Every eye will be glued to the Fed minutes to be released today

Outlook

In a fun tidbit, Brazil is reported to be in a state of shock (and tearful) after losing to Germany in soccer, and losing big. The press reports that Germany was so determined not to lose again after a loss in 2000 that it launched a nation-wide search for the best 6-year and 8-year old players… and now the focus is paying off. At last! Another country with a cultural obsession on a par with the worst of the US.

Back in the world of international finance, every eye will be glued to the Fed minutes to be released today, with some analysts expecting or wishing for the hawkish camp to start getting bigger and noisier. Others say Yellen’s emphasis on wage growth rather than unemployment per se will continue to rule. The debate is fairly sophisticated and Bloomberg may be right that it’s behind the 2 bp rise in the 10-year yield overnight. We worry that a just-in-case positioning for a one-time event (the minutes) is not the same thing as a genuine shift in sentiment. So far, those who think the Fed will bring forward the first hike see end-2015 instead of Q1 2016, but frankly, this is really a minor change and unimpressive. A lot of water can over the dam before then.

Besides, nobody knows what deep-running risk aversion currents might be forming. If a safe-haven need develops be-cause of events around the world, Yellen’s economics could take a back seat and become secondary—not irrelevant, just not the leading mover. Top of the list is headed by Israel, which is not sitting still while Palestinian militants in Gaza are sending rockets its way. It’s always amazing that people without potable water and indoor toilets, let alone books, put their energies into advanced weapons. When it comes to the Palestinians, we embrace Murphy’s Law—if anything can go wrong, it will.

Conditions are no better anywhere else. The US is supporting a Sunni faction in Syria while supporting the fight against Sunnis in Iraq. Libertarians who say “let’s get the hell out of this kind of fighting” (if not all war activities everywhere) are gaining ground. Russia may well be standing on one leg, economically speaking. As for China, no one in his right mind believes the inflation data, so what comes next in the financial sector? Boosting activity to reach 7.5% may or may not be the right action. No one knows, including the dozen guys in grey suits “managing” the economy. As for quibbles over this and that at the Strategic Dialogue, the US has made zero gains, as far as anyone can tell.

We just have to hunker down and await developments. But don’t count on a lot of action in any currency in any direc-tion.