View from London: Low Trade Volume in US, UK, Japan, Australia

07/26/2017 2:57 am EST

Focus: CURRENCIES

Robert Savage

Partner & CEO, CCTrack Solutions

Low expectations for trading again with lower volume. The U.S. dollar is higher if only because of modest hopes for some political reform, writes Bob Savage, CEO of Track Research in Wednesday commentary from London.

What happens today is unlikely to matter in the big summer picture.

Janet Yellen can’t explain the tersely worded FOMC statement today. The news agenda going forward is likely to remain fixed on inflation and the risks of monetary policy changes anywhere.

The Brazilians are in a party mood and most see 1% cut today. The EM rush of money continues but for the break of rates yesterday (July 25) as politics in the US opened up hope for reforms passing in Congress before the end of the fall.

The other central bankers overnight were less clear–the RBA Lowe speech didn’t change expectations that Australia suffers from the same low wages and unintended consequences of low rates than the US or Europe or Japan. The miss in 2Q Australian CPI highlights the problem.

The BOJ Nakaso speech made clear that Japan hopes for inflation even as the data suggests it’s going to take longer than Abe and Kuroda have politically.

The European inflation expectations are stable and the big jump in confidence in business and consumers is moderating–note the drop in France.

The UK GDP was in line with expectations even though 2Q GDP preliminary data is 44% real and the rest forecast.

So it goes for markets–low expectations for trading again with lower volume.

The euro/U.S. dollar (USD) is higher if only because of modest hopes for some political reform agenda and an unchanged Fed plan to hike one more time in 2017.

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