- Another very modest day for data: UK PSNB and CBI Industrial Trends survey;
Hungary rate decision and UK & German bond auctions; Trump diatribe on
Trade, FX and Fed rate hikes the main talking point
- Trump comments play conveniently into overcrowded long USD position
- Charts: USD Index: EUR, JPY, GBP, CHF, AUD & CAD CFTC positioning
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** EVENTS PREVIEW **
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On this the 'Holiday of Sacrifice' aka Eid-al-Adha ('celebrating' Abraham's (non-)sacrifice of Isaac), the data and events schedule is once again very meagre. In data terms, the overnight Japan Store Sales are to be digested ahead of the UK PSNB (budget) and CBI Industrial Trends, while the RBA minutes offered no fresh insights into the RBA policy outlook, which had already been elucidated in its quarterly SOMP, while Hungary's MNB is expected to keep policy on hold. Germany sells 2-yr Schatz and the UK offers 10-yr Index-Linked Gilt, with Kohl's and TJX feature on a modest corporate earnings schedule.
However the talking point of the day will inevitably be Trump's diatribe yesterday, which again accused China and the Eurozone of currency manipulation (why not Turkey?? Ed. Ah that one is fine because it was joint effort by Erdogan and Trump, thus appeasing the latter's outsized ego), and yet another pop at the Fed for hiking rates (which would have nothing to do with raising refinancing costs for Trump Inc, would it? Ed.). The timing of those comments was more than apposite given that the long USD position was looking especially overcrowded, above all given that Friday's CFTC report showed that market was short all major currencies vs USD, thus setting up the USD for a correction. The latter move will heighten not necessarily well reasoned speculation that one or both of tomorrow's Fed minutes or Powell's speech at Jackson Hole on Friday, will express concern about USD strength, above all the risks for EM countries and currencies, and the potential for a negative feedback loop in to the US banking system, if refinancing problems were to metastasize. Some thoughts via BNN Bloomberg TV yesterday here:
https://www.bnnbloomberg.ca/video/investors-hope-for-a-deescalation-of-trade-tensions~1466111 . Please also see charts attached. Thus far the implied benefit for commodities of a weaker has not really been in evidence.
from Marc Ostwald