EUR 9.06 For Business Accounts Only

The Morning Track precarious

- The Morning Track – Precarious by Bob Savage
http://track.com/articles/the-morning-track-precarious/

This isn’t a good time to be a polar bear. We are suffering climate change and their usual ice flows are leaving them precariously balanced. They are like markets today and similarly, bears in equities are likely to suffer, despite the hopes that moral outrage over Trump immigration policies drive US asset selling, the reality is far more complex like global warming and fixing it. The odd mix of more Trump inspired risk-off trading – this time on his firing of the acting Attorney General along with Pter Navarro in the FT suggesting that German has a “grossly undervalued EUR” - against stronger economic data in Europe and a BOJ unchanged leaves markets similarly stuck in a tense equilibrium. This balancing of risks will likely tip on more policy announcements either from Trump or the FOMC and may further ignore US data and 4Q earnings. When you have a fundamentally challenged position, the most logical thing to do is cut and run. Bulls and Bears have been doing t
hat for the last few days. The issue is whether there is a trend or if we are just stuck in precariously balanced markets until Friday and the US jobs report. If January has been about rate spreads then today should mean a EUR test of 1.08 as the inflation data from Europe – at 4-year highs – is sufficient to cast doubt about the ECB not tapering and doing more. If the story for markets is about growth the EUR is still a winner with German jobs and with 4Q GDP in Europe. What is notable is that Japan with its data and BOJ didn’t inspire much hope – with their higher GDP forecasts not met by higher CPI forecasts or any new policy ideas other than JPY weakness helping everything. This leaves EUR/JPY as the obvious risk tool for markets. It also makes it hard for Trump trade policies not to focus on FX. Markets are in precarious positions all around as a stronger EUR might not hurt Germany but hits at the heart of politics in the periphery.