The focus in the US is politics rather than data

Outlook

The focus un the US is politics rather than data. Today we get the usual Thursday jobless claims, the Kansas City Fed monthly report and a couple of TV speeches by Fed govs (one a hawk and one a dove). Tomorrow it’s US PPI and Germany’s CPI, but it’s not clear they are market-movers. US PPI tends not to shove CPI around and in the EU, the ECB is solidly at the hold position on rates whatever inflation in a single country, even the biggest member. European growth is not exactly wonderful, but there are green shoots despite the terrible global mess.

That leaves traders surplus time to watch the geopolitical situation and US politics. 

Forecast

Nobody is talking about recession or whether US growth is going to falter, but instead everyone is worried about AI taking jobs and AI companies being overvalued, perhaps. In Europe, a big worry is taking on Russia by itself without the US and being well within range of Iranian missiles, although the green shoots are promising.

All of this is too-big a collection of factors and FX traders are embroiled in one narrative or another alternatingly, when these are not the usual matrix of FX determinants. We lack coherence. That could mean a renewed focus on the Fed when the two speakers come out later today, one a hawk and one a dove. Heaven knows we would rather think about the Fed perhaps defying the president than about shooting wars.

When in doubt, aim for the crosses. We do see the euro gaining on both the pound and Swiss franc. As for the yen, stay out. They are totally confused in Tokyo about whether the PM will fight and win against the BoJ. The nail that sticks up is the one that gets the hammer.

Bottom line, pare positions. Something will come along that warrants risk. 

US politics

The news broke yesterday that the Justice Dept is withholding evidence of testimony that Trump raped an underage girl, a charge the FBI did not pursue at the time of the accusation and has destroyed or hidden some of the testimony. In addition, the Justice Dept has redacted a lot of names of high-profile men involved with Epstein, an act specifically prohibited by the Epstein law passed by a nearly unanimous Congress.

Meanwhile, every day seems to bring another bigshot to the spotlight and having to announce retirement. The latest is WEO chief Brende. US newscasters point out that the UK has actually arrested two, including Prince Andrew and the former ambassador to the US, while the US has arrested none. This is taking far too long but the Dems and a few resolute Republicans are not giving up.