From the FXWW Chatroom: The standout trend in markets right now is oil, moving higher pretty steadily. With the Asian Development Bank keeping Asian growth forecsts at 5.9% for 2017 and 5.8% for 2018, but talking up the improved prospects and better trade trends, there’s a sense of a more balanced global economy at the moment. Europe is on the up, the US is trundling along, Japan’s got no inflation but does have growth (and fiscal stimulus in the pipe) … All of this makes OPEC’s life a little bit easier, but it’s also significant at a wider level.
Markets, however, need to be able to get past the Trump/Kim war of words (easier said than done). Asian equities are a little soggy, bond yields are a little softer, and overnight FX movers see KRW, NZD, INR and IDR softer. If you went by the numbers alone, it’s a ‘risk-off’ start to the week.
Today’s events include Swedish PPI, a ‘key speech’ by President Macron, UK mortgage applications and US new home sales and consumer confidenmce but it’s speeches by the Fed’s Mester, Brainard, Bostic and Yellen which will get the headlines. 10year TIPS yields are edging lower, again; 10year nominal yields almost got to 2.3% in the iddle of last week, but are back at 2.22% now. They need data and Fed help to get higher and the dollar badly needs their help if its bounce is going to have any legs at all.
With oil here and in hope of a further push higher in bond yields, as well as the eternal hope that Kim & Trump will quieten down, familiar trades are favoured: Short EUR against NOK, SEK, PLN. Short GBP/CAD. Long USD/JPY or CAD/JPY.