EUR 8.84 For Business Accounts Only

The Morning Track red-lines-2

- The Morning Track – Red Lines by Bob Savage
http://track.com/articles/the-morning-track-red-lines-2/

Red lines are everywhere or nowhere – depends on your position. The mood overnight was complicated by the Friday North Korea missile launch and the Trump tweets. China and US relations are tender. Similarly, the promise for Trump to sign the Congressional sanctions against Russia has led to a Putin reaction of ejecting over 750 US diplomats from the country. Finally, the big red line of Maduro in Venezuela where his National Constituent Assembly vote is seen as a step to dictatorship and a promise for more US reaction – but for oil refineries and debt – it would be simple. The overnight data dump was significant as well – with Japan IP strong enough to make 2Q GDP hopes high. The China official PMI missed expectations but remains strong enough to lift metals higher and EM in general. Australian credit was strong but the RBA tomorrow matters and few really see them acting particularly with AUD bid. Similarly, ANZ business survey in New Zealand weaker with infla
tion expectations and prices lower – enough to make the NZD strength a problem for the RBNZ. The German jobs and retail sales are robust and indicate Germany remains the leader of growth in Europe. The core CPI rise in Eurozone was enough to leave some hope for inflation alive and keep ECB tapering talk. The news that hasn’t happened is likely more important than anything else – namely US PCE and ISM and jobs Friday. The FOMC path and data dependence remains very much in charge of prices in the US and bleeds out over the rest of the markets. The balancing act today is between economic hopes against geopolitical fears. The USD/JPY reflects that story best today as the JPY tested 110.30 and seems intent on making a saw tooth pattern to cut up investors. Equities and rates find JPY safe haven stories less compelling due to Abe and his political problems covered over with North Korean worries. Risk has a funny way of showing up at the end of a month – particularly
in the middle of summer. Maybe that is the real red line.