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http://trackresearch.com/articles/the-morning-track-overreactions/
Markets overshoot and this maybe the story for today and the USD. Many linked the USD risk reversal yesterday to weaker Philly Fed and more US/China trade fears. Maybe we are in a world of overreactions and the steady and boring world of economics grinds over all such stories in its own time. The selling of the USD has few explanations in the last 24 hours other than the intent of other central bankers to follow the FOMC toward rate normalization. Their talk from the Norges bank promise for a September hike to the BOE pointing towards August was sufficient to cap the USD. Today was about the global PMI flash reports with Europe showing better growth in Services and worse in Manufacturing, net edging up overall GDP view into 3Q, despite the warnings from the IHS Markit on complacency that "underlying trend remains one of slower growth" and business expectations are running" at 18-month lows. There is another story that merits attention for traders – the role of the US/Ch
ina trade war, the USD and US Treasury role in reserves and the back-channel talks that have been reported widely suggesting a smidge of hope before tariffs kick in. The USD is weaker as a risk barometer as fears of global growth going into reverse ebb like the sun in the Northern Hemisphere. Days are getting shorter like macro attention spans. Throw in today’s other headlines – Greece gets its final nod for debt relief from the EcoFin – pushing back E100bn payments in another extend and pretend deal – Japan CPI remains flat and well below 1% making BOJ 2% seem ever more impossible, and OPEC edges towards an Iran/Saudi oil output compromise leaving the world embracing risk again. The biggest issue for the USD is that it’s the weekend and there is a lack of news leaving the technicals to rule and yesterday’s key-day reversal opens a larger test to 94.25 in play. If markets believe correlation is causality –then expect equities to gain back further as the USD re
flects the hopes of trade deals returning with global growth.
The Morning Track overreactions
- The Morning Track – Overreactions by Bob Savagehttp://trackresearch.com/articles/the-morning-track-overreactions/
Markets overshoot and this maybe the story for today and the USD. Many linked the USD risk reversal yesterday to weaker Philly Fed and more US/China trade fears. Maybe we are in a world of overreactions and the steady and boring world of economics grinds over all such stories in its own time. The selling of the USD has few explanations in the last 24 hours other than the intent of other central bankers to follow the FOMC toward rate normalization. Their talk from the Norges bank promise for a September hike to the BOE pointing towards August was sufficient to cap the USD. Today was about the global PMI flash reports with Europe showing better growth in Services and worse in Manufacturing, net edging up overall GDP view into 3Q, despite the warnings from the IHS Markit on complacency that "underlying trend remains one of slower growth" and business expectations are running" at 18-month lows. There is another story that merits attention for traders – the role of the US/Ch
ina trade war, the USD and US Treasury role in reserves and the back-channel talks that have been reported widely suggesting a smidge of hope before tariffs kick in. The USD is weaker as a risk barometer as fears of global growth going into reverse ebb like the sun in the Northern Hemisphere. Days are getting shorter like macro attention spans. Throw in today’s other headlines – Greece gets its final nod for debt relief from the EcoFin – pushing back E100bn payments in another extend and pretend deal – Japan CPI remains flat and well below 1% making BOJ 2% seem ever more impossible, and OPEC edges towards an Iran/Saudi oil output compromise leaving the world embracing risk again. The biggest issue for the USD is that it’s the weekend and there is a lack of news leaving the technicals to rule and yesterday’s key-day reversal opens a larger test to 94.25 in play. If markets believe correlation is causality –then expect equities to gain back further as the USD re
flects the hopes of trade deals returning with global growth.
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Robert Savage
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