EUR 9.28 For Business Accounts Only

The Morning Track overload-2

- The Morning Track – Overload by Bob Savage
http://track.com/articles/the-morning-track-overload-2/

April Showers bring May Flowers. The trouble is too much liquidity can sink the boat and the germination for better times ahead. The question is what will this bring to markets – more politics or more hope – with the sell in May and go away adage ringing in the ears of investors as they face a month-end data overload. This all started with Trump warning on North Korea again and the risk of a US government shutdown without a funding deal. The Japanese data on CPI was less than expected, though April Tokyo CPI marginally better. The household spending missed along with industrial production while jobs held steady and retail sales rose reflecting fuel and auto increases. The big focus was on flash Eurozone CPI and it was higher than expected but not much and the Easter holiday timing maybe the full story. GDP in Spain was better in 1Q but France was weaker while retail sales in France were soft and retail sales in German slightly better. The big surprise is in the UK
where 1Q is weaker and drives some doubts about the GBP into the June election. The Swiss KoF barometer fell but remained solidly pointing to above expected growth. The net result of all the data is that we are living with a world outside of the US where growth is slightly above plan and inflation slightly below – making this an awkward moment of “goldilocks” risk taking where nothing is quite too hot or too cold – just right for equities, confusing for bonds given the need for rate normalization from EM and Europe but stuck with the reality that the FOMC will continue its hiking plan and that the policy and political noises that frighten buyers will remain real risks. In many ways today is like the trading manager’s worst outcome as everyone wants “no surprises” but expects enough volatility to find opportunities to buy low and sell high on the trend. In the new world of technology and speed of light analysis we see no such unfettered pace for trading but r
ather a rushed push to remain on top of passive money flows that seem endless. Today’s US data may be the turning point for sinking the boat – as risk-on has dominated since the French 1st round and survived the worst of Trump trade jitters and the one-page tax reform plan. For traders this is about the carry and low volatility trade holding and that means EUR/JPY with 122.25 needed to justify a bigger May trade.