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http://track.com/articles/the-morning-track-provocations/
Welcome to July 3 – new month, old ideas. News flows mattered but more politics than economics – something that has left many happy to stay on the beach and wait it all out. The US warship in the South China Seas is called by China a “serious provocation,†noting the US relationship impacted by negative factors – like the 20% Steel Tariff expected from Trump post the G20. Merkel and Trump are supposed to meet on Thursday to discuss that and more. UK May seems to be flopping towards softer Brexit views – seen as good for GBP - along with talk of raising public sector wages (breaking the 1% cap) leading to bigger Gilt selling but a weaker Manufacturing PMI counters - hence a lower GBP. The Japan LDP defeat in the Tokyo Assembly puts the longevity of Abenomics into question. The better Japan Tankan isn’t seen lasting either, while consumer confidence drops as prices rise. The net effect weaker JPY despite an early knee-jerk slip below 112. The China PMI from
Caixin rose more than expected but rebound seen unsustainable. The EU PMI reports are all pointing to German growth and some moderation elsewhere with prices tame – making the ECB taper talk less scary from last week. All of this helped the USD. But the real story is about rates with the market locked into what other central bankers do with the data ahead. So far, it’s just not enough to sustain the taper talk but we have many more trading days ahead despite the US holiday (and Canada’s today). So we move to watch US bonds today in a short-session to see how much more support can be found for the USD rebound. Key is 2.33% 100-day for now but bigger picture its 2.51% to catch up to Germany.
The Morning Track provocations
- The Morning Track - Provocations by Bob Savagehttp://track.com/articles/the-morning-track-provocations/
Welcome to July 3 – new month, old ideas. News flows mattered but more politics than economics – something that has left many happy to stay on the beach and wait it all out. The US warship in the South China Seas is called by China a “serious provocation,†noting the US relationship impacted by negative factors – like the 20% Steel Tariff expected from Trump post the G20. Merkel and Trump are supposed to meet on Thursday to discuss that and more. UK May seems to be flopping towards softer Brexit views – seen as good for GBP - along with talk of raising public sector wages (breaking the 1% cap) leading to bigger Gilt selling but a weaker Manufacturing PMI counters - hence a lower GBP. The Japan LDP defeat in the Tokyo Assembly puts the longevity of Abenomics into question. The better Japan Tankan isn’t seen lasting either, while consumer confidence drops as prices rise. The net effect weaker JPY despite an early knee-jerk slip below 112. The China PMI from
Caixin rose more than expected but rebound seen unsustainable. The EU PMI reports are all pointing to German growth and some moderation elsewhere with prices tame – making the ECB taper talk less scary from last week. All of this helped the USD. But the real story is about rates with the market locked into what other central bankers do with the data ahead. So far, it’s just not enough to sustain the taper talk but we have many more trading days ahead despite the US holiday (and Canada’s today). So we move to watch US bonds today in a short-session to see how much more support can be found for the USD rebound. Key is 2.33% 100-day for now but bigger picture its 2.51% to catch up to Germany.
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Robert Savage
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