EUR 8.70 For Business Accounts Only

The Morning Track playing-with-rules

- The Morning Track – Playing with Rules by Bob Savage
http://trackresearch.com/articles/the-morning-track-playing-with-rules/

This is month-end and the usual rules for markets are suspended as many investors change allocations and play for the books rather than absolute return. This is also a FOMC decision day, the last for Chair Yellen, and likely a non-event, despite whispers to the contrary. There are still things to watch for from the FOMC particularly their guidance for rates in 2018. Last night the Trump SOU didn’t seem to shake the USD downtrend much – nothing new on protectionism or fiscal issues but perhaps a bit more on the American moment as opposed to the Chinese century – leaves Asia content to own other things. Trump is known for playing against the rules of decorum but his speech seemed far tamer if not boring. Focus for the rest of the evening wasn’t the economic data but the politics and the visit of UK May to China is interesting as she warned Xi to play by global rules. The battle of trade between US and China isn’t yet a real factor for investors but the divergence
of confidence between them is making headlines and leaves the emerging markets on the front line with the flip-flop of Pakistan being the obvious example. The rules of engagement for developed markets remains one about central bankers and the Eurozone flash CPI today was better than feared leaving the expectations for the ECB tapering intact while the data from Japan was mixed and the BOJ sounds dovish again. Markets will be watching the US earnings – particularly Apple, the ADP and the price action in bonds to see if rates matter to more than the curve. For the moment, the month-end rules of ignoring the price action seem to be wrong as the USD downtrend returns – particularly in EM but also notably for the EUR with 1.25 back in play.