Tag Archives: #frenchelections

Some Mystique

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The Chairman is ready to speak
To Congress, and there’s some mystique
Will he indicate
The Fed’s favorite rate
Is likely soon in for a tweak?
 
Or will Chairman Powell explain
Inflation continues to drain
The ‘conomy’s health
And with it the wealth
He’s garnered through much of his reign

 

With recent elections behind us, market participants now turn their attention to Chairman Powell and his testimony today before the Senate Banking Committee and tomorrow before the House Financial Services Committee.  Of course, all eyes and ears will be searching for clues that the recent spate of softer than expected economic data has been sufficient to allow him, and his FOMC brethren, to gain the necessary confidence to cut the Fed funds rate.  Recall, to a (wo)man, every speaker has indicated that things were looking pretty good, but that they needed to see several months of this type of economic data before acting.

Lately, the punditry has become far more vocal about the possibility of a recession, with a number of well-known analysts claiming we are already in that state.  They point to the employment situation, notably the discrepancies between the establishment and household surveys.  Their argument revolves around the idea that the number of people working continues to decline despite the claim that there are more jobs being created.  It is true that job growth has been driven by an increase in part-time work, so this is not impossible.  And it is also true that when part-time work is ascendant, it typically signifies a weaker economy.

These same pundits point to the discrepancy between GDP and GDI (Gross Domestic Income) which ostensibly measure the same thing from different sides of the ledger.  Over the past year and change, as can be seen from the below chart, GDP has been growing at a faster rate than GDI with the difference between the two now at 2.3% of GDP.  

Source: St Louis Fed FRED data base

Putting that in context, the most recent Atlanta Fed GDPNow forecast for Q2 2024 has fallen to just 1.5% annual growth.  The implication is that GDP growth may well be negative.  Over time, these two measures get revised so that they are the same, but this particular discrepancy is both wider than normal and has been ongoing for a relatively long time in the history of the two.  Something is amiss and many pundits believe that the result will be GDP will be revised lower to match GDI rather than the other way around.  In other words, GDP growth is slower than reported and the chances we are currently in a recession are greater.

Of course, the other side of the story is also widely believed by other pundits who point to the consumer, which as evidenced by yesterday’s Consumer Credit data, continues to spend aggressively.  They also rely on the continued growth in the NFP data as a key indicator of economic activity and remain confident that the economy is simply in a slow patch during a continued growth period.

Now, it seems to me that the Fed are likely rooting for a bit more aggressive economic slowdown as that would give their models the signal that inflation is well and truly under control.  Perhaps Chairman Powell will give us those hints this morning, although he will certainly not explain that outright to the Senate.  (The one certainty from this morning’s testimony is that certain Senators from the Northeast are sure to rail at the current level of interest rates and berate Mr Powell for not having cut them already.)  In any event, that is really all we have on the calendar today, and likely the biggest news until Thursday’s CPI release.  After all, tomorrow’s House testimony will be identical by Powell, although we can look forward to even stupider questions from the likes of Representatives Maxine Waters and Ayanna Pressley.

And so, to markets.  Yesterday’s lackluster US session has seen a mix of results elsewhere in the world.  In Asia, the Nikkei (+2.0%) rallied sharply to new all-time highs, on the back of tech share enthusiasm and the AI story as well as the still weak JPY.  While the BOJ is slated to meet later this month, there is no clarity as to whether they will tighten policy given the still mixed data from Japan.  As well, Chinese shares (+1.1%) and Australian shares (+0.9%) both had solid performances although the Hang Seng was unable to gain any traction and was unchanged on the day.

In Europe, all is red this morning, led by the CAC (-0.8%) as it seems investors are beginning to understand that the electoral outcomes may not have been net beneficial for both the French and UK economies.  While the two nations have different issues (no leadership in France, a socialist one in the UK) I fear that both nations will have manifest economic problems going forward when it becomes clear that increased spending is unaffordable.  But for now, absent any additional data, investors are lightening up on exposures there.  US futures, though, are edging higher at this hour (8:00).

In the bond markets, yields are starting to turn higher again despite some lackluster economic data.  Treasury yields are higher by 2bps and across the UK and Europe, yields are higher by 3bps to 4bps universally.  This means there have been no changes to the spreads of OATs to Bunds, but it may not be that welcome overall.

In the commodity markets, oil (-0.4%) remains under pressure as concerns over US production being reduced by Hurricane Beryl have diminished now that wind speeds have fallen after landfall.  It did not impact the offshore drilling significantly.  As to metals markets, after a rough day yesterday, this morning both precious and industrial metals are little changed overall, arguably awaiting the next key catalyst, whether that is from Powell or CPI or something else.

