EUR 9.24 For Business Accounts Only

The Morning Track pulling-up

- The Morning Track – Pulling Up by Bob Savage
http://track.com/articles/the-morning-track-pulling-up/

The market wants another pulling up for the US today, but overnight there was more a catching up trade in fixed income markets and the lack of big news elsewhere. We are all waiting for the ECB today and Draghi’s performance along with FOMC Chair Yellen’s second speech later tonight. Expectations for anything new are low as neither seem to want to change the present course of rates or FX or risk. Inflation is going in the “right” direction and growth is outperforming. The movements in the FX were considerably less than yesterday and they seemed to ignore the data – particularly in AUD where a weak jobs report is likely to put an RBA easing back on the table but the currency recovers with commodities and stocks. The demand for alternatives with positive carry matters in a period of consolidation and doubt. The Bank Negara Malaysia decision to keep rates at 3% wasn’t a surprise but it shows that FX matters and that rates maybe as low as they can go. The Bank o
f Indonesia was similar on hold at 4.75% with its hands tied – guarding against global risks. One interesting data point overnight was the C/A surplus for the Eurozone – read as Germany given its now over 8% of GDP – and its surplus accounts for almost all of the EUR. This is a global imbalance that makes the USD/MXN relationship look fine in comparison and it maybe the next place for the new US President to highlight. The ongoing hearings for the Trump Cabinet mix starkly with the Davos speeches and the news to noise ratio for both has made this all less useful in understanding new policy and risks. The currency that seems to be the most dramatic in the last 2 days is the one least discussed – JPY – with the potential to break over 115.50 today should the US data add to reasons to sell bonds and should Janet continue to sound hawkish particularly against the expected muddle of words from Draghi. Expect Draghi to have to explain the new buying of bonds below th
e depo limit, whether the ECB really discussed tapering further and what he thinks about politics and the risks for trade wars. The currency everyone trades is the EUR today but the one to watch is the JPY.