Why is nobody agitating about the lack of progress in China talks?
|Outlook:
We get the first estimate of Q2 GDP next week, but yesterday's retail sales already have forecasters raising their estimates. Macroeconomics raised its Q2 forecast to 2.1% from 1.8% and the Atlanta Fed GDPNow from 1.4% to 1.6%. See the chart. The Atlanta Fed goes again today after June housing starts, likely a dip by 0.7% but less than -0.9% the month before. And we also get the Beige Book today. Canada reports June CPI, probably a fallback to 2%.
For the dollar to rise on short-term good data is a little annoying when there are Really Big Issues also on the table not getting enough attention. Why is nobody agitating about the lack of progress in China talks? If uncertainty about the trade deal is driving the Fed into rate cuts, why are we not hearing from Congress, or unions, or famers, or even the Chamber of Commerce? It's as though once Trump grabs a subject, everyone else has to stand aside. This kind of bullying is no way to run a railroad.
And the prospect of two or even three rate cuts—that drove the dollar down in the first place—is still very much with us. Good data is not going to stay the Fed's hand. Why a couple of good data points set off a knee-jerk buying spree is short-termism at its worst. Longer run, those rate cuts "should" be dollar negative (if everything else remains the same) and intervention talk should be negative, too. Customarily, talk about intervention often causes the desired move and removes the perceived need for the act itself. Intervention may not be serious or imminent just yet, but it's exactly the kind of disruption Trump enjoys and sometimes needs to take the spotlight off some other awful thing he just said or did.
The US House just rebuked Trump for racism with the vote all 235 Democrats, four Republicans and one independent. This doesn't pass the "so what?" test for other policy issues coming out of the inept White House. If anything, it eggs on new distractions and digressions.
The resumed upward trajectory of the dollar is getting stronger.
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