Risk on headlines filtering through supporting global equities


  • Trump is announcing a tax cut for middle-income Americans sometime in the next year.
  • Bloomberg released “sources” story that was claiming that the US administration was considering an interim trade deal with China.

 We have had a couple of encouraging headlines for risk and US stocks that are bound to filter their way through leading up to the Federal Reserve next week, including President Trump announcing a tax cut for middle-income Americans sometime in the next year.

A Reuters poll suggests that the Federal Reserve will be cutting rates by 25bps at the September meeting and again in Q4 2019. The poll suggests that the Fed's decision-making not influenced by president Donald Trump's criticism said nearly 80% of economists while US-China trade relations will either worsen or stay about the same by end-2020, said nearly 80% of economists.

The sentiment is picking up and gaining traction with respect to risk on which is sending the Yen packing. The euro was also able to recover, despite the European Bank cutting interest rates overnight and implementing quantitative easing. US stocks continued to climb following a Bloomberg released “sources” story that was claiming that the US administration was considering an interim trade deal with China that would either freeze or even roll back US tariffs, in particular avoiding the tariffs due to hit consumer goods in December - However,  less than an hour later, a “senior administration official” told CNBC that such a deal was “absolutely not” being considered.

Market implications:

Global equities are enjoying a ride of easier money cycles form the major central banks, (Fed next?), as well as the goodwill, gestured type of trade headlines. Such a switch up should lave the Yen and CHF out to dry off and be supportive of EM-FX and commodities

 

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