The risk of rates mattering hasn’t been part of the equity or forex trading world for some time and its return matters. While many see today as a wait and see story, the bond and oil markets are telling us something else, writes Bob Savage Thursday.

The greatest gift for discretionary traders is time. There is no rush to put money to work in volatile markets.

The pain of 2016-2017 was that risk-on was forever with volatility crushed.

The question for 2018 is whether the markets have climbed the wall of worry back to 2017 levels of imperturbability.

Carry trades take the front row for portfolio managers in such markets. Rates and risk balance. Trends may be still in doubt as we chop about in consolidation even with a globally better mood and bullish bias underneath it all.

Most of the overnight was about risk-on as fears about U.S. trade policy and hopes for North Korea peace summits supported after the Trump/Abe news conference. Overnight economic news was mixed and didn’t matter much. The Australian job report missed but metals prices supported the Australian dollar (AUD/USD).

The NZD CPI was higher but not enough to drive up RBNZ hike timetables.

The UK retail sales missed the mark and add to doubts about the BOE needing to hike in a hurry.

Focus on the day will likely shift in UK back to Brexit and the Lords vote. The bigger focus in Europe may be about how they deal with Trump as Macron and Merkel meet ahead of his visit to Washington. How this all works out is likely key for how the ECB tapers and that puts the June meeting as pivotal for euro (EUR/USD) and rates.

In emerging markets politics look important as well – with the Mexican peso (USD/MXN) hit early by the 22% lead for leftist Obrador for the July 1 presidential election. While Turkey lira (USD/TRY) gains in hopes that the early elections on June 24 called Wednesday by Erdogan bring an end to the emergency rule.

The Swiss franc (USD/CHF) may be something to watch as the grazing of the SNB 1.20 euro/Swiss franc (EUR/CHF) floor was chopped back to 1.1955 – with many seeing the currency pair as the key risk-on barometer. The 1.20 line matters to EUR and rates as well as the SNB won’t be buying on dip as much.

Others point to the Russian sanctions and see outflow. The role of oil, aluminum, palladium price spikes higher also are linked to Russian sanctions. The shift of mood into Europe looks important as U.S. rates are breaking higher with FOMC Beige Book and Fed speakers adding to the story.

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