EUR 9.28 For Business Accounts Only

The Morning Track subdued-4

- The Morning Track – Subdued by Bob Savage
http://track.com/articles/the-morning-track-subdued-4/

Markets are calm with a holding pattern for price action as most investors globally wait for the outcome of the US political drama with the ACA repeal and reform bill vote in the House today. There are votes and then there are crisis – this isn’t a make or break event except for the momentum expected from the bravado of the Trump team. Big Congressional votes are not new to Wall Street, TARP in the midst of the 2008 crisis is an example – something that generated far more volatility and interest. The shift from stock analysis to political doesn’t transfer well and true to form, waiting in cash seems to be the call. The ability for the London market to accept its terrorist tragedy from yesterday isn’t a surprise either, but it also leaves many more subdued as they recognize the evil of asymmetric warfare now so common in the EU (at least in Paris and Berlin) – something that Brexit won’t fix. The UK retail sales surprised to the upside despite higher prices
– something that hurt US new home sales yesterday and that dampened German GfK consumer climates today as well. This battle of good inflation vs. bad inflation remains central to trading markets and the bounce back in oil today has had a calming effect on the deflationists. Of course, central bankers don’t seem as calm as the market with the RBNZ last night nervously on hold at 1.75% with the risk of a November hike going up from 36% to 38% despite their usual complaint about NZD being too strong. Inflation linked to currency weakness is the GBP story and the opposite in the NZD. Taiwan kept its rates unchanged at 1.375% - as expected even with exports recovering but inflation mild. The Philippines central bank left policy unchanged at 3% - as expected – but cut inflation forecasts. That divergence of inflation outlooks matters in the long term and maybe the story to watch after the vote today as one of those pesky themes making bond yields ever more important. I
n the interim – we are all Londoners today and GBP is setting up for 1.27 with that implacably calm that only those that have the history of the Blitz behind them can show.