Call the start of March a lion rather than a lamb – and per usual, we are back to watching the US dollar rally as a signal of bigger global trouble. US Dollar Index (DX) 91.01 and 90.08 are the keys,writes Bob Savage, CEO of Track Research Thursday.
The price action into the first day of March has been messy.
The news can be blamed – there was a lot of it and it’s not obviously supporting the global growth recovery or the easy money policy that have been the supports for risk-on rallies extending.
Let’s start with talk that President Trump will implement steel and aluminum tariffs – hitting Australia and China. This headline took some of the gains from a better China Caixin PMI away, and only added to the Australian dollar (USD/AUD) troubles – below its 200-day and at 2-month lows - after its weaker CapEx report.
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This led a talk-at-thon in Japan where BOJ Kuroda and Kataoka were dovish and didn’t help the Nikkei. The drop in consumer confidence and in inflation outlooks is troubling there.
For Europe, mixed Eurozone PMI keeps 1% q/q growth intact but UK Brexit noise still a problem along with Italian election doubts.
The U.S. open is all about the Jerome Powell redo moment – to see if he wants to clarify his hawkish first pitch. Most see this as unlikely and so we are in a risk-off, wait for more trouble start to March – call it a lion rather than a lamb – and per usual, we are back to watching the US dollar rally as a signal of bigger global trouble. US Dollar Index (DX) 91.01 and 90.08 are the keys.
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