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Markets Are Buying Risk. Watch US Rates As Bond Yields Move up

12/18/2017 2:28 pm EST

Focus: CURRENCIES

Robert Savage

Partner & CEO, CCTrack Solutions

The markets are happy and there is no tension even with political worries. That has been the story of 2017 and today is not different. No tension means that the only way to derail this upswing is in a burnout, writes Bob Savage, CEO of Track Research.

Holiday trading rules required.

Markets are buying risk as the U.S. tax reform plans feed into a stock rally extending from Friday. The turnaround has helped commodities, hurt the U.S. dollar (USD/EUR) marginally in Europe but not Asia, and left bonds lower.

Politics dominates the headlines today from:

    • South Africa with the ANC leadership vote starting and a big 2% gain in the South African rand (ZAR/USD),
    • to the Australian by-election keeping government intact, with the Australian dollar (AUD/USD) up 0.3%,
    • to the far-right party holding positions of power in Austria,
    • to Chile voting in Sebastian Pinera, a right-wing billionaire,
    • to the Catalan election Thursday where the independents are on the upswing,
    • to the U.S. tax reform passage sometime this week.

The economic data was sparse but also important as it showed robust trade gains in Japan highlighting the global demand story, China housing prices holding and showing the 3-4 tier city strength and a big UK CBI industrial orders survey showing Brexit be damned for growth.

The markets are happy and there is no tension even as the political worries linger. That has been the story of 2017 and today is not different. No tension means that the only way to derail this upswing is in a burnout.

U.S. rates may be worth watching here as the move up in bond yields isn't a flattener as much as a steady rise like water in a cup not quite ready to overflow but for the tension at the top.

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