As BofA's rates strategist Ralf Preusser writes in a note this morning, "not even a month since the US election and markets seem unrecognizable" adding that the Trump election represented a paradigm shift. Fiscal easing would take over from monetary easing and would allow for the dollar and rates to rise in unison, a trend not seen for a while.
While investors are focused on Italy, Bloomberg's Mark Cudmore warns that another Mediterranean country is poised to grab their attention very soon. A currency crisis in Turkey is rapidly deteriorating, setting the stage for dramatic and unscheduled central bank action.
The lira has weakened by more than 11% in the last six weeks against an equally weighted dollar-euro basket. This devaluation is exacerbating the situation rather than providing a relief valve.
Back in April, we commiserated with BBG ex-trader and commentator, Richard Breslow, who when looking at the ongoing events in markets, had a near nervous breakdown. For those who missed it, here are the key excerpts:
The greatest trick OPEC ever pulled was convincing the world to buy oil even as production kept rising to new all time highs. Case in point, just out from Reuters:
Less than two months ago, after the Algiers meeting but before the Vienna OPEC summit when speculation was rife that the cartel would be unable to reach a deal to cut production, we reported that "US Oil Producers Are Hedging At Levels Not Seen Since 2007" in which we wrote that "while OPEC has been busy desperately jawboning oil higher, US producers have been worried about oil's reacquaintance with gravity. As a result, as the EIA reports, the amount of WTI short positions held be producers and merchants is just shy of a decade high."