EUR 21.16 For Business Accounts Only

The Weekly Track singles

- The Weekly Track – Singles by Bob Savage
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Today is singles day in China. The heralded event for internet sales has not lost its glitter even with the moving on of Alibaba’s Ma. As of midday, Alibaba had chalked up 149 billion yuan -- $21.5 billion -- in sales – with $1bn in the first minute, $10bn in the first hour, so with hours remaining, the 2017 record $25.3bn in sales has already broken. With or without Ma, business goes on. Politics matter but just how much is the question. The pressure of Chinese politics is opaque in comparison to that of the US and yet those risks remain just like they do in the US. After last week’s US mid-term elections, the power of democracy shines through markets. Perhaps the largest voter participation in history doesn’t hit a home run but it’s a solid single against those that argue stability is better than giving the power to the ballot. Economics may return to dominate markets into the last 1 ½ months of the year, but politics particularly in Europe continue to be t
he key with Brexit, Germany, Italy and the ECB replacement for Draghi all essential to keeping the EU intact. The EUR is fast becoming the favorite trade to short into 2019 as the economic divergence, political issues and policy divides make 1.10 more likely than 1.20. Compare this to the USD views at the beginning of the year where 1.30 targets were more plentiful than the snow in London. Against this view is the growing consensus that the US goes into a recession in 2020. The risk of an FOMC mistake rises with jobs, the unwinding of the US tax cuts, fear of a prolonged China trade war (if not cold war) and the ever-growing debt weigh on the dollar and equities. No one is sure that the rally into year-end for risk isn’t a screaming opportunity for shorting into 1Q2019. The world wants clarity but can’t find it in autocracy whether in politics or policy. Singles maybe less fun than doubles, less powerful than home runs, but more sustainable in the long run. For the
week ahead, the EUR/USD is the key FX barometer for measuring politics over economics. Oil will be in play given the Iran sanction waivers from the US and the weekend Saudi efforts to shore up prices at $70 Brent. The US bond market will be watching CPI and Powell while the US stock market gets the last dripples of earnings and more on the rotation plays post the mid-terms. For risk players, EUR/USD is about watching for 1.05 bets over 1.20 to dominate into year-end.