As U.S. rates remain less scary, the focus there will shift to the data and the 2Q earnings–making the U.S. once again the pivot for moods globally, asserts Bob Savage, CEO of Track Research in Wednesday commentary from London.
The asymmetry of markets is in play today.
Janet Yellen is given a chance to right the leaning of global financial conditions again back towards fear and away from greed.
Trees don’t grow to the sky, nor do markets–they both move towards the hot money.
The biggest stories from overnight were about flows and then economics with USD recovering from Asia as it grazed near new historic lows while EU bonds flipped back bid despite no real ECB talk.
The Australian dollar (AUD) and New Zealand dollar (NZD) gained sharply–linked to the China trade which was the sole economic upside. The Swedish krona (SEK) is also a winner as its inflation beat expectations and puts the Riksbank back in play to join the ECB in talking about normalization.
The failure of the euro (EUR) to break over 1.15 is beginning to get many excited in forex as that only further supports the easy financial conditions that Mario Draghi noted in Sintra 2-weeks ago.
We are all waiting to see if Yellen in her second day of testimony will do something similar–throwing a bone to those bond bears who expected a larger run back to 2.55%.
As the U.S. rates remain less scary, the focus in the U.S. will shift to the data and the 2Q earnings–making the U.S. once again the pivot for moods globally. Watching 2.40% as the key level in 10Y to break to take any Yellen shift in tone to matter.
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