Key Barometer Today Is Japanese Yen as Euro Is Flat, US Dollar Falters

03/12/2018 11:04 am EST

Focus: CURRENCIES

Robert Savage

Partner & CEO, CCTrack Solutions

The usual Monday rules apply. The U.S. markets look sleepy with the spring ahead time change leaving the spread to news an hour tighter but the hope for more light and better weather prevails, writes Bob Savage, CEO of Track Research Monday.

Overnight markets had little news to digest after the weekend and that leaves the same old mood and themes from last week intact but it’s Monday and we all want a fresh start.

Or for the pessimists, we can call it a slow start for a heavy week of important U.S. economic data and auctions in the U.S. and EU. Money flows are less meaningful without volume but there are a few standouts:

1) The Japanese yen (JPY/USD) gained despite risk-on mood thanks to a political scandal. Finance Minister Taro Aso refused to resign over the deepening land sale scandal – where both he and Abe had their names removed, documents altered, from sale of public land to a the Moritomo Gakuen educational foundation with Abe connections.

2) The Australian dollar (AUD/USD) gains as Turnbull and Trump hash out tariff exemption. Prime Minister Malcolm Turnbull said Donald Trump confirmed the tariff exemption in an early Saturday morning call.

3) Oil lower as the Saudi Aramco IPO is delayed. According to the FT, delays on IPO decision-making come as advisers have struggled to achieve the $2 trillion valuation that Mohammed bin Salman, the crown prince, wants.

4) Italian BTPs lower as Renzi says PD support for any 5-Star coalition impossible. Meetings with Salvini’s League are next on the agenda after 3 pm vote today. Renzi said the PD party’s future is up to others as the Democratic Party meets to find a new leader.

Separately, none of these stories are movers but together, there is a clear headwind against a bigger risk-on move today as political doubts shuffle over any evidence of new economic growth. The bulls need to be funded to have a faster start today. Perhaps the key barometer is JPY again – as the euro (EUR/JPY) is flat, U.S. dollar (USD/JPY) and its failure to break out of 107 resistance seems essential for bullish-mood momentum.

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