The reactions of markets to yesterday's activity was fairly muted as liquidity continued to be plentiful. Most currencies stayed with a 0.75% range on the day as the market geared itself up for more significant activity later in the week.
U.S. Factory Orders were a little weaker than expected but not sufficiently to register on the FED’s radar.
Australia, as expected left rates unchanged despite lingering concerns about domestic spending and the sustainability of the records being set for exports. The AUD traded in a narrow range between 0.7560 and 0.7610. Yawn.
Sterling fell to a seven week low against the euro yesterday driven by an uptick in the single currency in reaction to political events in France. The two centrist candidates Emmanuel Macron and Francois Fillon are making inroads into the lead enjoyed by right wing National Front Candidate Marine le Pen.
The budget is announced by Chancellor of the Exchequer Philip Hammond tomorrow and despite all that is happening economically in the UK, reaction is again expected to be muted since the room for surprises simply doesn’t exist.
The announcement of the date for triggering Article 50 of the Lisbon Treaty formally signalling the UK’s resignation from the E.U. is imminent and it is a real throwback to the days of Thatcher to hear Ministers deferring to the Prime Minister.
Perhaps Theresa May really is “Maggie Lite!”
Since traders are convinced that there will be a rate hike in the U.S. next week, their thoughts typically wander to when the next hike after this one will be. The Fed is still on a three hike path for 2017 and it is unlikely that they will use all their bullets quickly. The next (but one) hike in the U.S is probably slated for early in Q3.
Reaction to North Korea’s missile launch was muted as the buying of the JPY as a safe haven play quickly petered out. The traded close gto 114 but the bigger selling orders are nearer to 114.20 and that level seems pretty well protected for now.
There is an air of anticipation about the market right now but adequate liquidity is keeping currencies in narrow ranges.
Today’s release of German factory orders and EU wide GDP is unlikely to give a major push to the single currency since it is political rather than economic factors that are driving the market.
Is there a possibility of a Trump or Brexit style shock in either The Netherlands or France? Yes, of course and it is glib to say it is unlikely since if it was likely it wouldn't be newsworthy.
Populist politicians like Le Pen in France or Wilders in The Netherlands send shivers through Brussels since they are so heavily anti-EU.
The Bureaucrats of Brussels and Strasbourg however continue to live in ivory towers unconcerned that the Barbarians whilst not actually at the gates are clearly deciding whether an attack is feasible. Their defenses are very flimsy yet they don’t enter into the conversation. Is this because they do not see the danger or are they aware that their arguments for the advancement of the EU to its next stage are unlikely to lacking in substance or large scale support?