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The Morning Track throttled

- The Morning Track – Throttled by Bob Savage
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We all know the euphoria of speed, racing fast with no fear, dashed with the throttle back as the joy-killer, the brake back to reality, forced usually by some mechanical limitation rather than some regard for the actual speed limit. The balancing act of rates against equities is back in play today, as the gridlock joy of the US election fails to sustain with debt markets everywhere waiting for the FOMC decision. While few expect anything today, most see a December hike and the meeting statement remains important as to guiding views for 2-3 hikes for 2019. The throttle back of growth in the US follows with less government spending, higher rates and ongoing fears about trade wars with China lingering. The mid-term certainty isn’t sufficient. There was a significant amount of overnight news to digest and that adds to the view that the bounce back in risk is more a correction than a new trend.
• RBNZ rate cut hopes are dwindling after decision and statement – keeps NZD bid
• Australia Payne and China Wang meeting make clear US/China relations still key for AUD
• China trade surplus shows big imports ahead of tariffs – and less metals and oil
• Japan Ecowatchers index bounces with government spending on natural disasters but Reuters Tankan weaker, core machinery orders lower and BOJ summary of opinions adds to BOJ policy tweaking fears for 2019. Leaves JPY watching 114 expiries but no momentum
• German trade surplus shows less exports and more doubts about overseas demand
• ECB Bulletin keeps expansion talk and QE end path despite seeing higher uncertainty and lower growth.
• Italy hit with EU commission growth outlook cuts – BTPs suffer on budget doubts that follow
While each one of these points is hardly enough to turn markets, the total effect mixed with US natural doubts about the election meaning make the reversal of mood more like a throttle back – as the speed of change and news needs to moderate, like that of the USD selling from yesterday, today’s buying throttles the downtrend talkers – and with it hope for a simple, low-volatility leap higher in risk.