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Good Morning: The Long & the Short of it and The Bigger Picture - 6 August 2019 - ADM ISI
- US/China trade war still front and centre as US labels China 'currency
manipulator'; digesting UK BRC Sales, record OZ Trade Balance, Japan
Household Spending & Wages, German Orders; awaiting US JOLTS Job
openings and Fed speaks; UK 5-yr and US 3-yr sale
- UK: BRC sales imply risk of sharp setback in official data after
surprise June jump
- German Factory Orders: welcome bounce unlikely to last
- China FX: obsession with USD/CNY misguided
- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-6-august-2019/
..........................................................................
********************
** EVENTS PREVIEW **
********************
Once again, the question is whether anything on today's scheduled data and events agenda can offer anything other than a moment's distraction from the US / China trade war? Particularly given the US' random (in timing terms) designation of China as a 'currency manipulator', see comment below. The bulk of the key data has already been published - NZ Unemployment & Wages, UK BRC Retail Sales, Japan Labour Cash Earnings & Household Spending, Australia Trade and German Orders, with US JOLTS Job Openings the only item ahead. As expected the RBA kept its key rate at 1.0%, but continued to signal scope for further easing; of rather more interest will be today's Fed speak from the dovish Bullard and Harker. Government bond auctions take the shape of £3.0 Bln of 5-yr UK Gilts, and $38 Bln of US 3-yr T-Note, while US earnings highlights are likely to include Regeneron and Walt Disney.
** Overnight data **
- For a second month the BRC has described its UK Retail Sales as the worst on record, in this case for July (+0.1% y/y vs. expected +0.5%, per se a reminder that last month's 'strong' official data were nothing of the kind. It certainly raises the possibility of a sharp reversal in the official data. As for German Orders, the stronger than expected 2.5% m/m rebound was a lot better than the 0.5% m/m forecast, but it would be unwise to call a turn in the fortunes of the German manufacturing sector, above all given a universally negative set of sector surveys and other anecdotal evidence. To be sure a chill headwind is blowing from China, but successive Merkel govt' domestic economic policies and the stupid 'Schwarze Null' (balanced budget policy) have to take most of the blame .. as such most of this has been 'Hergestellt in #Deutschland. As a reminder, this from the December edition of the Ghost In The Machine https://content.yudu.com/web/400wi/0A400wk/Nov-Dec2018/html/index.html?page=4&origin=reader
** China and the CNY **
There is no doubting that the stakes have been raised sharply in the US / China trade war, but the focus on USD/CNY moving above 7.00 was a very poor bit of analysis. these are the key aspects:
a) Trump is clearly trying to strong arm China back to the negotiating table, but his language ensures that he only exacerbates the situation - e.g. Trump says ‘US needs a better trade deal with China, not just an even deal’ – so it really does look like both sides are digging in for a protracted fight. As an aside, central banks can do precisely nothing about this, other than ‘react’ to the fall-out, and even then (regardless of ltd policy ‘ammunition) they can only apply a soothing policy salve… fiscal policy is the only antidote outside of the ‘nuclear’ military option
b) China asks state buyers to halt US farm imports, China says US accusations that China has not purchased US agriculture products are false
c) China says US stance on trade talks will cause problems with North Korea
BUT to say China is devaluing CNY is actually not true. as China/PBOC targets CFETS Index not USD/CNY, and as the chart attached actually underlines, the current CNY move is about USD strength above all against EUR and many Asian currencies, for example KRW & AUD, and other EM FX. The fact that today's fixing was back below 7.00 serves as a timely reminder of this.
========================== ** THE DAY AHEAD ** ===========================
| Inbox | x |
| 09:04 (6 minutes ago) |
|
- US/China trade war still front and centre as US labels China 'currency
manipulator'; digesting UK BRC Sales, record OZ Trade Balance, Japan
Household Spending & Wages, German Orders; awaiting US JOLTS Job
openings and Fed speaks; UK 5-yr and US 3-yr sale
- UK: BRC sales imply risk of sharp setback in official data after
surprise June jump
- German Factory Orders: welcome bounce unlikely to last
- China FX: obsession with USD/CNY misguided
- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-6-august-2019/
..........................................................................
********************
** EVENTS PREVIEW **
********************
Once again, the question is whether anything on today's scheduled data and events agenda can offer anything other than a moment's distraction from the US / China trade war? Particularly given the US' random (in timing terms) designation of China as a 'currency manipulator', see comment below. The bulk of the key data has already been published - NZ Unemployment & Wages, UK BRC Retail Sales, Japan Labour Cash Earnings & Household Spending, Australia Trade and German Orders, with US JOLTS Job Openings the only item ahead. As expected the RBA kept its key rate at 1.0%, but continued to signal scope for further easing; of rather more interest will be today's Fed speak from the dovish Bullard and Harker. Government bond auctions take the shape of £3.0 Bln of 5-yr UK Gilts, and $38 Bln of US 3-yr T-Note, while US earnings highlights are likely to include Regeneron and Walt Disney.
** Overnight data **
- For a second month the BRC has described its UK Retail Sales as the worst on record, in this case for July (+0.1% y/y vs. expected +0.5%, per se a reminder that last month's 'strong' official data were nothing of the kind. It certainly raises the possibility of a sharp reversal in the official data. As for German Orders, the stronger than expected 2.5% m/m rebound was a lot better than the 0.5% m/m forecast, but it would be unwise to call a turn in the fortunes of the German manufacturing sector, above all given a universally negative set of sector surveys and other anecdotal evidence. To be sure a chill headwind is blowing from China, but successive Merkel govt' domestic economic policies and the stupid 'Schwarze Null' (balanced budget policy) have to take most of the blame .. as such most of this has been 'Hergestellt in #Deutschland. As a reminder, this from the December edition of the Ghost In The Machine https://content.yudu.com/web/400wi/0A400wk/Nov-Dec2018/html/index.html?page=4&origin=reader
** China and the CNY **
There is no doubting that the stakes have been raised sharply in the US / China trade war, but the focus on USD/CNY moving above 7.00 was a very poor bit of analysis. these are the key aspects:
a) Trump is clearly trying to strong arm China back to the negotiating table, but his language ensures that he only exacerbates the situation - e.g. Trump says ‘US needs a better trade deal with China, not just an even deal’ – so it really does look like both sides are digging in for a protracted fight. As an aside, central banks can do precisely nothing about this, other than ‘react’ to the fall-out, and even then (regardless of ltd policy ‘ammunition) they can only apply a soothing policy salve… fiscal policy is the only antidote outside of the ‘nuclear’ military option
b) China asks state buyers to halt US farm imports, China says US accusations that China has not purchased US agriculture products are false
c) China says US stance on trade talks will cause problems with North Korea
BUT to say China is devaluing CNY is actually not true. as China/PBOC targets CFETS Index not USD/CNY, and as the chart attached actually underlines, the current CNY move is about USD strength above all against EUR and many Asian currencies, for example KRW & AUD, and other EM FX. The fact that today's fixing was back below 7.00 serves as a timely reminder of this.
========================== ** THE DAY AHEAD ** ===========================
Dentalfloss
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our trendline became support
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Out
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supp held
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lined up
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Pop
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dax in rez
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