Markets are treading water with global PMIs mixed (China btr, Europe worse) and no major news on Greece. Dovish Bank of England minutes generating GBP selling and Japanese yen continues to weaken against most currencies. The DXY index is up .11 at 79.21 with a range of 78.99 to 79.34. The 1yr OIS are: U.S. at .14%, UK at .49%, EU 0.37%, JP .07%, CAD at 0.99%, Aus 3.98%, and NZ is 2.59%. The 1yr spread between US/UK is -35; EU/US is -23; US/JP +0.07; US/CA -85; US/AU -385 and US/NZ -246. AUD/NZD spread is 139. 3mth Euro Libor-OIS is flat at 67.3. 5yr European CDS prices are flat: Portugal 1102; Ireland 575; Italy 382; Spain 365; Hungary 532; Belgium 242, France 177. Two year spreads from German are higher: Portugal 1216, Ireland 369, Spain 240 and Italy 258. 10yr yields are higher: Italy 5.49% (355bps to Germany) and Spain 5.08% (314bps).

Global equities are mixed-to-negative again with the S&P future flat at 1358.50. Philly semiconductor index (SOX) closed at 426, -5. Like yesterday, commodities are mixed with grains soft, but energy is soft as well today: gold is at 1752.50, crude is $106.00, gasoline is $3.05, nat. gas is $2.61 and home heating oil is at $3.24. The CRB is at 321.5, wheat is at 6.35 and corn is at 6.32. US rates are higher with the US 10yr note yield at 2.03% and the 2yr note at 0.30% with the spread to 173. US/Ger. 2yr spread is at -3.0. US Risk indicators are mixed: TED spread is at 41.1; the VIX 18.2, CVIX closed at 10.2 and the US 2yr swap spread is at 29.12.

CFTC shocker: Again, they delayed a vote on swap dealer designation.

Why the Republican debates are like votes in Greece

So far, the Republican primary has contained these candidate themes:

• The rise and fall of Newt Gingrich.
• The rise, the fall, the rise again of Rick Santorum.
• The persistent meandering of Mitt Romney.
• The inconsistent voter appearing to make a decision in the booth.

In January, I wrote that I thought this primary would go all the way to the convention due to voter uncertainty and was my major call for US politics. With each shift in sentiment by the Republican base towards the current field, this call looks more and more likely with even the mainstream media (CNN and Fox) picking up on this possibility. These Republican debates are like votes in Greece: every one appears to be crucial, but each one creates more uncertainty.

Now, the question is what will this mean for Republican chances in the fall election?

The Negatives

1. Stating the obvious, the longer it takes to get a nominee, the less Republican focus will be on President Obama.
2. There will be less time for the Republican candidate to focus voter attention on his/her policies and to contrast those with President Obama.
3. There will be less time to establish an identity away from the Republican base (conservative on social and fiscal issues) towards gaining the independent voter.
4. There will be less time to raise funding to spend on ads.
5. If a new candidate (Rubio, Bush, Daniels) is chosen at the convention, then the Republican voters for other candidates may feel disenfranchised and may not turn out to vote in the general election.

The Positives

1. A combination candidacy of Santorum/Romney or Santorum/Gingrich or other pairings may be embraced by both the base and independents.
2. The longer the Republican primary goes on, the longer time the economy has to peak and then start to decline.
3. The longer the Republican primary goes on, the longer the time gasoline prices can rise and become an issue in the general campaign.
4. The longer the Republican primary goes on, the longer the time for an exogenous event to occur like a flare up in the Middle East that would test President Obama’s ability to lead.
5. If the economy stalls, then the fiscal deficit will deteriorate and pull forward a debt ceiling hike from a current target of after the election to before the election, making it headline news that shows an inability to deal with the issue by President Obama.

Also in January, I said I thought Romney would win the primary. I still believe this is the most likely outcome, but having it go all the way to the convention reduces the likelihood of his winning the general election. Romney has missed many opportunities to turn his negatives into positives such as saying Romneycare was a mistake or that his tax bill is a great example of why the tax code needs to be changed and why corporate taxes lowered.

All of this translates into an opportunity for President Obama to stay out of the mess while allowing him to remain presidential by doing things like getting a payroll tax cut done and offering his version of a corporate tax cut. At this point, he has the strongest position to win in the fall…..but that is eternity in politics.

CNBC Squawk on the Street Trade

Today at 10:25AM ET, I’ll be appearing on CNBC’s Squawk on the Street discussing the EUR and Friday’s UK GDP data.
Here are the major points:

• EUR/USD is stalling and looks to be developing a new short term range between 1.3025-1.3325.
• The near record EUR CFTC position shorts as well as EUR/JPY short covering is currently containing any downside for EUR/USD.
• EUR/GBP is also rallying today as the Bank of England minutes showed 2 members wanting more QE and the pair appears to have broken out of its 0.8250-0.8425 range.
• This sets up an opportunity to fade the EUR/GBP rally on Friday when the UK releases its GDP report with the market expecting -0.2% with sentiment negative after the BOE minutes.

I want to attempt to fade a rally in EUR/GBP as I believe the opportunity will present if the GDP is better than expected. This would wipe out all the momentum on further easing by the BOE.

If GDP>0, then sell EUR/GBP

Entry0.8510

S/L 0.8535

T/P 0.8410

Andy