Pre-Jackson Hole heebie-jeebies
|Risk Markets
It seems to be a regional occupational hazard trading global risk when the USDCNH opened bid. However, the Yuan is doing little more than playing catch up to the dollar bid overnight.
However, there’s a very capricious mood leaching into markets today, which has a decidedly risk-off note. The FOMC minutes fell considerably short of confirming the markets dovish pricing.
Asia traders are focusing on the fact the minutes suggested that more FOMC members wanted no cuts vs those who wished to a 50bp cut at the July meeting.
This FOMC division is well documented, and while nothing new, it acts as a not so subtle reminder of how challenging it could be for Chair Powell to meet the market’s exceedingly dovish expectations.
With that in mind, the minutes seem to have triggered some pre-Jackson Hole heebie-jeebies as investors are opting to get out while others have already committed to staying away
However, we need to take any market move with a grain of salt given the August liquidity conditions not to mention the high degree of policy uncertainty which has investors sidelined ahead of the Jackson Hole symposium and the next round of trade discussions.
Gold market
Gold continues to take a breather, attempting to furrow out a base around $1500. All the overbought market banter is causing some concern among technical driven traders, which is feeding through the fundamental scrim. Given the increase in length, further gains may become more difficult in the near term unless positive catalysts continue to emerge. Even on that note, macro sentiment improved in recent days. What last week looked like a dangerous doom-and-gloom spiral appears to have been averted for now.
Oil market
Oil markets continue to move lower after the gloomy surprise build in US fuel inventories The gasoline build is a very sobering negative growth reminder even more so with the market perched on a recessionary razor-edged heading into what many are now viewing as a make or break US-China trade discussions next month
Risk skewed lower
Also, traders are negatively skewed risk ahead of the EU PMI's. If the manufacturing surveys come out weaker than expected, it could trigger yet another episodic yield curve inspired risk panic attack.
With that in mind, oil markets seem to be leading the charge of the negative brigade today
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