So, we are unwinding some of the asymmetry of the CBOE S&P Volatility Index (VIX) and pushing it back to other asset classes. Will this matter on the day? Perhaps as the USD appears to be holding its support and bouncing, writes Bob Savage, CEO of Track Research Thursday.
For many, the game of watching equities turns boring, the risk-on and risk-off mood swings are like watching a toy spin and wobble – we have all been at these all-important index levels before.
The drivers haven’t changed – Trump tariffs and China threat of retaliation, Syria and the U.S./Russia potential conflict there, FOMC rate hikes certainty and global growth doubts.
What is different today as these stories grow old is the shift up in foreign exchange headlines and worries – start with the Hong Kong dollar (USD/HKD) peg at 7.85 – we traded there overnight and the last time that happened 2005.
Continue with the New Zealand dollar (NZD/USD), which outperforms with no discernable news other than rates in 2 year rising to 9-month highs.
Continue with euro/Swedish krona (EUR/SEK) trading higher to Dec. 2009 levels as CPIF misses the Riksbank target – and rate hike expectations shift lower. The news actually appears to matter again.
Overnight, the Bank of Korea left rates unchanged but talked dovishly and made clear 1060 still matters to South Korean won (USD/KRW).
The BOJ regional report was blah – and BOJ Kuroda appropriately dovish. Australia inflation expectations fell and housing finance trends lower.
BOE credit survey shows a crushing of unsecured consumer credit and weaker demand. The EU industrial production was weaker even with accounting for weather.
Markets are buying up USD for the first time in four days and watching something besides the S&P 500 (SPX). Oil is lower as Trump hasn’t yet acted on Syria and the U.S. production and inventories make it hard to hold without more fear.
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