Negative Rates And The Bank Of England: Having Your Cake And Eating It Too

Overview: The euro has been sold through $1.20 for the first time since December 1 and has now given back roughly half of the gains scored from the US election (~$1.16) to the early January high (~$.1.2350). More broadly, the greenback is bid against most of the major currencies, with the Australian dollar more resilient after reported record iron ore exports and all but a handful of emerging market currencies. Risk appetites, as expressed in the equities markets, are more subdued. The MSCI Asia Pacific Index snapped a three-day (4%+) advance, while Europe's Dow Jones Stoxx 600 is consolidating in a narrow range, though holding above the gap created with yesterday's sharply higher opening.US shares are a little firmer. Benchmark 10-year bond yields are little changed, leaving the US Treasury around 1.13%. Italian bonds also remain firm as the political drama of establishing a technocrat government continues. The price of gold lurched lower. Having settling Monday above $1860, gold has been sold through the trendline connecting the November and January lows (~$1817) and fallen to nearly $1810 before stabilizing a bit in the European morning. Oil prices are moving in the opposite direction. March WTI is advancing for the fourth session to straddle the $56-a-barrel level. It finished last week, a little above $52.  

Asia Pacific

Australia's December trade surplus was not as large as expected, and exports did not rise as anticipated, but the details were favorable.  The surplus widened to A$6.79 bln from A$5.01 bln. Exports rose by 3% for the second consecutive month. Economists had looked for an acceleration. Imports, which rose by a revised 9% in November (from initially 10%), fell by 2%, as expected. On one level, it is notable that Australia completed its third consecutive year with a trade surplus. On another level, iron ore exports surged by 21% in the month to a new record of A$12.6 bln. Coal exports rose by 26% to A$3.7 bln. Moreover, the country breakdown showed that China, which had been punishing Australian exporters for Canberra's foreign policy, relented. Australia's exports to China rose 21% in the month of December to A$13.3 bln. Exports to Japan increased by almost a quarter to A$4.4 bln.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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