The true focus is on payrolls tomorrow

Outlook:

We get US factory goods orders and trade data today, plus the usual jobless claims. with the true focus on payrolls tomorrow. The ADP forecast is pretty grim—only 67,000. If that is what we get—and the end of the GM strike plus the hiring of Census workers can disrupt the numbers—the outlook for the US economy leans more to the recession side than to the recovery side. As the ISM chief said, the economy is fundamentally strong and will do just fine if we can get this trade war behind us.

That should take talk of another Fed cut off the table. The probability of rates remaining the same at next week's FOMC is 99.3%, according to the CME. That number slides down progressively to 86.2% in Jan, 72.9% in March, 52.1% in April and 50.8% by the June 10 meeting. Bottom line—additional rates cuts are not really on the table and we should stop talking about it.

That doesn't mean the dollar won't suffer from vario 50.8% by the June 10 meeting. Bottom line—additional rates cuts are not really on the table and we should stop talking about it. us bits and bobs of bad data, including perhaps even jobless claims and tomorrow's payrolls. But the euro keeps getting slammed with bad data anytime it tries for an upside breakout. Today it was German factory orders. The danger of slowdown/recession is much higher in Europe and Japan than in the US, and in the long run, the currency with the more robust economy wins.

Tidbit: The 10-year yield is unnaturally bouncey. Seemingly unrelated to the long end, the Fed injected $95.56 billion in temporary liquidity on Tuesday, $77.8 billion in overnight repos and $17.76 billion in 14-days. It also bought $7.5 billion in Treasury bills against an offer of $17.71 billion.

About six people on the planet know how this relates to anything else, including the 10-year yield, and we are not among them. Note that Dodd-Frank capital requirements (stress test rules) are blamed by many and now Fed Vice Chair Quarles concurs, according to the FT. These rules are triggering hoarding of cash and keeping it from the repo market.

"The Federal Stability Oversight Council, which includes all major US banking regulators, has asked individual agencies to gather data on why overnight interest rates soared, it also emerged on Wednesday." The rule in question is the liquidity coverage ratio, "which requires banks with more than $50bn in assets to hold enough cash to cover 30 days of outflows at times of stress," although other provisions might be in play.

Politics: The Judiciary Committee hearings were riveting. Three of the professors asserted the evidence shows abuse of power, bribery, and contempt of Congress, and so powerfully that impeachment is more than justified. As in the Nixon and Clinton hearings, the witnesses brought forth the historical facts and contexts. Very interesting if you believe in the constitutional system. Trump has engaged in precisely the misconduct the Founders feared and were legislating against.

The fourth is Turley, an impressive presence we have followed for years. While his manner of speaking remains appealing, he was not impressive on this occasion--and easily refuted. He says the evidence is not sufficient; it's based on supposition, inference and presumption, and would need to become hard proof to justify impeachment.

The process has been too hasty and the House should go back and get more evidence. "If there were proof of quid-pro-quo, impeachment would be justified." But we do have proof. We have chief of staff Mulvaney and Ambassador Sondland admitting it on TV. Apparently Turley needs Trump to say it. And so he did, also on TV, twice—soliciting not only Ukraine but also China to investigate his political rival.

In addition, Turley says avoiding court battles over evidence is a mistake. The courts should be an integral part of determining what can be withheld without bringing a charge of obstruction. The White House may be within its rights to withhold some of the evidence—it takes a court to decide. That Trump would cause a painful and dangerous delay is too bad. If you are going to impeach, do it right. But that's precisely the point. The slow judicial process could allow Trump to reach the next election with foreign interference under his belt—and win. Again, exactly what the Founders feared. Both House committee chairmen claim a "clear and present danger." "Present" means get off your duff and fix it.

And finally, the process is being rushed, not giving the public enough time to change its mind, as we saw in Watergate. At the beginning, public opinion was deeply against impeachment. By the end, months later, the public supported it. This could change the lack of bipartisan support so clear today. An impeachment should have at least some bipartisan support and not break on party lines. Well, there Turley has a point. But again, delay is dangerous.

We await the attitude of Chief Justice Roberts when he takes the gavel in the expected Senate trial.

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This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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