Finally, the dollar is a bit firmer this morning across the board.  Both the euro (-0.15%) and the pound (-0.15%) have performed surprisingly well lately given the political backdrop.  Perhaps that is a hint that politics is not necessarily a key short-term driver of FX rates.  However, today, along with the rest of their G10 brethren, they are under pressure.  In the EMG bloc, ZAR (-0.6%) continues to demonstrate the greatest amount of volatility amongst the most traded currencies and is under pressure alongside metals prices.  As well, both HUF (-0.3%) and CZK (-0.4%) are showing their high beta response to the euro’s weakness.  However, today appears very much to be a dollar day, not a currency day.

The NFIB Survey was released at a better than expected 91.5, although that level remains in the lowest decile of readings in the history of the series.  In addition to Powell, we hear from Vice-chair for supervision Barr as well as Governor Bowman during the day, but really, it is all about Powell.  Personally, I doubt he tells us anything new and do not expect him to hint strongly at a rate cut coming soon.  However, if he does, look for the dollar to decline sharply.

Good luck

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Not Yet Sealed the Deal

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Said Powell, the progress is real
And though there are many with zeal
To quickly cut rates
Our dual mandates
Explain we’ve not yet sealed the deal
 
Meanwhile, as the holiday nears
Investors, ‘bout some stuff, have fears
The UK will vote
And Labour will gloat
Then Payroll, on Friday appears
 
At this stage, the Payroll report
Is forecast to, last month, fall short
But if the U Rate
Once more does inflate
The doves, for rate cuts, will exhort

The Fed whisperer himself, the WSJ’s Nick Timiraos, did an excellent job covering the Chairman’s speech in Sintra, Portugal at a big ECB confab yesterday, so let me give it to you straight from him.  [emphasis added]

“We’ve made a lot of progress,” Powell said Tuesday on a panel with other central bankers at a conference in Portugal. After serious shortages two years ago that sent wages up sharply, the labor market has “seen a pretty substantial move toward better balance,” he said.

The Fed leader’s remarks underscored a sense of cautious optimism that had faded after disappointing inflation readings in April. He alternately said the economy had made “significant progress,” “real progress” and “quite a bit of progress” toward cooler inflation with stable growth.

Apparently, progress toward their stated goals has been substantial.  And while that is fantastic, he also mentioned, later in his speech, that they were now also looking far more carefully at the labor market, which is starting to slow down.  “You can see the labor market is cooling off, appropriately so, and we’re watching it very carefully.”  You may recall that SF Fed president Daly also focused on the labor market late last week and I am confident that it is on every FOMC members’ radar. 

Of course, that’s why Friday’s Payrolls report is going to be so important.  Arguably, while the NFP data gets all the press, the Unemployment Rate is really going to matter this time as it ticked up to 4.0% last month.  A rise from here will start to call into question just how strong the labor situation remains.  For instance, while yesterday’s JOLTS data showed a modest rise to just over 8M job openings, that is after the previous month’s data was revised down substantially, by nearly 240K jobs.  One of the things about the Unemployment Rate is that once it starts to move in one direction or the other, it tends to really build momentum for a while.  As you can see from the long-term chart below, once it starts to rise, it tends to go a lot higher. 

Source: tradingeconomics.com

I have maintained that the payrolls have been a key all along as it is quite easy for the Fed to parry complaints from Congress about ‘too high’ interest rates if the job market is tight.  But if it starts to loosen too quickly, Congress will be howling every day and night and make the Fed’s life quite miserable.  As such, my eye is on the Unemployment Rate rather than NFP come Friday.

Now, this is not the only story around, but from a market perspective, I believe it is the most important by far.  However, let’s touch on some others before highlighting the ongoing risk rally.  While most of the oxygen in US newsrooms is consumed by the debate on whether President Biden is fit to, and will, be the Democratic nominee, there are several other key elections coming this week.  

Tomorrow, the UK heads to the polls (was the July 4th date chosen to commemorate the last big English loss?) where the current Tory government, led by PM Rishi Sunak, is forecast to be decimated by the voters.  Apparently, the good folks of the UK are fed up with the same inflation and immigration issues that are apparent elsewhere in the Western world and are looking for a change.  Interestingly, a look at UK markets doesn’t really indicate that investors are greatly concerned over the change as Gilt yields, the FTSE 100 and the British pound have all been range trading for the past month.  Certainly, there is no indication a Labour government is going to be fiscally responsible, but they have promised to raise taxes to try to fund their spending.  In the end, I don’t see the change in government having an immediate impact on financial markets in the UK.  Rather, I expect that the US story on rates and economic activity is still going to be the main driver of things.

