EUR 8.70 For Business Accounts Only

The Morning Track squeezed

- The Morning Track – Squeezed by Bob Savage
http://trackresearch.com/articles/the-morning-track-squeezed/

Month-end trading and money was squeezed with overnight rate in China up almost 25bps. Hong Kong 1M rates touched 9-year highs over 1%. In Europe, the EONIA Dec 201 fix was up 6bps to -0.301%, the highest since June 2016. This isn’t to say there isn’t liquidity, but to respect that its not a steady stream. In many places, the technology to financial rotation that started in the US yesterday, continues today. The bellwether of volatility Bitcoin flipped from $11,000 to $9,000 yesterday, continues to consolidate today near $10,000. The number of articles about bitcoin have now reached a new high as well – suggesting the next month will bring even more squeezes there. Month-end money flows dominate as bonds gain and stocks lose in Asia, gain in Europe as oil bounces after OPEC extends its oil production cuts through 2018 and ahead of US PCE, jobless claims, Fed speakers and more political drama – with the US/UK dominating headlines. UK deals on the Irish Border and ta
lk of EU 2Y transition deal lift GBP to 2-month highs. But the Trump/May tweet battle maybe a new low for the US/UK special relationship. There was a massive economic news download today – with the Bank of Korea raising rates 25bps to 1.5% - first hike in 6 years – all as expected but with a dissenter ruining some of the effect – KRW is lower with technology shares. NZD fell as business confidence retreats to March 2009 lows. China and the US are heating up trade issues – as Trump seeks to deny China market economy status at the WTO. In the same breath, the US wants China to fully stop oil exports to North Korea and to up sanctions following the latest ICBM missile test yesterday. Japan had weaker industrial production blamed on typhoons and BOJ talk about the exit again bothered but BOJ buying plans for December are unchanged – JPY is weaker tracking US rate spreads. The Australian Capex was on target and credit/housing steady leaving A$ stronger on crosses. The
German retail sales missed while jobs were better, Swiss GDP higher in 3Q led by manufacturing. The biggest mover and story this morning for FX is the flash HICP for the Eurozone at 1.5% and core at 0.9% y/y – this missed hopes for higher particularly after Germany CPI flash yesterday – and that sent the EUR back down and left many wondering if the oil story will be enough today to keep EUR from larger moves. The return of regional volatility, the rise in ranges across markets makes this all a bit more interesting and dangerous. EUR is the barometer for such pain and maybe doesn’t yet reflect that gnawing fear of a larger equity risk pullback – watching EUR 1.1782 the 100-day for a breakout.