Decidedly On

While risk is decidedly on
Investors have kept being drawn
To dollars, so they
Can still overpay
For stocks, and sometimes, a junk bond

With the trade story still titillating markets, or at least distracting them, a funny thing has happened to the broad picture; the dollar has continued to rally despite the market’s embrasure of risk. Touching on the trade story, we continue to get dueling headlines from both sides as to how things are progressing, but the key is that both sides say things are progressing. The latest is confirmation that any phase one deal will, in fact, include a rollback of some portion of the existing tariffs, and there has been absolutely no discussion regarding the mooted tariffs to be imposed on December 15th. In addition, this morning, EU President Jean-Claude Juncker announced that he was certain there would be no US tariffs on European automobiles going forward, at least no additional ones.

This has been more than sufficient to encourage the equity bulls to continue to drive indices to new highs, at least in the US, but to generally rally around the world. At the same time, this week has seen a massive selloff in haven assets, specifically in US Treasuries and German bunds. For instance, last Friday, the 10-year closed at a yield of 1.712%. This morning it is trading at 1.924%. We have seen a similar, albeit not quite as large, move in the bund market, where the yield has risen from -0.386% to -0.247%. Still a 14bp move, given the low absolute level of yields, is nothing to dismiss.

Other favorite havens are the Japanese yen and the Swiss franc, both having fallen -1.1% this week. Gold? It too is lower by 3.45%, with Silver (-7.3%) and Platinum (-5.8%) faring even worse. And yet, despite this strong risk-on market sentiment, the dollar continues to perform well against all comers. In fact it is firmer against every G10 currency (SEK and NZD have been the worst performers, each down 1.4% this week), and it is firmer vs. most of its EMG brethren, with the South African rand (+1.6%) the major outlier based on the news earlier this week that it would not lose its last investment grade rating and so bond investors would not be forced to liquidate their positions.

But it begs the question, why is the dollar remaining so strong? Typically when risk is acquired, investors are seeking the highest yielding assets they can find, which includes EMG government bonds, junk bonds and equities. Usually, the carry trade makes a big comeback, where those who view FX as an asset class simply sell dollars and earn the points. But this time around, that doesn’t seem to be the case. In fact, one might point to the fact that US yields are the highest G10 yields, and higher than many EMG yields (e.g. South Korea, Singapore, Thailand, Hong Kong, Bulgaria, Slovenia, Croatia, Greece and the Czech Republic) and so on a risk adjusted basis, it appears that investors are far more willing to buy Treasuries and clip that coupon. At any rate, the dollar remains well bid across the board, and barring a sudden negative trade headline, I see no reason for this trend to change in the near term. This is especially true if US data continues to surprise to the high side, like we saw last week with the payroll numbers.

The upshot is hedgers need to beware of the current situation. While the dollar hasn’t had any days where it exploded higher, it continues to grind higher literally every day. Hedgers, at least receivables hedgers, need to be actively managing their risks.

One other thing supporting the dollar has been the change in market tone regarding the Fed’s future activities. It wasn’t that long ago, September, when the futures market was pricing in one more 25bp rate cut for December and one in March of next year. But now, looking out a full year shows there is not even one more rate full cut priced into the market. So the Fed’s dovishness has been effectively dissipated as made evident yesterday by Atlanta Fed President Rafael Bostic’s comments that if he were a voter, he would have dissented from cutting rates last week.

Looking ahead to this morning’s session, the only data we see is Michigan Sentiment (exp 95.5) at 10:00, although at 8:30 Canada releases their employment report. Yesterday’s Initial Claims data was mildly better than expected, just 211K, which indicates that the US jobs situation is not deteriorating in any real way. Perhaps a bit more surprising was the sharp decline in Consumer Credit yesterday, falling to just $9.5 billion, its lowest increase in more than a year, and a data point you can be sure will be highlighted by those pining for a recession. We also hear from three more Fed speakers, Daly, Williams and Governor Lael Brainerd, although both Daly and Brainerd are speaking at a climate change conference, which seems a less likely venue to discuss monetary policy.

