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The Morning Track sublime

- The Morning Track – Sublime? by Bob Savage
http://trackresearch.com/articles/the-morning-track-sublime/

From the sublime to the ridiculous is just the first step for markets today. The rally to new highs in the Russell 2000 yesterday for markets confirmed what many already wanted to believe, 2018 markets are not dead because of February and US growth is strong enough to handle 3% plus 10-year rates. The problem with the sublime is that it turns to the ridiculous faster than fashion senses herald new dresses or populist governments spend money. Its prom season and trouble lurks everywhere – this is the list to consider for FX:
1) China won’t compromise on core trade interests in talks with US. This set a less optimistic backdrop for talks in Washington today and tomorrow;
2) GBP rallied on Telegraph report that the UK will tell the EU its prepared to stay in customs union beyond 2021 but this means higher rates and less secure politics;
3) NZD sold on cross technicals despite rally on stable budget – NZ PM Ahern’s first budget has 2018-19 surplus at NZ$3.14bn up from NZ$2.54 but 2022 at NZ$7.3bn down from NZ$8.8bn;
4) KRW lower, USD up beyond 1081, as BOK Governor said it’s hard to be optimistic about the economy amid uncertainties including monetary policy normalization by major countries and trade tensions between the U.S. and China.
5) EUR was steady as Italian markets bounce at the open, as the Italian populist leaders accusing markets of “blackmail,” even as they yearn for a return to pre-Maastricht settings hangs over investors - their draft leaked to the Huffington Post yesterday suggested 6% deficits, ECB canceling E250bn in debt and a new EU budget deal but that was partially reversed with a 39-page draft budget last night according to news reports.
6) EUR also hit as the EU meetings in Bulgaria respond to US Iran deal unwind and sanctions along with trade tariff issues on steel. The Tweet of the day comes from EU President Donald Tusk not Trump – “if you need a helping hand, you will find one at the end of your arm.”
All of which leaves the EUR as the risk barometer again as the move from sublime to ridiculous follows politics in both the US and Europe.