EUR 8.84 For Business Accounts Only

The Morning Track unstuck-2

- The Morning Track – Unstuck? by Bob Savage
http://track.com/articles/the-morning-track-unstuck-2/

There was much made about the lack of price action across markets yesterday, some claiming that markets were stuck in summer snooze post the July 4th fireworks from North Korea. While some traders are moaning about lack of volatility in summer, the two markets that are clearly moving suggest we maybe more in a balloon squeeze for price action – with bonds and oil the key focus overnight as China/US relations, G20 talks, trade policy and monetary policy shifts dominate the news. The biggest break is in German 10Y Bunds that make new 2017 lows (higher yields over 0.50% March levels). The price action follows ECB Villeroy’s warning that non-standard policy isn’t “eternal.” He also added to EU/Japan free trade parade suggesting the G20 will be contentious with US policy at odds with the new pact. The mood flip in US bonds also notable after the FOMC minutes showed some confusion over balance sheet tapering and the inflation outlook. This puts the market back in wat
ching bonds as the key guide for risk in equities, FX and in commodities. The break of 2.32% in US 10Y opened 2.50% tests and we remain on that course with the jobs data ahead as central to seeing an even larger push up in momentum. Rates going up because money isn’t cheap is very different for the US – and the correlation of the higher US rates to USD is at risk accordingly. This is about EU and Asia strength more than US weakness.