EUR 8.70 For Business Accounts Only

The Morning Track too-hot

- The Morning Track – Too Hot by Bob Savage
http://trackresearch.com/articles/the-morning-track-too-hot/

The general theory is that when things are too hot you burn your hands. This maybe the simple explanation for why “risk-off” has hit equities after weeks of record breaking rallies. Some will point to the German Government lifting its GDP forecasts for 2018 to 2.4% from 1.9% today as an example of economic overheating and worrying about inflation. But others will point to the IG Metall Labor Union there calling for a strike on Friday. The real economic news overnight was fast and furious and very much less scary – with Japan unemployment up, household spending down leaving room for BOJ easy money. In Europe GDP 4Q was as expected – and 2017 up 2.5% is the best in 17-years - while January economic sentiment slipped. So did the Swiss KoF likely due to FX effects. Dutch sentiment better, Italian worse, while French consumer spending also fell in December. German CPI was slightly lower than expected and leaves room for the ECB to pay attention to the EUR. Markets ar
e in the reversal of reversal mode with many expecting the usual buy the dip mentality to dominate as investors grab a mitt and go back into the fire. Today will be important to see if buying the dip works – it has for the USD bears as the EUR/GBP/JPY complex all revert to the trend. USD remains on the ropes with the Trump SOU a key fear for trade and nationalism. Perhaps the USD rally in Asia meant nothing or perhaps the bigger trend reversals in equities, oil will be matched in rates and eventually the USD, just not yet.