(12/15/17) Yen Is Today’s Best Barometer, over the Euro and Pound

Yen Is Today's Best Barometer, over the Euro and Pound

12/15/2017 11:25 am EST•2 min read •Tickers: DIS, FOXA

Head of FX Americas

BNY Mellon

The key risk-on and off drivers today are the same – U.S. politics, global growth, other central banks needing to change policy like the US, writes Bob Savage, CEO of Track Research Friday.

Is it that the Mouse ate the 21st Century Fox (FOXA)? Fox Murdoch selling out to Iger of Walt Disney Company (DIS) grabs the headlines in equities and maybe importantly highlights the obsession of the new world about delivery.

The more likely story is that we are at the start of holiday trading as not even a mouse is stirring.

What matters from now until the year-end? That seems to be the only question for traders and investors as they await the arrival of a Republican tax reform bill – so far stuck in the Senate on amendments to the reconciliation bill.

The list of events that matter between now and Christmas is worth highlighting to get what may matter next after an exhausting week of central bank meetings and important data. This week four European central banks kept policy unchanged despite seeing better growth into 2018.

Start with the Australian by-election in Sydney Saturday, where Turnbull’s government majority hangs in the balance, continue with the Chilean presidential election Sunday, continue with the BOJ, and Catalan elections Dec 21.

Today brought a mixed Japan Tankan survey led higher by capex plans, another Russian bank bailout (third this year) – and a surprise 50bps rate cut today to 7.75% from the central bank.

Throw in the long wait for the EU formal approval of the UK divorce deal as still on the agenda along with industrial production in the U.S. and the ongoing tax reform debate and you have a modestly busy news day – but a thinly traded one – filled with more concerns about next week and the year-end.

The key risk-on and off drivers today are the same – U.S. politics, global growth, other central banks needing to change policy like the US – all that seems to make today’s barometer the Japanese yen (JPY/USD) more than the euro (EUR/USD) or British pound (GBP/EUR) – with the risk of 111.60 stops triggering a test to 110.8 being the outside shot.

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