View from London: Shifting Focus from War to Strength of Dollar

Can we return to that pleasant state of oblivion where Goldilocks lives happily with the bears at bay along with moderate growth, low inflation, and a big appetite for yields and risk? Bob Savage, CEO of Track Research writes in his Tuesday commentary from London.

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Summer trading returns today as the European Assumption Day holidays mix with the further relief rally back in risk as North Korea’s Kim Jong Un removes an immediate missile threat from Guam. South Korean Moon Jai-In vowed to prevent war at all costs.

The world returns to selling Japanese yen (JPY/USD), Gold and bonds – but that coupled with lighter volumes doesn’t make it all a vacation.

Bond yields in the U.S. are not back to the pre-Trump “fire and fury” declaration last week. Even New York Fed Dudley sounding hawkish (wanting another hike if the data is in line with forecasts) didn’t do it.

The USD has stabilized a bit, but remains near the 2017 lows and there isn’t a lot of reaction to data even as China M2 misses, German GDP misses but still robust for EU, UK CPI/PPI proves benign.

Sweden saw some movement with euro/Swedish krona (EUR/SEK) back below 9.50 as CPI in July rises to 2.2% y/y – more than the 1.9% y/y expected.

The world continues to focus on U.S. rates as a key support for U.S. dollar (EUR/USD) and for measuring risk. The 2.26% 10Y level looks important and will be the pivot post retail sales with 2.33% the breakout fear in the short term.

All of that seems less exciting and more a trading story rather than an investing story – leaving today likely calm and waiting for more information – particularly about geopolitics.
It’s hard to go back to a summer vacation when you are ripped from it due to nuclear war fears.

But maybe we don’t have to return completely to summer but just that pleasant state of oblivion where Goldilocks lives happily with the bears at bay along with moderate growth, low inflation, and a big appetite for yields and risk.

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