The focus of global markets and the lack of fear of a larger U.S. trade war remains key with positions returning to get to critical size. What seems to be the bellwether is the USD where the break today of 93.29 opens bigger rallies in equities ahead, says Bob Savage.
Markets are enjoying happiness – higher equities, higher rates, higher growth hopes, lower USD. The geopolitical dysfunction has been pushed aside or maybe considered normal as USD (DXY) weakness links back to a growing view that Trump trade barks have no teeth.
Economic data that doesn’t fit into the story has been forgotten. Markets are risk-on despite ongoing doubts about trade policy with the G7 Quebec meetings seen as the potential turning point with Trump advisor Kudlow Wednesday calling it “a family quarrel.”
Trump will meet one-on-one with both his Canadian and French counterparts at the conference before flying to Singapore to meet North Korean leader Kim Jong Un on June 12.
The effect has been to see USD drop 1% in four days with overnight continuing the trend.
This drives first on rate policy shifts – starting with ECB Wednesday and continuing with Swedish krona (SEK) today – the leader of G10 –as Riksbank Deputy Governor Jochnick reiterated a rate hike is likely toward year-end.
Second effect has been that U.S. policy on trade returns the twin deficits as a drag on the dollar. There are some exceptions for the U.S. dollar/British pound (USD/GBP) being prime – as U.K. Prime Minister Theresa May is facing a major cabinet rebellion over Brexit, and the whole government could be destabilized as Brexit Secretary David Davis clashes with her.
View Bob Savage at TradersExpo New York in brief video interviews recorded Feb. 9:
How to create a risk parity portfolio
Duration: 3:25
How I pick assets on the basis of highest yield
Duration: 3:31
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