E Markets: Again?

Another verse, same as the first, a little bit louder and a whole lot worse. Sometimes when we repeat the same action we get a different feeling but the same outcome. The path from amateur to expert follows. Markets are becoming experts in trading all things in the UK. Another day, another set of key UK votes on Brexit, another set of very weak China economic data – 17-year lows in industrial production, - more handwringing over EU politics, more US/China trade talks being delayed - this time until April, more fallout over Boeing and politics everywhere. While the delay and can-kicking exercises of US trade and Brexit has been positive for markets in January and February, they no longer seem to be now. That is the reason that again is scary and perhaps foreboding. The risk-off story is also being revealed in the USD which is bid and threatens a retest of 98. That is the barometer to watch in the context of more economic data and more FOMC reaction - as pausing isn't the same as easing. 

Question for the Day: Does Brexit matter? The last 2 years have been a debate about how the UK wants to separate from the EU and what that means politically, ecnomically and strategically. The fallout from the first referendum has been clear - a weaker GBP, less growth, less investment and more uncertainty.  The hope that the next set of votes will clarify it all maybe a wish more than a reality. The uncertainty seems most likely to be pushed down the road in another set of votes in can-kicking. We can't see why this is so bullish for risk other than it takes away the present worst cast scenarios. 

The hope for many is that a new referendum solves all problems. The chart from the BBC above points out that this logic has more difficult paths than the simple no Brexit one. The other chart is the one that today brings and it has plenty of other ugly outcomes as well.  Both suggest markets are too sanguine. 

What Happened?

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