EUR 8.70 For Business Accounts Only

The Morning Track reversals-2

- The Morning Track - Reversals by Bob Savage
http://trackresearch.com/articles/the-morning-track-reversals-2/

Today is full of reversals from the Monday USD lows with the EUR and JPY in full focus, along with GBP and EM. There are plenty of fundamental stories behind the flip-flop in mood and yet the trend isn’t so easy to break given the new yet ahead from China and on the US political battle over budgets. The equity risk-on mood, particularly in Japan, maybe a counter to all of this political noise along with the global modest inflation data supports the easy money games for central bankers. The feedback of FX moves into inflation is the UK input PPI highlight today, along with the EUR effect on stocks, particularly in Germany.
• Spiegel reports that Berlin SPD rejects coalition talks with Merkel bloc.
• Reuters report sees ECB unlikely to drop the QE pledge next week.
• Spanish PM Rajoy warns Catalonia it will retain rule if Puigdemont is re-elected and tries to govern by Skype.
• The UK Construction Group’s Carillon collapse is seen as a political failure as well as a business one given its one of the biggest contractors with the government with 19,000 jobs at risk.
• China data may mask economic rebound – FT highlights the Inner Mongolia data falsification problem and mean reversion risks.
• The odds of a US government shutdown continued to rise over the weekend – 30% chance from 15% last week according to Predictit.org.
What clearly happened yesterday was an extension of USD selling without any US news of note. What happens today matters in that context with lows for the USD set notably in the EUR and JPY. Risk-on for equities means the focus will be on the EUR and how big the pull-back today can be – 1.2185 looks key with risk for 1.2110.