesn’t make the incline of trade and other political worries less important but for now, we wait for the data, the FOMC minutes and the next headline to get back into gear. The EUR has become the new leader for risk watching – with its bounce back yesterday looking for a gear to grind up to 1.15 again. The reality is that the EUR remains in a downtrend and bounces to 1.1475 or 1.1550 are going to be sold. Perhaps that is the foreshadowing for the global equity market up 5% in the last 2 days as it faces the G20 and more data.
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Robert Savage
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