FREE

The Morning Track slings-and-arrows

- The Morning Track – Slings and Arrows by Bob Savage
http://trackresearch.com/articles/the-morning-track-slings-and-arrows/

Trading markets into big events has a psychological quality similar to that of Hamlet where doing nothing is just as damning as doing something. Waiting for trend or risk reversals hasn’t paid off in the world run by central banks and yet perhaps the slings and arrows from Singapore are going to change all that. The Trump-Kim Singapore summit was hailed a success, photographs were taken and the US President flies home. North Korean leader Kim agreed to work toward complete denuclearization in a joint statement with Trump, but the term wasn’t defined and there was a lack of detail on what would happen next. The next big political event is the UK Commons Brexit plan vote while the big economic data will be the US CPI. The inflation trade focus this week is notable and yet seems to lack consistency – witness the Japan CGPI jump and the lack of JPY or JGB reaction. The China TSF drop and the credit tightening ongoing there is probably the most important news for today �
� given that China growth risks aren’t on the radar for most traders even though the data on retail sales and industrial production later this week will clearly matter. There are some obvious confusions over correlation and causality.

Growth not inflation? Witness the NOK bounce back up 0.5% to 9.433 vs. EUR – best since Nov 2017 - as the Norway Regional Network Survey gauge for output for next six months at 1.47 – better than the 1.45 expected. This unwinds the pain trade from yesterday’s CPI miss. But this flies in the face of the EUR where a weaker German ZEW clashes with the higher monthly CPI prints. The ECB and Norges bank remain firmly in control of markets.
Politics not Growth? The UK better unemployment report but lower wages was ignored ahead of the all important UK Commons vote on Brexit plans. UK May made her final pleas ahead of the event. GBP is stuck about in the middle of market expectations with BOE not seen as key anymore and with more data on retail sales ahead this week – growth and politics both drive markets.
Buy the rumor, sell the fact? The KRW weakness today has been linked to the Trump-Kim summit not being enough. Perhaps more accurately its that the hype was just that and that real economic growth matters more and that the path to prosperity will take time. So equities wobble, FX adjusts.
For trading into the FOMC and CPI today, we could just reprint the US bond chart and go home but there are other things to watch in FX – namely the GBP which seems most likely to move outside of comfort soon.