Overall, the dollar remains bid and while it may stall as it runs into some profit-taking this afternoon, there is no reason to believe it is going to reverse course anytime soon.

Good luck and good weekend
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Removal of Tariffs

According to some in Beijing
Removal of tariffs’ the thing
That ought to diminish
And fin’lly help finish
The problems the trade war did bring

Another day, another story about progress in the trade talks. Given the complete lack of movement actually seen, a cynic might conclude that both sides have realized just talking about progress is probably as effective as making progress, maybe more so. After all, making progress requires both sides to make actual decisions. Talking about progress just hints that those decisions are being made. And let’s face it; the one thing at which politicians have proven especially inept is making decisions. At any rate, the news early this morning was that part of the elusive phase one deal would be simultaneous rollbacks of the current tariff schedules. If true, that is a great leap forward from simply delaying the imposition of new tariffs. But the key is, if true. At this point, it has become difficult to recognize the difference between actual progress and trial balloons. The one thing going for this story is it was put out by the Chinese, not President Trump. Of course, that could simply be a negotiating tactic trying to force Trump’s hand.

It should be no surprise that the market reacted quite positively to the story, with equity markets in Asia turning around from early losses to close higher on the day. While the Nikkei just clawed back to +0.1%, the Hang Seng finished higher by 0.6% and Australia’s ASX 200 gained 1.0% on the day. Europe has followed the trend with the DAX leading the way, +0.75%, and the rest of the Continent showing gains of between 0.2% (CAC) and 0.6% (IBEX). And of course, US futures turned higher on the news, now showing gains of approximately 0.5% across all three.

So risk is in vogue once again. Treasuries and Bunds have both sold off sharply, with yields in the 10-year space higher by roughly 6bps in both markets. And the dollar, as would be expected, is under further pressure this morning.

A trade truce cannot come soon enough for Germany, which once again released worse than expected data. This morning’s miss was IP, which fell 0.6% in September, and is down 4.3% Y/Y. So while yesterday’s Factory Orders seemed positive, they also seem like the outlier, not the trend. However, given the dollar’s overall performance this morning, it should be no surprise that the euro has edged higher, rising 0.1% as I type. But a step back for some perspective shows that the euro has actually done essentially nothing for the past month, trading within a range barely exceeding 1.0%. It will take more than just the occasional positive or negative economic print to change this story.

And perhaps there is a story brewing that will do just that. Several weeks ago there was a Bloomberg article about inflation in the Eurozone, specifically in Spain, that highlighted the dichotomy between the low rate of measured inflation, which in Spain is running at 1.0%, and the fact that the cost of home ownership and rent is rising at a double digit pace. It turns out that the European CPI measurements have rent as just 6.5% of the index and don’t even include the costs of home ownership. In contrast, those represent more than 30% of the US CPI measurement! And housing costs throughout Europe are rising at a much faster rate, something on the order of 3.0%+ over the past five years. In other words, a CPI basket constructed to include what Europeans actually spend their money on, rather than on some theoretical construct, would almost certainly have resulted in higher CPI readings and potentially would have prevented the poisonous negative interest rate conundrum.

With this in mind, and considering Madame Lagarde’s review of ECB policy, there is a chance, albeit a small one, that the ECB will consider changing the metric, and with a change in the metric, the need for further QE and NIRP will diminish greatly. That would be hugely euro positive! This is something to watch for going forward.

The other big news that just hit the tape was from the Bank of England, where while rates were left unchanged, two members of the MPC voted to cut rates by 25bps in a complete surprise. Apparently, there is growing concern inside the Old Lady that the recent weakening data portends further problems regardless of the election outcome. Of course, regarding the election, the fact that both the Tories and Labour are promising huge new spending plans, the need for low rates is clear. After all, it is much easier to borrow if interest rates are 0.5% than 5.0%! The pound, which had been trading modestly higher before the news quickly fell 0.4% and is now back toward the lower end of its recent trading range. Sometimes I think central banks do things simply to prove that they matter to the markets, but in this case, given the ongoing economic malaise in the UK, it does seem likely that a rate cut is in the offing.

