EUR 9.28 For Business Accounts Only

The Morning Track rally-on

- The Morning Track - Rally On by Bob Savage
http://track.com/articles/the-morning-track-rally-on/

Money is being put to work, the risk rally is on, but the ride to the top is going to be rough and likely to get dirty. The relief that the Dutch didn’t fully embrace populism – as the liberal VVD takes 33 seats while anti-EUR PVV takes 20. And the FOMC hiked “dovishly” – as they didn’t indicate they need to do even more, faster, since they left forecasts unchanged – both these events drive a relief rally for risk. Note that PM Rutte’s party still lost 25% of its seats and that the FOMC promises to hike 2 more times in 2017. Nevertheless, market volatility drops, in a line, as the outcomes for the FOMC and the EU politics are seen as benign. The French Le Pen risks fall as well as the Dutch mood is seen as a harbinger of the French voters. However, multi-party outcomes are far different than winner-take-all events like Brexit and the US Presidential votes. Politics remain uncertain – just ask Trump as he sees a Federal Judge in Hawaii block his second ve
rsion of a travel ban. This leaves the Trump Budget, the PM May article 50 call and the G20 as the next immediate political noises. Of course, this ignores the other central banks meeting today BOJ – on hold, Bank of Indonesia – on hold, SNB – on hold, Norges Bank – on hold, while China PBOC hiked its 7-day repo rate overnight and that leaves Turkey, Chile and BOE next. But no matter as the market appears obsessed with returning to “normal” for both bonds and stocks. Some argued that the early March selling of both assets was linked to an unwinding of risk parity strategies. Perhaps those same analysts will be calling for a resurgence of this as market set up for Spring and a return of “goldilocks” policy where growth and inflation risks are just right like the bear’s porridge. The net result on the day is the USD is up, bond yields are up off the overshooting lows with 2.45% 10Y 55-day holding and equities are the universal consensus for a bull run –
with Europe and Asia both seeing new highs. The key for today will be in the weakest part of the rally up in demand – oil – as this needs to hold over $49 to remain convincing.