EUR 21.52 For Business Accounts Only

The Weekly Track more-please

- The Weekly Track – More Please by Bob Savage
/articles/the-weekly-track-more-please/

The removal of fear brings and an extension of greed. The fear of a no-deal Brexit receded a bit as the UK Parliament pushed back on all alternatives and asked for an EU extension in the midst of chaotic politics. The fear of a no-deal US/China talks receded further as a summit between Trump/Xi sets up for 4-6 weeks. The fear of another FOMC flip-flop on rate guidance receded with a tame but strong US jobs report with rates still expected to be lower elsewhere. The RBNZ dovish outlook sent NZD lower, the RBI cut helped send the INR lower. The risk-on mood for the week ensued with JPY the best example as 112 returns as the upper boundary next likely to be in play for an otherwise dull time for FX. The lack of fear drives down volatility everywhere and the stretch for yield follows along with all the implications for passive program trades. The excitement for some came with Trump again calling for the FOMC to cut rates and this time to throw in more quantitative easing. T
rumps push to add two of his political supporters with less than ideal academic credentials to the Fed add to fears about independence, even while he notes he is stuck with Chair Powell. The wearing off of the US fiscal stimulus leaves a bigger deficit and a slowing economy, albeit one that remains above potential. The wish for many investors is more, just like the US President, wanting more momentum, more growth to justify an otherwise gloomy world where growth and trade forecasts are still being cut. The synchronized slowing of global growth has become the clarion call for central bankers to do more than stop normalization, with all eyes to the FOMC minutes and ECB next week. Delivering more in monetary policy will likely do less, leaving the gap for fiscal and reform wider than ever into the rest of 2019. The return of JPY to 112 maybe the key balancing act for geopolitical fears as China/US hopes meet the reality of a slowing Japanese economy stuck with a BOJ at the
limit and Abe’s VAT hikes clashing against positions set up for the worst outcomes.