Come Sunday, the French head back to the polls for the second round of their parliamentary election and virtually every story you can read about it describes the lengths to which the coalition of left-wing parties and the current Macronist parties are going to try to prevent Marine Le Pen’s RN party from gaining a working majority.  I find it instructive that rather than considering why so many people were drawn to the RN message of restricting immigration and enhancing public safety, the other parties simply demonize the RN as a reincarnation of the Nazis.  (sounds familiar, no?).  The current market narrative seems to be that the RN will not be able to capture an absolute majority by themselves with the result that a caretaker government will be appointed with limited powers.  This has been seen as a great leap forward from the fear of an RN led government, and so we have seen French equity markets rebound from their worst levels last week, while French OAT yields have compressed vs. their German counterparts by about 15bps from the widest levels seen just before last Sunday’s first round votes.

In a related note, this morning I have seen several articles describing the recent rise in US yields as a response to the presidential debate last week, where suddenly there is concern that Mr Trump may win and spend trillions of dollars, rather than a Biden win where the government would spend trillions of dollars.  Frankly, there is no indication that either party is going to rein in spending, it is far more a question of their spending priorities.  But that is the story that is all over the press this morning.

Ok, a quick look at the overnight session shows that yesterday’s US equity rally was largely followed by shares in Asia (Nikkei +1.25%, Hang Seng +1.2%) although Chinese shares remain lackluster.  In Europe, as well, shares are higher across the board with the CAC (+1.55%) in Paris leading the way on this renewed narrative of a caretaker government.  I suppose if the RN does win a majority that come Monday, French shares, and most of Europe as well, will see sharp declines.  As to US futures, at this hour (7:30), they are edging very slightly higher, just 0.1%, ahead of this morning’s data dump.

In the bond market, Treasury yields are unchanged this morning, but Europe has seen virtually all sovereigns rally slightly vs. Bunds as the French narrative seems to have longer tails than one might imagine.  So, spreads are narrowing a bit.  The one consistency in bond markets, though, has been Japan which saw yields edge higher by another basis point overnight and are now 18bps higher in the past two weeks.  Remarkably, despite the rise in Japanese yields, the yen continues to get punished daily.

In the commodity markets, oil is little changed on the day, but has rallied more than 2% in the past week on rumors of a significant inventory drawdown to be reported later this morning, as well as the pending shut in of production in the Gulf of Mexico.  However, metals markets are rallying this morning with both precious (Ag +0.6%, Ag +1.8%) and base (Cu +1.6%, Al +0.7%) finding support amid the equity/risk rally and the dollar’s softer tone today.

Speaking of the dollar, other than the yen (-0.25%) which is now pushing to 162.00, the rest of the G10 bloc is modestly firmer, between 0.1% and 0.25%.  Meanwhile, in the EMG bloc, ZAR (+0.65%) is again the biggest mover, rallying on metals strength along with broad dollar weakness.  One must be impressed with the ongoing volatility in the rand, which seems to be the leading mover in one direction or the other every day.  However, away from that, while most EMG currencies are a bit firmer, the movement has been much less dramatic.

On the data front, it is a busy day as tomorrow’s holiday has forced much info onto today’s calendar.  As well, since there will be no poetry on Friday morning, I will include the current estimates of the payroll data as well

TodayADP Employment160K
 Trade Balance-$76.2B
 Initial Claims235K
 Continuing Claims1840K
 ISM Services52.5
 Factory Orders0.2%
 -ex Transport0.3%
 FOMC Minutes 
FridayNonfarm Payrolls190K
 Private Payrolls160K
 Manufacturing Payrolls5K
 Unemployment Rate4.0%
 Average Hourly Earnings0.3% (3.9% Y/Y)
 Average Weekly Hours34.3
 Participation Rate62.7%
Source: tradingeconomics.com

In addition to all this, we hear from NY Fed president Williams this morning, but given that Powell continued to highlight the lack of confidence that inflation was quickly going to reach their target, I doubt Williams will say anything different.  My concern is that we are going to see the Unemployment Rate rise to 4.1% or 4.2% and that will change the narrative greatly.  Suddenly, there will be a lot more pressure to allow inflation to stay at current levels or even go higher to address the employment side of the mandate.  As I have written in the past, any rate cuts before inflation is well and truly vanquished will likely result in a much weaker dollar and much higher commodity prices.  Be on the watch for Friday’s data to be the first step in that direction.

