EUR 8.70 For Business Accounts Only

The Morning Track still-matters-2

- The Morning Track – Still Matters by Bob Savage
http://trackresearch.com/articles/the-morning-track-still-matters-2/

Fundamentals still matter. Macro factors aren’t dead. Politics don’t always trump economics but today both matter as the European Commissions says the UK Brexit talks are sufficient to move on to a 2-year transitional deal and a future trade agreement, as the German SPD votes to push forward coalitions talks with the CDU/CSU, as the US Senate passes an interim-spending bill, as Trump vows to have January infrastructure spending plans and as the Basel III rules aren’t changed – pushing implementation to 2022 from 2019. The economic stories are also important with Japan GDP revised sharply higher, with China trade showing a big jump in exports, with UK trade and IP better than expected and also French IP, as German trade is the only wobble in a day full of “good” news. Throw in that we have holidays in Austria, Italy, Spain, Portugal and some of Switzerland (immaculate conception day) and liquidity to express the headlines and you have a risk-on party. But this
all swings around on the GBP and the fragility of the government as the EU officials caution that any trade deal will take a long time and that the DUP in the UK coalition warns it could still vote against any compromise. The problem today is that political events are faster and slower than market headlines – with the US jobs data the next prime example. US employment reports still matter as we will find out today. No one should underestimate the risk of surprise in these reports and the effect it could have on the nascent rate moves globally as the reaction function of the FOMC will be in clear view – perhaps not for the hike next week priced at 97% but for 2018. The USD is the key driver of all things about risk now and the GBP wobble is a signal that politics and economics still are married together and both matter.