EUR 9.24 For Business Accounts Only

The Morning Track walls

- The Morning Track – Walls by Bob Savage
http://track.com/articles/the-morning-track-walls/

Walls aren’t always about keeping people out, sometimes as in the case of East Berlin – they keep them in. Costs for that were about $200mn which sounds like a bargain now. So the world when it thinks about bilateral rather than global deals on trade will be rethinking how walls work and cost. The winners and losers for Trump policy shifts are beginning to get more play in the FX world. It’s not just about China bashing or the Mexico Wall but on the positive side expectations that the UK and Canada will have an easier time “fast tracking” new trade deals. UK May is running a race with Trump for market moving – with her plans to get a Brexit bill passed another kind of wall. The movers overnight are equities – globally bid after the new record highs in the US yesterday. The USD is mixed to lower even though US rates are higher and that break of correlation is important as it brings back the relative value game with European bonds all lower and leading the
story in FX despite weaker IFO and French Economic Sentiment. Supply matters and the German 30Y auction found tepid demand. Across the channel, The UK CBI industrial trends at 2-year highs highlights the power for FX in fixing other ills and that keeps the focus on other FX stories -
• MXN off 0.3% to 21.591 in Asia after Trump tweets on plans to sign another executive order to shift funds to build promised Mexican border wall. MXN gains back some to 21.486 in Europe on cross pressures.
• GBP rallies up 0.5% to 6-week highs at 1.2598 as the UK Supreme Court ruling holds out “hope” for a soft Brexit with disarray in UK Tories.
The key for risk in 2017 is in the balancing act of how a new world of trade policies pushes against FX shifts. The MXN and GBP are clearly highlights for 2017 along with KRW and TRY but the bigger race is in the EUR and JPY where both central banks remain easy and have less to gain from higher global rates – EUR/JPY measures that race and the stalling of the trend post the Trump election mimics that of many other markets making it a useful barometer with 121.10 the key support to watch in the near term.