Good luck and have a good holiday weekend

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Deep-Rooted

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We have now a president, Biden
Who lately, has taken much chidin’
Last night he debated
A man who he hated
Alas, polls against him did widen
 
The market response, though, was muted
With not many trades prosecuted
Instead, we await-a
The PCE data
To learn if inflation’s deep-rooted

 

While it was painful to watch, I did last through most of the debate.  Unfortunately, it didn’t help me sleep any better!  Clearly the top story around the Western world today is the performance of President Biden and the concerns it raised over his abilities to not merely execute the responsibilities of the President if he is re-elected, but to complete his current term.  There have been numerous calls by high profile Democratic strategists and pundits for him to step down from the ticket.  We shall see what happens, but my personal take is he will not willingly step aside regardless of the situation and that those closest to him will not force him to do so.

The upshot is that in the betting markets, Mr Trump is now a 60% favorite with Mr Biden at 22% and a host of other Democrats making up the difference, at least according to electionbettingodds.com.  Arguably, though, the question that most concerns all of us is how will this outcome impact markets going forward.  And remember, there is a very big election this weekend in France that is also going to have a major impact, not just in France, but in all of Europe.

Perhaps the most surprising thing to me is the non-plussed manner that markets have behaved in the wake of the debate.  Equity markets around the world have traded higher as have US futures.  Bond yields have traded modestly higher and so has oil, metals markets and the dollar.  Clearly, investors do not appear to be concerned that the leader of the free world is in such dire physical condition.  While I would not have expected a collapse, it doesn’t seem hard to foresee a chain of events that results in less positive economic outcomes.  

Or…perhaps the market has absorbed this outcome and determined that central banks, and especially the Fed, are going to be starting to err on the side of easy money to ensure that economies don’t fall into disarray, so all that rate cutting that has been discussed, hypothesized and, frankly, dreamed about may be coming sooner than the hawkish central bankers themselves had considered previously.  I understand that political events typically don’t have a big market response, but the depth and breadth of the damage that last night’s debate had on ideas about President Biden’s mental competence and acuity are stunningly large.  That cannot inspire confidence in investors.  

Of course, of far more importance to the market, obviously, is today’s PCE data release and the corresponding Personal Income and Spending figures.  So, let’s take a look at expectations there.

PCE0.0% (2.6% Y/Y)
Core PCE0.1% (2.6% Y/Y)
Personal Income0.4%
Personal Spending0.3%
Chicago PMI40.0
Michigan Final Sentiment65.8

Source: tradingeconomics.com

Of this grouping of data, the Core PCE reading is the most important as it represents the Fed’s North Star on inflation.  (While we all live in a CPI world, the Fed apparently found out that their models worked better with core PCE and so that became the benchmark.)  At any rate, forecasts are that prices, ex food & energy, did not rise in May.  That was not my lived experience, and I will wager not many of yours either, but we don’t really matter in this context.  However, the Bureau of Economic Analysis, when they are calculating GDP also calculate their own PCE figure for the quarter.  That was released yesterday with the Core PCE printing at 3.7% while GDP was raised to 1.4%.  In total, that implies nominal GDP was at 5.1% in Q1, a slight decline from Q4’s reading of 5.4%.  It should not be surprising that both these PCE measures track one another well, and as per the chart below, that seems to be the case.

Source: tradingeconomics.com

However, I cannot help but look at this chart and see that the blue line (the quarterly BEA data, RHS numbers) is not trending lower at all.  Perhaps it turns around, but perhaps the forecasts for this morning’s numbers are a bit too optimistic.  After all, we saw higher inflation in Canada and Australia this month.  As well, we have seen a continuation in the rise in the price of housing and energy.  None of those are perfect analogs for the PCE data this morning, but I sense that we may have found the lows in inflation.

Ahead of the data, as I discussed briefly above, markets are in fine fettle.  After a modestly positive session in the US yesterday, virtually every market in Asia was in the green as well, with the Nikkei (+0.6%) leading the way and smaller gains, on the order of 0.1% – 0.2% across the rest of the major markets in the region.  In Europe, the CAC (-0.3%) is bucking the trend as investors continue to leave the market ahead of the elections this weekend, but the rest of the bourses are all decently firmer, on the order of 0.35% – 0.55%.  I suppose the reason French investors are concerned is the possibility of a hung Parliament, where no party has a majority and therefore no new legislation will be able to be enacted under a caretaker government for at least a year.  Of course, there are also those who are concerned that a ‘cohabitation’ between President Macron and the RN might have trouble governing as well.  As to US markets, they continue to rally with futures higher across all three major indices this morning, roughly by 0.35%.