As to the rest of the market, some of the biggest gainers this morning are directly related to the US-China trade story, with the offshore renminbi trading higher by 0.6% and back to its strongest level in three months’ time. In addition we have seen NOK rally 0.85%, which seems to be on the back of stronger oil and the fact that easing trade tensions are likely to further support the price of crude. Combining this with the fact that the krone has been mysteriously weak given its fundamentals, relatively strong economic growth and positive interest rates, it looks like a lot of short positions are getting squeezed out.

Finally, I would be remiss if I didn’t mention the Brazilian real, which yesterday tumbled 2.0% after a widely anticipated auction of off-shore oil drilling rights turned into a flop, raising just $17 billion, far less than the $26 billion expected. In fact, two of the three parcels had no bids, and no oil majors were involved. While they will certainly put them up for auction again, the market’s disappointment was clear. It should also be no surprise that the real is rebounding a bit on the open, currently higher by 0.5%.

On the data front this morning the only thing of note is Initial Claims (exp 215K) and there are two more Fed speakers on the agenda, Kaplan and Bostic. However, the plethora of speakers we have heard this week have all remained on message, things are good and policy is appropriate, but if needed we will do more.

And that’s really it. I expect we will continue to hear more about the trade talks and perhaps get a bit more clarity on the proposed tariff rollbacks. But it will take a lot to turn the risk story around, and as such, I expect the dollar will continue to be under pressure as the session progresses.

Good luck
Adf

 

Not Been Tested

From Germany data suggested
The slowdown in growth’s been arrested
If true, that’s good news
But still there are views
The hypothesis, null’s, not been tested

There seems to be an inordinate amount of positivity surrounding a single data point this morning, German Factory Orders, which printed at +1.3% in September versus expectations of a 0.1% rise. And while this is certainly good news, two things to keep in mind are that the Y/Y rate of growth is -5.4%, (that’s right a significant decline) and that the other German data out this morning showed that October PMI’s printed at 48.9 on a composite level. In other words, all signs still point to a German recession on the basis of negative GDP growth in both Q3 and Q4. This will be confirmed next week when the official data is released. And remember, a negative print will be the third subzero outcome there in the past five quarters. My point is that Germany continues to drag on the Eurozone as a whole, and until the global trade situation improves, it is likely to continue to do so.

Yet, despite a spate of positive sounding articles about the nadir in Eurozone growth having been reached, the markets have taken a much less enthusiastic approach to things this morning. Yes, the euro is higher as I type, alas, by just 0.1%, and that is after a 0.6% decline yesterday. In other words, it is difficult to describe the FX market as jumping on board this narrative. What about equities you may ask? Well, the DAX is up by 0.15%, but again, this doesn’t seem to warrant much hype. In fact, looking at the Eurozone as a whole, we see a mixture of small gains (Germany, France, and Italy) and losses (Spain, Portugal and Austria) and a net of not much movement. In other words, it appears the press is far more excited than the investment community.

Perhaps a more interesting story has been the indication that Germany may be ready to allow more Eurozone banking integration by finally embracing allowing joint European deposit insurance. Recall that northern European nations, those that run surpluses, are loathe to bail out Italian and Spanish (and Greek and Cypriot, etc.) banks when they eventually go bust. However, it seems that Chancellor Merkel, whose power has been slipping away by the day, has decided that in order to maintain her grip she needed to do something to encourage her Social Democrat partners, and this is the latest wheeze. That said, if Germany and the rest of the north do sign off on this, it will be an unmitigated positive for the continent and, likely, for the euro. As is often the case with issues like this, there is a long way to go before an agreement is reached, but this is the first positive movement on the subject since the euro’s creation twenty years ago. In fact, success here is likely to permanently improve the euro’s value going forward.

