EUR 8.70 For Business Accounts Only

The Morning Track policy

- The Morning Track - Policy by Bob Savage
http://trackresearch.com/articles/the-morning-track-policy/

Make clear, policy has determined market direction today and for most of the last 8 years, leaving open the question of when that will change as central bankers recede from fear and focus on greed. Between the BOJ cutting Y10bn in JGB buying, affectionately called a shadow taper, and the PBOC suspending the counter-cyclical tool to cap USD/CNH – the USD direction is higher except for JPY. Some will argue this is about rates as the US bonds slip lower overnight despite a dovish Bostic call for 2 rather than 3-4 hikes in 2018. This makes clear the role of both the Chinese and Japanese in setting global policy, with the BOJ curve program feeding the US as well as the Chinese focus on holding 6.50 in CNY means something important for the entire Pacific Rim. These are subtle shifts from fear of deflation to the greed of competitive advantage. Mixed with politics, this could be a turning point for volatility. Witness the cabinet shuffle in the UK where some ministers resign, s
ome refuse the new job and the ability for the May government to make hard decisions gets pushed further into doubt. The US government has its own debates about budgets and policy but that maybe less in play today with some data and a 3Y auction to fill the time. We all seem to be waiting for rates to matter, leaving the melting up process in equities a similar one for yields. Only a break of 2.38% 10-year US will change the mood else we seem destined to touch 2.54% on the next big economic surprise and expect fireworks at 2.63% the March 2017 highs.