In the bond market, yields are higher across the board after they traded up yesterday as well.  This morning, Treasury yields are +2bps while European yields have risen between 3bps (Germany, Netherlands) and 9bps (Spain) with French and Italian yields 6bps higher.  This is the most straightforward explanation as investors demonstrate their concern with a further split between Germany and the rest of Europe regarding fiscal policies.  As to JGB’s they have slipped 2bps lower overnight, despite Tokyo CPI data printing a tick higher than expected at 2.3% headline, 2.1% core.

Oil prices (+0.75%) continue to rally as summer driving demand is now the story of the market despite the large inventory builds seen this week.  In a bit of a conundrum, metals markets are also firmer across the board despite the higher yields, although in the past hour or so, the dollar has reversed some of its earlier gains, so that is giving some support.  However, I suspect that these markets will be subject to a dislocation in the event that we see a surprising PCE report.

Finally, the dollar has edged a bit lower this morning with modest declines vs. the G10 bloc, on the order of 0.1% – 0.2%, and a few outliers vs. EMG currencies like ZAR (+1.4%) and KRW (+0.6%).  The won has benefitted from the upcoming increase in onshore trading hours as the country attempts to increase trading volumes and get more activity and more market participants to help the currency’s international standing.  As to the rand, it appears that the sharp rally today in the Johannesburg stock exchange has drawn in outside investors and supported the currency.

In addition to the data, we hear from both Governor Bowman, again, and SF Fed president Daly this afternoon.  Bowman has already explained, twice, that she would be amenable to raising rates if inflation rebounded, while you may recall Daly exhibited concern over the labor market and what to do if it deteriorates.  Well, labor is a discussion for next week when the NFP report is released.  Today is all about PCE.  My sense is it will be higher than forecast which will probably undermine equities to some extent and keep pressure on bonds while supporting the dollar.  In that situation, I see commodities suffering as well.

Good luck and good weekend

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Trussed

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The markets are worried that France
If given a half-decent chance
Will vote for Le Pen
And so, seems the ten-
Year OAT is now looked at askance
 
But ECB “sources” have said
There’s no TPI straight ahead
The French, rather, must
Show they won’t be “Trussed”
Else traders will leave them for dead

 

On an otherwise quiet summer morning, the ripples from the European Parliament election continue to grow. Not only did French President Macron dissolve parliament there and call new elections, but it appears the German government is far closer to falling as well.  However, right now, France is the story of note.

Elections in France are a two-stage affair where multiple candidates run for specific seats and then the two largest vote-getters in each district have a runoff a week later, if nobody won an outright majority.  Additionally, as is common throughout Europe, it is not a two-party affair like in the US, but there are several political parties vying for seats.  What makes this election so different from previous votes is the fact that the parties on the right are leading in all the polls.  Historically, throughout Europe, the right wing was anathema given that so many believed anything right of center would lead to the second coming of the Nazi Party.  This is the main reason that Europe has been consistently left of the US politically since the end of WWII.

However, what we have seen over the course of the past decade, and what has accelerated rapidly in the post-Covid era, is that many citizens of most Western countries are feeling dissatisfied with the politics of the left.  Immigration, which is obviously a huge issue in the US, is no less a problem in Europe.  The other key policy discrepancy is in the politics of global warming climate change global boiling, as it has become clearer each day that the policies that have been enacted, and those promised, have done nothing but raise the price of energy and the cost of living for all Europeans with no corresponding benefit to the climate.

The upshot is that many citizens throughout the continent are ready for a change, and this is beginning to frighten financial markets.  This can be seen in the chart below from tradingeconomics.com that shows German 10-yr yields in blue on the right-hand axis and French 10-yr yields in green on the left-hand axis.  While the spread has been creeping higher for the past six months, it has widened dramatically in the past week and is now at its widest (80 basis points) since the Eurozone crisis in 2013.

Source: tradingeconomics.com

It is not clear to me why financial markets are so concerned with excess spending by the right, as compared to excess spending by the left, but that seems to be the pattern.  (Recall the UK’s issue in October 2022 when Liz Truss, the newly minted PM, proposed a great deal of unfunded spending and the UK Gilt market sold off so sharply it put a number of insurance companies at risk and forced the BOE to buy gilts despite their efforts to shrink the balance sheet.)

