The only problem is in US rates where 3% 10-year looks vulnerable – given Trump tweets for 5% GDP and 10-year $26 billion sale today at 1 pm EDT. Time for old school bond trading and look at Sept.  futures – the skinny range looks set for a breakout, says Bob Savage.

We all live in Missouri this morning, perhaps not Ohio or Kansas where voters yesterday left tight races. Missouri is the show-me state where you have to prove the facts before you trade them. The summer lull continues with less news continuing to support risk.

The take-aways from economic data were:

1) China trade isn’t yet hurt by the U.S. tariffs – though imports are likely higher in anticipation of them.

2) Japan economic outlook is weak and BOJ talk of hiking rates seems far-off market.

3) Spanish and French economic data point to slowing growth. The global synchronized growth that start 2018 has become splintered and we live with idiosyncratic markets allowing traders to win but for the noise of central bankers and politicians.

Here is the overnight list:

  • Italy’s Tria was reported to have said that they will go ahead with pension reform and repeats the government is not questioning the euro (EUR). This led to further BTP buying and helped support EUR.
  • BOJ Summary of Opinions saw only one member support -/+0.25% 10Y JGB yield range. This pushed U.S. dollar/Japanese yen (USD/JPY) down but was expected.
  • RBA Lowe noted that he expected the next move in the cash rate will be higher, and that he sees no strong case for a near term adjustment. For the market, he expects inflation to be close to 2.5% by 2020, the most recent SOMP, which ran through to June 2020, had CPI at 2.25% at the end of the forecast range. This lifted Australian dollar (AUD) marginally.

We are now in a “show-me” phase for markets to believe in bad news. The China trade data are not weak enough to give much credibility to the worst-case scenarios prices for a global trade war.

However, there are plenty of other fears like inflation and growth out there that remain in play. The UK continues to lead the pain trade for forex with British pound (GBP) at new yearly lows with 1.2750 in play again while New Zealand dollar (NZD) holds the G10 lead into the RBNZ meeting today.

For most, the lack of big movements leave open hopes for carry trades, selling volatility and playing with bulls in equities.

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