Euro (EUR) set for more trouble – that is the place where risk remains – as Italy continues to trade poorly and the ECB/debt dynamic looks most at odds with the explanations. Watching 1.1250 for 1.10 still as the target against 1.15 resistance, says Bob Savage Friday.
The storyline for the week has been China trade talks and a stable Chinese yuan (CNY) versus Turkey defiance as it goes its own way to fix the Turkish lira (TRY) and economic crisis as it battles the U.S. over a jailed pastor.
The U.S. Treasury Mnuchin threat for more sanctions on Turkey at the U.S. close has led the TRY off 6% back to 6.20 on the day and so risk in Europe is lower. This offset hopes in Asia that the U.S./China talks in the next few weeks might lead to something, that the CNY stability is a peace offering and that Trump said NAFTA negotiators need to take their time to strike a deal.
China shares may be a better guide as they fell again. While the calm today has been attributed to the mixed hopes above after a volatile week, the answers aren’t satisfying. If you want more creative explanations for the markets perhaps ask your kid why the window is broken.
Better even still read about how broken windows lead to lower morale.
The answer for the price action today returns to the mundane. There was little economic data to move markets either – Japan’s Reuters Tankan was better for manufacturing despite trade fears while services were worse.
Korean jobs fell and the Moon government may feel some heat on the economic front. RBA testimony from Lowe and a speech from Ellis didn’t move markets either.
The HICP final reading for Europe was unrevised and as expected.
This leaves the market watching U.S./China trade talk hopes, Turkey and its reactions to more U.S. pressure – watch S&P 500 (SPX) today for a downgrade on the debt, and the upcoming Putin/Merkel meeting tomorrow for headlines. US data is light – with preliminary University of Michigan Consumer Sentiment unchanged, Canadian CPI will be the main focus with most fearing higher locking in a BOC rate hike again.
Forex is in consolidation with the focus on EM still but the risks are in Europe.
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