Elsewhere in markets things have been pretty quiet. The rest of the G10 has seen modest movement with only Sweden’s krona rallying smartly, +0.45%, after the Minutes of the latest Riksbank meeting confirmed that they are working feverishly to figure out a way to exit the negative interest rate trap. At this point the market is pricing in a better than 60% probability of a rate hike at the December meeting, taking the base rate back to 0.00%. But away from that, the G10 is completely uninteresting.

In the EMG space, India’s rupee was the worst performer, falling 0.45% after weaker than expected PMI data (Services 49.2, Composite 49.6) indicated that the growth impulse in India remains absent and that further policy ease is likely from the RBI. Elsewhere, the Bank of Thailand, which has been trying to slow the baht’s steady appreciation, +8.5% in the past twelve months, cut its base rate by 25bps and relaxed some currency controls in an effort to release some pressure on the currency. However, given the economy’s ongoing relative strength, this seems unlikely to have a long term impact. In the end, the baht has declined 0.4% overnight, but hardly seems like it is getting ready to tumble.

And in truth, that’s really all that has been going on overnight. Yesterday we heard from a few more Fed speakers, Barkin, Kaplan and Kashkari, and the message remains consistent; i.e. the US economy is strong and monetary policy is appropriate, although the balance of risks still seem tilted toward the downside. In the end, Chairman Powell and his minions have done an excellent job of getting the markets to accept that there will be no further rate movement for the foreseeable future barring some catastrophic data.

Speaking of data, yesterday showed the Trade Balance shrunk to -$52.5B as imports fell sharply, and that the services sector in the US remains robust with ISM Non-manufacturing rising to 54.7. This morning we await Nonfarm Productivity (exp 0.9%) and Unit Labor Costs (2.2%), neither of which is likely to move the needle, and we hear from three more Fed speakers; Evans, Williams and Harker, none of whom are likely to deviate from the current mantra.

Overall, it has been a mixed session so far with no real direction and at this point, there is nothing obvious that is likely to change that mood. Look for a quiet one as the market seeks out its next big thing, maybe confirmation that the trade deal is going to be signed, but until then, hedgers should take advantage of the quiet market to execute.

Good luck
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Not Been Sated

As markets, a trade deal, awaited
Risk appetite has not been sated
The headlines insist
That barring a twist
Phase one will soon be activated

Hooray!! Phase One of the trade deal is almost complete and apparently President’s Trump and Xi are planning a meeting to sign this historic document. At least that’s today’s story to pump up global equity markets. Actually, I assume that will be tomorrow’s as well, just as it has been the story for the past two weeks. But whether or not this comes to pass, the current view is quite positive and risk assets are back in demand. Equity markets are generally higher worldwide, with Asia showing significant strength (Nikkei +1.75%, Shanghai +0.55%, KOSPI +0.6%), although Europe is having a more muted session (DAX 0.0%, CAC +0.15%, FTSE +0.25%). Meanwhile, US futures are currently pointing to a 0.25% rise at the open.

Other evidence of increased risk appetite has been the decline in both Treasury and Bund prices, with the former seeing yields rise a further 4bps this morning and the latter 2bps. A quick look at the recent price history of the 10-year shows that one week ago they were trading at 1.84% and in the interim they fell to 1.69% before rebounding to this morning’s 1.82% level. A slightly longer term view shows a picture of a market that looks like it bottomed in early September, when the 10-year traded to 1.457% amidst escalating fears of everything, and is now slowly trying to head a bit higher. If the Fed has truly stopped cutting rates, and if they maintain their current ‘not-QE’ version of QE, purchasing $60 billion/month of T-bills, I expect we are looking at a much steeper yield curve and the chance for the dollar to resume its rally. (Historically, the dollar performs better in a steepening yield curve environment.)

