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EUR 21.16
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/articles/the-weekly-track-pendulums/
The best performers last week in G10 were AUD and NZD up 1.6% – both reflect the renewed faith that global growth can be saved by the simplicity of a Trump deal. CNY led the winners in emerging markets as the PBOC pushed the fixes with the Yuan up 1.55% for the week to 6.76 – with 6.71-6.73 the next key support. If the focus last week was on positive US/China talks, the week ahead is about Europe with UK Brexit and ECB Draghi speech key event risks. Throw in that the Greek Tsipras government likely faces a confidence vote and on-going French protests – all put the EUR/USD relationship back in play after the pendulum of risk moved from despair to euphoria in 2 weeks. Given the weakness of the European data and the messy politics ongoing, ECB Draghi has a thin wire to balance for investors as they face the liquidity trap. Watch 1.1640 and 1.1300 for the new swings and extremes 1.12-1.17 into the ides of January.
The bounce back in oil prices maybe the other problem and issue for Europe and the US as the inflation noise of energy may proves less helpful in 1Q just as it did in 4Q. Emerging Markets maybe moving off the current account/real rate focus and back to commodities accordingly. India INR off 1.25% was the notable loser last week with oil a key part of the story, politics, RBI policy was the rest. Mexico MXN gained 1.5% with the AMLO financial reform push. IPO tax cut from 35% to 10% being the most notable driver. Brazil gained 2% with pension reform hopes key. The finer point of tracking FX markets as a barometer for global asset flows reveals a richer diversity of outcomes in the last week than just a return to risk-on and risk-off thinking, making the pendulum analogy less important and the wrong focus for the awful eight risks into the week ahead. Thematically, markets have been stuck on China, European politics, Brexit and US politics. But there more clocks ticking wi
th many different time lines for potential blow-us and surprises than the present tape for global equities suggests.
The Weekly Track pendulums
- The Weekly Track – Pendulums by Bob Savage/articles/the-weekly-track-pendulums/
The best performers last week in G10 were AUD and NZD up 1.6% – both reflect the renewed faith that global growth can be saved by the simplicity of a Trump deal. CNY led the winners in emerging markets as the PBOC pushed the fixes with the Yuan up 1.55% for the week to 6.76 – with 6.71-6.73 the next key support. If the focus last week was on positive US/China talks, the week ahead is about Europe with UK Brexit and ECB Draghi speech key event risks. Throw in that the Greek Tsipras government likely faces a confidence vote and on-going French protests – all put the EUR/USD relationship back in play after the pendulum of risk moved from despair to euphoria in 2 weeks. Given the weakness of the European data and the messy politics ongoing, ECB Draghi has a thin wire to balance for investors as they face the liquidity trap. Watch 1.1640 and 1.1300 for the new swings and extremes 1.12-1.17 into the ides of January.
The bounce back in oil prices maybe the other problem and issue for Europe and the US as the inflation noise of energy may proves less helpful in 1Q just as it did in 4Q. Emerging Markets maybe moving off the current account/real rate focus and back to commodities accordingly. India INR off 1.25% was the notable loser last week with oil a key part of the story, politics, RBI policy was the rest. Mexico MXN gained 1.5% with the AMLO financial reform push. IPO tax cut from 35% to 10% being the most notable driver. Brazil gained 2% with pension reform hopes key. The finer point of tracking FX markets as a barometer for global asset flows reveals a richer diversity of outcomes in the last week than just a return to risk-on and risk-off thinking, making the pendulum analogy less important and the wrong focus for the awful eight risks into the week ahead. Thematically, markets have been stuck on China, European politics, Brexit and US politics. But there more clocks ticking wi
th many different time lines for potential blow-us and surprises than the present tape for global equities suggests.
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Robert Savage
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