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EUR 8.70
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http://trackresearch.com/articles/the-morning-track-prices/
Forget the fluff about at Trump-Kim summit or the Trump tariffs on steel, or the EU freezing Brexit talks – we all know that geopolitics don’t matter. Today is about inflation. Yes, of course, it’s also US non-farm payroll day and we all know that number holds special volatility power over markets, but the average hourly earnings in the rest of the US jobs report is quickly catching up in its importance. Wage inflation means FOMC doing 4 hikes for sure and risks more into 2019. Wages up mean the theory that the FOMC stops at 2.75% (the market’s estimate of the terminal rate) is wrong. As for the overnight, inflation was the key release with China seeing a sharply higher food inflation bleeding into its CPI but not the PPI. This was mostly ignored, with the CNY flat on the week, rates lower there despite PBOC draining liquidity. The Norwegians saw inflation at 2.2% - far worse than the 1.8% expected – and the NOK rallies sharply and a Norges Bank September hike
is priced. The different reactions matter and highlight the problem for all traders – inflation is trouble for markets in some places but not all. BOJ would welcome it and decided to leave rate policy extraordinary even as Kuroda continued to talk about possibility of changing the longer-term rate 10Y at 0% target even before CPI 2% target reached. In Europe, weaker industrial production hurt the views that the ECB post Draghi yesterday will do anything different until September. All of these things highlight the doubt about inflation actually returning. So we are all back to easy money hopes and data dependency with a veneer of political noise for excitement. The risk-on mood just has to get beyond the facts of the US jobs report to enjoy another weekend. For measuring that FX players return to EUR/JPY and the base from the 200-week at 129.50 looking key with hopes for 131.80 and 133.05 Feb 21 highs to return.
The Morning Track prices
- The Morning Track – Prices by Bob Savagehttp://trackresearch.com/articles/the-morning-track-prices/
Forget the fluff about at Trump-Kim summit or the Trump tariffs on steel, or the EU freezing Brexit talks – we all know that geopolitics don’t matter. Today is about inflation. Yes, of course, it’s also US non-farm payroll day and we all know that number holds special volatility power over markets, but the average hourly earnings in the rest of the US jobs report is quickly catching up in its importance. Wage inflation means FOMC doing 4 hikes for sure and risks more into 2019. Wages up mean the theory that the FOMC stops at 2.75% (the market’s estimate of the terminal rate) is wrong. As for the overnight, inflation was the key release with China seeing a sharply higher food inflation bleeding into its CPI but not the PPI. This was mostly ignored, with the CNY flat on the week, rates lower there despite PBOC draining liquidity. The Norwegians saw inflation at 2.2% - far worse than the 1.8% expected – and the NOK rallies sharply and a Norges Bank September hike
is priced. The different reactions matter and highlight the problem for all traders – inflation is trouble for markets in some places but not all. BOJ would welcome it and decided to leave rate policy extraordinary even as Kuroda continued to talk about possibility of changing the longer-term rate 10Y at 0% target even before CPI 2% target reached. In Europe, weaker industrial production hurt the views that the ECB post Draghi yesterday will do anything different until September. All of these things highlight the doubt about inflation actually returning. So we are all back to easy money hopes and data dependency with a veneer of political noise for excitement. The risk-on mood just has to get beyond the facts of the US jobs report to enjoy another weekend. For measuring that FX players return to EUR/JPY and the base from the 200-week at 129.50 looking key with hopes for 131.80 and 133.05 Feb 21 highs to return.
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Robert Savage
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