However, that dollar movement is much more of a long-term trend than a day to day prescription, and in fact, this morning’s risk-on movement has seen the dollar soften further, except against the other two haven currencies, the Swiss franc (-0.35%) and the Japanese yen (-0.25%). The most notable mover has arguably been the Chinese reniminbi, which has rallied 0.5% and is back below 7.00 for the first time since early August. You may recall that time as a severe escalation of the trade conflict and fears were rampant that the PBOC was going to allow the renminbi to weaken substantially to offset tariffs. Of course, that never happened, and ostensibly, part of the trade deal is a Chinese promise to prevent significant currency weakness. (You know, manipulation of a currency is fine when it works in your favor, just not when it works against you.) At any rate, CNY has been strengthening steadily for the past month and has recouped 2.3% in that time. Quite frankly, despite the fact that the slowdown in the Chinese economy would argue for a weaker currency, I expect that we will continue to see modest strength in the renminbi; at least until the trade deal is signed.

In the G10 space, today’s big winner is the Aussie dollar, which is higher by 0.45% this morning and has rallied 3.65% since its recent trough in the beginning of October. Given the country’s close ties to China, it should be no surprise that positive news regarding China helps the AUD. In addition, last night the RBA met and left rates on hold, which while widely expected was a bit of a relief given they cut rates in the past three meetings. While they maintained their easing bias, the market is gaining optimism that the global trade situation will improve shortly and that Aussie will benefit. While the move in Aussie did help drag kiwi higher (+0.25%), the rest of the space is entirely uninteresting.

In the EMG bloc, South Africa’s rand is the leader, gaining 0.65% as the market continues to absorb the fact that Moody’s left them with an investment grade rating. While things are still precarious there, perhaps a relaxation of trade tensions globally will allow the country to stabilize their finances and the currency to stabilize as well. On the flip side, Chile’s peso has opened under pressure, falling 0.65% after Retail Sales there were released at a much worse than expected -0.9% (expected +1.8%). Clearly the ongoing protests are having an impact and as in most places around the world, there doesn’t appear to be any end in sight.

On the calendar this morning we see the Trade balance (exp -$52.4B) as well as the JOLTS Jobs report (7.063M) and finally, at 10:00 ISM Non-Manufacturing (51.0). You may recall the ISM data on Friday was soft at 48.3, and this morning we saw UK Services PMI print at a better than expected 50.0. The best explanation I can give is that we are at an inflection point in the global economy, where what has clearly been a slowing trend may finally be responding to the massive stimulus efforts by the world’s central banks. (FYI, the PBOC reduced its 1-year lending rate by 5bps last night, the first cut since 2016). But inflection points are probably more accurately referred to as inflection curves, since things are not going to turn around quickly. I anticipate we are going to see mixed data for some time into the future. This will allow both bulls and bears to use data to make their respective cases.

In the end, unless today’s data is horrendous, I expect that the risk-on scenario will continue to drive markets and the dollar will likely soften a bit further before it is all over.

Good luck
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Employment Unstressed

The jobs report Friday impressed
With growth in employment unstressed
As well, Friday’s quotes
From Fed speakers’ throats
Explained how their policy’s best

As is evidenced by the fact that the stock market in the US continues to trade to new all-time highs on a daily basis, the Fed is doing an incredible job…just ask them! Friday we learned that both the economy and monetary policy are “in a good place” according to vice-chairman Richard Clarida. Governor Randall Quarles used the same terms as did NY Fed President John Williams, who added, “…the economy is strong,” as well to the mix. At least they are all singing from the same hymnal. So, following a much better than expected payrolls report Friday morning, with the headline number not only beating expectations handily (128K vs. 85K), but the previous two months’ data were revised higher by a further 95K, the Fed is patting themselves on the back.

