• USD weaker as US v China trade tensions ratchet up
  • Central banks are central to today’s activity

As if the US and China didn’t have enough disagreements, the US Congress is condemning China’s handing of the Hong Kong protests and that has escalated tensions once again. The impact in the financial markets is a general shift of investor funds into the safety of US Treasuries; causing the 10 year bond yields to fall and, oddly, we have also seen the US Dollar weaken a tad.  At the interbank level, Sterling is pushing above USD 1.29 again and the Euro is half a cent higher; just below USD 1.11.

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Rates on hold affect the value of USD

These moves largely ignored the minutes from the last Federal Reserve meeting which were released last night. There appears to have been a general accord amongst the Federal Open Market committee (FOMC) members that global growth was a concern but there was no need for further monetary looseness right now. The perception is that rates will remain on hold for an extended period, adding to the USD weakness.
 
Central banks are central to today’s activity

We will get the details of the last European Central Bank (ECB) meeting this morning. A similarly concerned but not panicked approach is likely. However, the ECB has confirmed that their own virtually zero interest rates are damaging growth prospects and that is partly the reason for Moody’s downgrading the outlook for German banks from ‘stable’ to ‘negative’. Higher interest rates attract depositors and give room for a gap between interest paid and earned.

Other than a few central bankers speaking today, we have an almost certain ‘on hold’ decision from the South African reserve Bank and a smattering of US data but not much else. The US data includes some existing home sales numbers and the weekly measure of fresh unemployment welfare claims. As mentioned above, the data is less impactful on the USD than events in China, Hong Kong and on the Whitehouse lawn. Personally, I think every President should have his press briefing notes written by a child with a magic marker, but that’s just me.
 
Faultless plan… or not

And drug dealers in Tuscany may have thought their cunning plan to hide their cocaine in woodland was faultless. That was until wild boars found their stash and consumed a large quantity of the drugs. The police were already onto the gang but their frantic calls about the missing stash added to their evidence and three members of the gang were arrested. I wonder if the pigs will ever seek out truffles again.

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