EUR 8.84 For Business Accounts Only

The Morning Track talking-and-doing

- The Morning Track – Talking and Doing by Bob Savage
http://track.com/articles/the-morning-track-talking-and-doing/

If you want to use talking as a policy – its called “forward guidance” amongst central bankers. If you want to act but make sure no one cares you talk and hope no one notices the doing. The phrase “dovish hike” has become the consensus for today. Perhaps the Yellen Fed has read their history and begs to be more independent, like Teddy Roosevelt – speaking softly, but carrying a big stick – or more likely, they want to raise rates but not be called out for hurting the meek recovery – where jobs are tight, wages low, growth modest and inflation below target. Talking about hiking rates and shrinking the balance sheet is what will be the key for proving the “dovish” part of today. Much of the investor focus will be on how it makes other central bankers think – particularly China – where the PBOC in March lifted its liquidity rates 10bps after the FOMC. The data from China overnight already show some easing in property investment, but encouraging sta
bility in industrial output and retail sales holding – suggesting the effects of rates will be a 3Q story while the sharp drop in M2 adds to this credit worry. The Bank of Canada has already put itself on call for tightening after Poloz joined his deputy governor signaling a 1Q 2018 action but the RBA and RBNZ are less clear – and the data overnight make it a tougher decision witness weak consumer sentiment and a troubling C/A. This leaves the SNB and BOE focus intact for tomorrow – with neither expected to do anything but talk. Doing is different and it maybe the key for trading today as rates and the USD are watching how the FOMC describes its own actions. The data focus overnight should have been on China but it was more about the UK still with jobs holding but wages lower putting the Phillip’s Curve on call. The focus on Brexit intensifies with UK May marching towards talks with cabinet shuffles and Macron visits. The focus is on anything that moves – whi
ch today is oil waiting for EIA and the US inventories – with risks of lower prices putting the recent rally up in A$, C$ and NOK at risk.