EUR 8.40 For Business Accounts Only

The Morning Track war-and-peace-4

- The Morning Track – War and Peace by Bob Savage
/articles/the-morning-track-war-and-peace-4/

War beats peace in driving markets today. The search for safe-havens restarts with JPY and CHF benefiting. The border clash intensifies with Pakistan claiming it shot down 2 Indian jets after it carried out six airstrikes on Kashmir. Ground forces are exchanging fire in more than a dozen locations. Both markets are suffering from the conflict and both are being urged to show restraint On the peace side, the US/North Korea summit started with hope. “Vietnam is thriving like few places on earth. North Korea would be the same, and very quickly, if it would denuclearize,” Trump said on Twitter before the meetings. Then there is the in-between of democracy as the UK Parliament debates Brexit today. Markets are focused on the outcome as the “no-deal” hard Brexit risk was priced out of the market yesterday but the risk for delay, another referendum and more political confusion continues. Also notable is the BOJ battle to push back deflationary pressures even as its QE an
d negative rates seems insufficient in the face of a slowing global trading environment. The BOJ dove Kataoka pushed for more action. “While not impossible, it’s hard to achieve the price target with monetary policy alone,” Kataoka said, adding that fiscal and monetary policies “must be on the same page” to change public perceptions that deflation will persist. The German Bundesbanker Weidmann noted that economic weakness from 2H2018 persists but that pessimism is unwarranted given the foundations for growth from cheap financing, expanding employment and higher wages. He also got the greenlight for another term keeping his hat in the ring for replacing ECB Draghi. The markets are confused and stuck in between war and peace over politics and policy with the JPY and CHF the best barometers for fear today both are more stuck yellow than red.