The euro rally will probably continue

Outlook:

The euro rally will probably continue and reach beyond the recent high at 1.1583, but first it has to pull back when Draghi disappoints. The only question is how far. The channel bottom lies at 1.1462 and we don't expect to see a level much lower than that. But the previous intermediate low was 1,1369 and a test of that level is always a possibility.

Reuters reports that dollar shorts reduced positions ahead of the ECB and Draghi, which is the better way to look at it. On the 15-minute chart, the euro stopped falling when the ECB statement of no change was released. But that doesn't mean the slide will not resume, depending on what Draghi says.

Draghi is sensitive to the effect on the euro of his comments. We can probably assume he knows perfectly well that if he admits the council talked about tapering, the euro will rally. At the same time, Draghi would never, ever lie about it.

We like the comment in the FT from a fund manager: "The euro is on track to reach $1.25 by the end of the year, but it won't be a straight line and today could be a good reason to take some profits on recent moves against the dollar," says Paul Brain, head of fixed income at Newton Investment Management.

"For currencies the interest rate story is most important, as changing interest rate differentials drive currencies. If the ECB's tone switches from reducing stimulus spending to discount rate increases then the euro could accelerate. But that's probably for the ECB and Fed September meetings."

Or perhaps Jackson Hole, imagine the wishful thinkers.

Politics: Even the Wall Street Journal is urging Trump to stop lying. In fact, it wants Trump to disclose everything, all at once, and get it over with. That advice assumes there is nothing critical to cover up. But what if the Trump campaign really did accept Russian hacks without complaint on the promise of disclosure later during the summer (as Don Jr. wrote) when disclosure would do Clinton the most harm—in return for lifting sanctions? What if there was, in fact, a deal?

Yesterday Trump gave an interview to the New York Times in which he warned that if special counsel Mueller starts poking into Trump finances, that would be a red line. In other words, Trump might fire him. Too late—Mueller has already sought documents from Deutsche Bank, which has been fined for money laundering for Russians. Deutsche Bank is Trump's only big Western lender. We know for a fact that Trump was dumped from Citibank for lying, breaking contracts and refusing to pay when he had the ability to pay. In banking, it's named "bad character" and character is the very first criterion on which to judge whether to lend someone any money.

This is so similar to Watergate as to make your hair hurt.

The sideshow is former campaign manager Manafort, who owed a ton of money, $17 million to be exact, to the Russians influencing a Cyprus bank and then (it seems) traded a high-level job in the administration to a Chicago banker named Calk in return for real estate loans totaling $16 million. The US Attorney for New York is seeking the records from the bank. And banker Calk got only an economic advisor job, not Secretary of the Army. Remember, the former governor of Illinois went to jail for trying to trade a government post for money.

Last month, Manafort filed documents with the US government, belatedly admitted he was representing a foreign government, disclosing he was paid over $17 million over two years from a Ukrainian politi-cal party with links to the Kremlin. Golly, everything costs $17 million in Manafort's world.