Adding to the overall joy in markets is the apparent thaw in the US-China trade talks, where it appears that a small, ‘phase one’ deal is pretty much agreed with both sides simply trying to find a place to sign it now that the APEC conference in Chile has been canceled due to local violent protests. And of course, the other big uncertainty, Brexit, has also, apparently, become less risky as the amended deal agreed by Boris and the EU has put to rest many fears of a hard Brexit. While the UK is currently engaged in a general election campaign cum second Brexit referendum, the smart money says that Boris will win the day, Parliament will sign the deal and the next steps toward Brexit will be taken with no mishaps.

Who knows, maybe all of these views are absolutely correct and global growth is set to rebound substantially driving stocks to ever more new highs and allowing central banks around the world to finally unwind some of their ‘emergency’ measures like ZIRP, NIRP and QE. Or…

It is outside the realm of this morning note to opine on many of these outcomes, but history tells us that everything working out smoothly is an unlikely outcome.

Turning to the market this morning shows us a dollar that is marginally firmer despite a pretty broad risk-on feeling. As mentioned above, equity markets are all strong, with Asia closing higher and almost every European market higher by more than 1.0% as I type. US futures are pointing in the same direction following on Friday’s strong performance. Treasury yields are also higher as there is little need for safety when stock prices are flying, and we are seeing gains in oil and industrial metals as well. All of which begs the question why the dollar is firm. But aside from the South African rand, which has jumped 1.5% this morning after Moody’s retained its investment grade rating on country bonds, although it did cut its outlook to negative, there are more currencies lower vs. the dollar than higher.

One possible explanation is the Fed’s claim that they have ended their mid-cycle adjustment and that US rates are destined to remain higher than those elsewhere in the world going forward. It is also possible that continued weak data elsewhere is simply undermining other currencies. For example, Eurozone final PMI’s were released this morning and continue to show just how weak the manufacturing sector in Europe remains. Given the fact that the ECB is basically out of bullets, and the fact that the Germans and Dutch remain intransigent with respect to the idea of fiscal stimulus, a weak currency is the only feature that is likely to help the ECB achieve its inflation target. However, as we have seen over the past many years, the pass-through of a weak currency to higher inflation is not a straightforward process. While I do think the dollar will continue its slow climb higher, I see no reason for the pace of the move to have any substantive impact on Eurozone CPI.

Meanwhile, the G10 currency under the most pressure today is the pound, which has fallen 0.2%, and while still above 1.29, seems to have lost all its momentum higher as the market tries to assess what will happen at the election six weeks hence. While I continue to believe that Boris will win and that the negotiated deal will be implemented, I have actually taken profits on my personal position given the lack of near-term momentum.

Looking ahead to this week, the data picture is far less exciting than last, although we do have the BOE meeting on Thursday to spice things up, as well as a raft of Fed speakers:

Today Durable Goods -1.1%
  -ex transport -0.3%
  Factory Orders -0.4%
Tuesday Trade Balance -$52.5B
  JOLTS Job Openings 7.088M
  ISM Non-Manufacturing 53.4
Wednesday Nonfarm Productivity 0.9%
  Unit Labor Costs 2.2%
Thursday Initial Claims 215K
  Consumer Credit $15.05B
Friday Michigan Sentiment 95.5

Source: Bloomberg

As all of this data is second tier, it is hard to get too excited over any of it, however, if it demonstrates a pattern, either of weakness or strength, by the end of the week we could see some impact. Meanwhile, there are nine Fed speakers slated this week, but given the consistency of message we heard last week, it seems hard to believe that the message will change at all, whether from the hawks or doves. At this point, I think both sides are happy.

Putting it all together, I would argue that the dollar is more likely to suffer slightly this week rather than strengthen as risk appetite gains. But it is hard to get too excited in either direction for now.

