For what it’s worth, the Atlanta Fed has a forecast of 2.9% for Q4, reduced from higher numbers in Q3 because of a drop in inventory builds. Hmm. Pre-tariff buying can’t have stopped already, can it? The Atlanta Fed updates today.

Today we also get Oct PPI and the University of Michigan consumer sentiment and inflation expectations survey, not market-movers. Everyone is exhausted from the midterm election, anyway. The outcome was initially seen as dollar-negative for any of several reasons—a pullback in deficit spending, for example—none of which were ever remotely probable.

We say the dollar fell because the Dems won the House and while that means no real rein on Trump, it does mean a lot more argumentation and public criticism. Trump will continue to say and do outrageous and destructive things, but we don’t have to watch the shameful display of Republican leadership cowardice any longer. It remains to be seen how aggressive the Dems will be. Talking head cable TV is focusing on investigative powers and paying no attention to things like deficit spending. Sometime soon talk will get hotter about impeachment, which is virtually certain if not immediately. The Dems will probably wait until the Mueller report—or call Mueller to the stand to get the information. This will be fun but not a market-mover.

The dollar still has a strong tailwind in the form of the Fed, but we maintain it’s inaccurate to say the Fed was hawkish. The Fed maintained the same tone as before—we are getting a 4th hike in December, period. For some reason we fail to understand, the CME FedWatch tools attributes only a 75.8% probability of that next hike in Dec, which is only 40 days away. Why is it not 95%?

We don’t see the end of dollar firmness given bigger problems in the UK, Italy, China and maybe Japan. Until Trump opens his mouth.


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