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http://trackresearch.com/articles/the-morning-track-right-path/
We have all gotten lost, but how we refind the right path varies. Notoriously, men don’t ask for directions. The confidence game about figuring something out on your own dominates. Perhaps this is a good place to start on the daily mood for markets as the FOMC minutes turned a bearish, nasty geopolitical messy bog for traders back onto the right path for risk – where normalization of policy in the US will be 3 hikes not 4 in 2018 and where inflation can overshoot and where policy will pause appropriately when rates begin to no be accommodative anymore – call that 2.5% Fed Funds. As for the overnight, little mattered, Trump considering imposing auto tariffs started the session, the Bank of Korea left rates unchanged at 1.5% as expected. North Korea threatened to cancel the summit with Trump. New Zealand had a bigger than expected surplus thanks to Kiwi fruit exports, Japan had a better Reuters Tankan thanks to Tokyo urban development around the Olympics, but Europe
remains less robust with GfK German consumer outlook expected to drop again, French business climate slipping while the UK saw its retail sales bounce back in April thanks to fuel costs and repairs after a long-winter. The focus on Italy and the cabinet formation opened some relief for BTPs but that didn’t last. La Stampa reports Five Star consider Finance Professor Zingales for Finance Minister, after previously seeing Euroskeptic Savona as its choice. Similarly, for Turkey the 3% rate hike late yesterday helped push TRY back to 4.50 but failed to hold it there as the election and capital control risks rise. Markets are caught in consolidation of the fear and greed extremes. Rates matter still but they aren’t everything and so we may be on the right path for the longer-term inflation and growth balancing act but not the smoothest one for markets. The EUR has become its own barometer of political risk in Italy, trade and policy contrasts with the US and the role of cen
tral bankers in fixing it all. Watching 1.1690 for evidence we remain lost or 1.1840 for evidence we are back on track.
The Morning Track right-path
- The Morning Track – Right Path by Bob Savagehttp://trackresearch.com/articles/the-morning-track-right-path/
We have all gotten lost, but how we refind the right path varies. Notoriously, men don’t ask for directions. The confidence game about figuring something out on your own dominates. Perhaps this is a good place to start on the daily mood for markets as the FOMC minutes turned a bearish, nasty geopolitical messy bog for traders back onto the right path for risk – where normalization of policy in the US will be 3 hikes not 4 in 2018 and where inflation can overshoot and where policy will pause appropriately when rates begin to no be accommodative anymore – call that 2.5% Fed Funds. As for the overnight, little mattered, Trump considering imposing auto tariffs started the session, the Bank of Korea left rates unchanged at 1.5% as expected. North Korea threatened to cancel the summit with Trump. New Zealand had a bigger than expected surplus thanks to Kiwi fruit exports, Japan had a better Reuters Tankan thanks to Tokyo urban development around the Olympics, but Europe
remains less robust with GfK German consumer outlook expected to drop again, French business climate slipping while the UK saw its retail sales bounce back in April thanks to fuel costs and repairs after a long-winter. The focus on Italy and the cabinet formation opened some relief for BTPs but that didn’t last. La Stampa reports Five Star consider Finance Professor Zingales for Finance Minister, after previously seeing Euroskeptic Savona as its choice. Similarly, for Turkey the 3% rate hike late yesterday helped push TRY back to 4.50 but failed to hold it there as the election and capital control risks rise. Markets are caught in consolidation of the fear and greed extremes. Rates matter still but they aren’t everything and so we may be on the right path for the longer-term inflation and growth balancing act but not the smoothest one for markets. The EUR has become its own barometer of political risk in Italy, trade and policy contrasts with the US and the role of cen
tral bankers in fixing it all. Watching 1.1690 for evidence we remain lost or 1.1840 for evidence we are back on track.
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Robert Savage
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