The lack of fear is noticeable today. The risk-on mood for markets today is about inflation being tame and growth being on target – pushing investors into a Goldilocks scenario – where FOMO and TINA acronyms return, writes Bob Savage Friday.
The next expectation maybe about M&A Monday as companies buy market share in this late stage recovery. The rise of equities, weakness in the USD continues. Modest U.S. CPI buys time for investors and the wait for better data before new hikes becomes the mantra at the Bank of England and maybe even the FOMC for September.
Overnight little news with weaker Australian home loans, modest China M2. The geopolitical fears are also easier – Trump wants a better deal with Iran, set the date for the North Korea summit June 12 in Singapore, the new Malaysian PM Mahathir wants to be business friendly and plans to pardon his opposition Ibrahim; the Italian 5-Star Movement could be running a coalition government by next week; UK May backs off the customs union and postpones legislation; the US-Canada-Mexico appear to be on course for a new NAFTA deal rewriting car rules.
The price action is all logical and yet not sufficient to make anyone feel urgency. The largest surprise may be in that a populist government in Italy – the third largest sovereign bond issuer – has been mostly shrugged off.
The reason may be simple enough – ECB buying – but its ability to hold that market together depends on the data and the anti-EU movement tame. The bounce back in the EUR Thursday was about the USD losing some rate hike support.
The holding of the EUR gains overnight is more technical and seems at odds with the ECB – but we will have to wait for Draghi to confirm this and that puts the EUR as a key risk barometer on the day with the oversold condition not yet unraveled and the risk for 1.2030 again returning.
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