Good luck
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Frustrations

The global economy’s state
Continues to see growth abate
As trade between nations
Has met with frustrations
While central banks try to reflate

Markets have been extremely quiet overnight as investors and traders await the release of the US payroll report at 8:30 this morning. Expectations, according to Bloomberg, are as follows:

Nonfarm Payrolls 85K
Private Payrolls 80K
Manufacturing Payrolls -55K
Unemployment Rate 3.6%
Average Hourly Earnings 0.3% (3.0% Y/Y)
Average Weekly Hours 34.4
Participation Rate 63.1%
ISM Manufacturing 48.9
ISM Prices Paid 50.0
Construction Spending 0.2%

While the GM strike has ended, it was in full swing during the survey period and explains the expected significant decline in manufacturing jobs. One other thing having a negative impact is the reduction of census workers. Given these idiosyncratic features, we must look beyond the headline number to ascertain if the employment situation remains robust, or is starting to roll over. Consider that most analysts expect that the GM strike was worth about 50K jobs and the census situation another 20K. If we add those back to the median expectation of 85K, we wind up at essentially the 3-month average of 157K. However, it is important to remember that the 1-year average is higher, 179K, which indicates that there has been an ongoing decline in new hiring for a little while now. Some of this is certainly due to the fact that, as we have heard repeatedly, finding good employees is so difficult, especially in the service industries. But certainly, the trade situation and the fact that the US economy is growing more slowly is weighing on the data as well.

The reason this is important, of course, is that the NFP report is one of the key metrics for the Fed as they try to manage monetary policy in an uncertain world. Unfortunately for them, the Unemployment Rate is backward looking data, a picture of what has been, not what is likely to be. In truth, they should be far more focused on the ISM report at 10:00. At least that has some forecasting ability.

A quick recap of this week’s central bank activity shows us that there were 3 key meetings; the Bank of Canada, who left policy unchanged but turned dovish in their statement; the FOMC, which cut rates and declared they were done cutting rates unless absolutely necessary; and the BOJ, which left policy unchanged but hinted that they, too, could be induced to easing further if things don’t pick up soon. (I can pretty much promise the BOJ that things are not going to pick up soon, certainly not inflation.) Perhaps the most interesting market response to this central bank activity was the quietest bond market rally in history, where 10-year Treasury yields are, this morning, 15bps lower than Monday’s opening. Only Canada’s 10-year outperformed that move with a 20bp decline (bond rally). Given the rate activity, it ought not be surprising that equity markets retain their bid overall. This morning, ahead of the NFP report, US futures are pointing higher and we have seen gains in Europe (FTSE, CAC, and DAX +0.33%) as well as most of Asia (Hang Seng +0.7%, Shanghai +1.0%) although the Nikkei did fall 0.3%.

And what about the dollar? Well, in truth it is doing very little this morning, with most currencies trading within a 0.20% band around yesterday’s closing levels. The one big exception has been the Norwegian krone which has rallied sharply, 0.65%, after a much better than expected Manufacturing PMI release. Interestingly, this movement has dragged the Swedish krona higher despite the fact that Sweden’s PMI disappointed, falling to 46.0. However, beyond that, there is nothing of excitement to discuss.

We hear from five Fed speakers today, starting with Vice-chairman Richard Clarida, who will be interviewed on Bloomberg TV at 9:30 this morning before speaking at 1:00 to the Japan Society. But we also hear from Dallas Fed President Richard Kaplan, Governor Randall Quarles, SF Fed President Mary Daly and NY’s John Williams before the day is out. It seems to me that the market was pretty happy with Chairman Powell’s comments and press conference on Wednesday so I expect we will see a lot of reaffirmation of the Chairman’s thoughts.

So, all in all, it is shaping up to be a pretty dull day…unless Payrolls are a big surprise. I have a funny feeling that we are going to see a much weaker number than expected based on the extremely weak Chicago PMI data and its employment sub index, as well as the fact that the Initial Claims data seems to be edging higher these days. Of course, the equity market will applaud as they will start to price in more rate cuts, but I think the dollar will suffer accordingly.

Good luck and good weekend
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