The only barometer for the risk-on and risk-off world that seems to be working is the Japanese yen (...
View from London: Trading on Political Intrigue?
07/12/2017 2:57 am EST
The Japanese yen move stands out today. The oil market is the close second and Canadian dollar the third. They continue to point to the over-importance of central bankers in markets, asserts Bob Savage, CEO of Track Research in Wednesday commentary from London.
The saga of the Trump relationship to Russia and what it means for the U.S. president’s agenda push through Congress continues to dominate markets.
The U.S. dollar fell on the headlines of his son’s email exchange with a Russian’s offering help to hurt Clinton in the election. The smokescreen of U.S. politics continues to obscure larger fundamental drivers and what this means to the USD, U.S. stocks and bonds.
Trading on political intrigue hasn’t been very useful for beating markets in 2017.
Political risks remain, but perhaps not the sort that many in the opposition want, as the issues surrounding North Korea, global trade, NATO, Syria and Qatar all matter significantly to the rest of the world.
So the focus in the U.S. session logically shifted to Yellen, oil and the Bank of Canada.
The overnight news was again not sufficient to change markets or drivers–leaving the US to lead. This is different than in past weeks with the U.S. normally following Europe. Perhaps this is the summer effect finally kicking in or perhaps it’s just about the preponderance of U.S. doubters.
The Japanese yen (JPY) move stands out today–dominating the forex world and reflecting the sharp move in U.S. rates pre-Yellen and post-Yellen.
The oil market is the close second and Canadian dollar (CAD) the third. These movers collectively don’t correlate to a new world view but rather continue to point to the over-importance of central bankers in markets.
This will eventually be a larger political risk. The FOMC Chair Yellen and the Vice-Chair Fischer both leave next year making the Trump replacements and the present policy key–as the bigger debates about inflation now could shift to other factors like business investment or financial stability.
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