At any rate, back in 2022, the ECB created a new program, the Transmission Protection Instrument (TPI) to help them prevent Italian BTPs from collapsing during the pandemic, thus maintaining what they believed to be an appropriate spread between bunds and BTPs.  While that spread peaked at 250bps, it is now a much more sedate 155bps, and despite Giorgia Meloni being a right-wing PM, the markets seem comfortable.  

However, with the ructions in France, there are many questions as to whether the ECB will dust off the TPI again to prevent a greater dislocation of French OATs vs. bunds.  Remember, too, that Madame Lagarde may have a personal vested interest in France, given her nationality, but as of yet, there has been no willingness to discuss using this tool.  However, if OATs continue to widen vs. Bunds, you can be certain this discussion will heat up even more.  We have already seen French stocks fall sharply, with French bank stocks down more than 10% in the past week.  It is movement like this that typically draws a response from central banks.  And of course, the euro is not immune to this situation as evidenced by its nearly 2% decline since the beginning of the month.  We will need to watch this closely until the elections at the end of the month and the second round on July 7th.

Beyond that, however, markets remain relatively dull.  Friday’s weaker than expected Michigan Sentiment data combined with the higher than expected inflation expectations was not very well received by risk assets (other than Nvidia and Apple) although by the end of the day, US major indices closed near flat.  Japanese shares fell sharply (Nikkei -1.8%) while the rest of Asia closed with much smaller declines, albeit they were declines.  In Europe, this morning, the picture is mixed with the big three markets, UK, Germany and France, all little changed on the day (a change for France of late) although there is more movement elsewhere but no consistency with both gainers and losers of up to 0.5%.  And following its recent pattern NASDAQ futures are edging higher this morning while DJIA futures are falling although neither has moved very much.  Arguably, the question is how long can the Magnificent 7 6 3 1 continue to rally in the face of increasing headwinds?

In the bond markets, yields are creeping higher with Treasuries (+2bps) bouncing off recent lows while European sovereigns all have shown similar yield gains except French OATs (+7bps) as the stress there continues to grow.  However, Asian bonds did little overnight with JGBs slipping one more basis point and now back to 0.92%, nearly 15bps lower than its peak at the end of May.  Things in Japan just take a verrryyy long time to play out.

In the commodity markets, oil (+0.25%) has managed to eke higher this morning, but the metals markets remain under pressure (Au -0.5%, Ag -1.0%, Cu -1.6%) as confidence in the economy ebbs alongside significant position reductions as metals had been one of the market themes for the first half of the year.  While I still like the long-term story, it seems clear there is no love for the space right now.

Finally, the dollar is mixed this morning with modest gains and losses overall across both G10 and EMG blocs.  The biggest winner is ZAR (+0.7%) which continues to retrace post-election losses as the new coalition government is gaining adherents in the investor community.  Alas, MXN (-0.2%) continues to feel pressure as concerns grow that president-elect Sheinbaum is going to be far more left leaning than markets expected.  In the majors, there is not much of distinction today with both gainers and laggards, although more laggards than gainers.  It should be no surprise that JPY (-0.25%) is pushing back to 158 given the yield moves overnight.

On the data front, there is some important stuff to be released this week, as well as a plethora of Fedspeak.

TodayEmpire State Manufacturing-9.0
TuesdayRetail Sales0.2%
 -ex Autos0.2%
 IP0.3%
 Capacity Utilization78.6%
ThursdayInitial Claims235K
 Continuing Claims1810K
 Philly Fed4.5
 Housing Starts1.38M
 Building Permits1.45M
FridayFlash PMI Manufacturing51.0
 Flash PMI Services53.3
 Existing Home Sales4.09M
 Leading Indicators-0.4%

Source: tradingeconomics.com

In addition to the data, we hear from seven Fed speakers with Richmond’s Thomas Barkin regaling us twice.  I would contend the narrative is searching for a direction other than BUY NVIDIA, as we continue to see a mixed picture.  While the NFP was strong, it appears data since then has softened.  If this remains the case, then the talk of a Fed cut sooner rather than later is going to really start to come back.  While July is only priced for a 10% chance of a cut, the market has September in its sights with a nearly two-thirds probability currently priced.  If the data weakens, that is viable.  In that scenario, I would expect the dollar to suffer and everything else to rally.  But we need to see a lot more soft data to reach that point.

Good luck

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