Presenting this morning's best overnight wrap, which comes courtesy of Rabobank's Michael Every, and whose title, "Is this the real life? Is this just fantasy?", was inspired by obvious events.
Market comments
“I see a little silhouetto of a man; Scaramucci, Scaramucci, will you do the Fandango?”
I didn’t sleep well last night after watching the latest episode of Game of Thrones. While I enjoyed it, I couldn’t escape the feeling that major developments are happening too fast as the show tries to shoe-horn lots of developments into the remaining 4 hours of this series/season. Plots that took months of viewing to play out in the first four or five series now seem to happen on fast-forward, and colourful characters just disappear. As a result the whole world seems a little less believable somehow.
Then one wakes up to find out that the new White House Communications Director Anthony Scaramucci has been fired just 11 days into his tenure. (“Is this the real life? Is this just fantasy?”) Even more amazingly, this was not due to his recent profanity-strewn interviews, or character assassination of the now ex-Chief of Staff Priebus, but allegedly because Scaramucci told the new Chief of Staff, former general John Kelly, that he didn’t report to him but directly to the president…on which note he was then summarily dismissed.
Quite naturally, this news (and a weaker-than-expected Chicago PMI) have pushed the broad USD index lower yet again, and this morning in Asia we are trading at below 93 at the time of writing, the lowest point since May 2016. Indeed, EUR/USD tested over 1.1840 early this morning, the first time we’ve been there since early 2015. (Despite yesterday’s Eurozone unemployment printing at 9.1%, a tick better than expected, while core CPI for July was a tick higher at 1.2% y-o-y, one can almost hear “Thunderbolt and lightening, very, very fright’ning me” playing in the ECB.)
The biggest question now must surely be if this latest White House firing is indicative of an administration in total meltdown, in which case the USD seems unlikely to avoid being swept along with it. Or could the new Chief of Staff bring some much-needed discipline and order to the Trump administration? Considering how far the Greenback has already fallen at a time when the Fed is after-all raising rates and looking at reversing QE might an indication of that counter-trend prove a turning point in the other direction? It’s worth considering, even if for now the market seems to see that a slowing-raising Fed is massively out-gunned by a nowhere-near raising ECB.
In another market-related headline today I see that Alan ‘Never-met-a-bubble-I-didn’t-like’ Greenspan is arguing to equities are not in bubble territory despite their stratospheric P/E ratios and similar measures, but that the bond market is. He might know something about that having been the instigator of the delicate “just slash rates” policy stance that we have come to rely on for decades now. Then again, he’s been wrong on just about everything else for just as long, so it may be another counter-indicator (or, “No, no, no, no, no, no, no”). Robert Shiller certainly seems far less sanguine.
Meanwhile, we have finally seen an official Chinese response to President Trump’s tweets on North Korea: Beijing’s UN Ambassador has stated “No matter how capable China is, China’s efforts will not yield practical results because it depends on the two principal parties.” That doesn’t point to any kind of imminent de-escalation of tensions; neither does US officials proposing to supply Ukraine with “defensive weapons”, as the Wall Street Journal reports, though the White House has yet to sign off there. (“Sends shivers down my spine, body’s aching all the time.”)
And down in NZ --and just two months before the upcoming general election-- opposition Labour Party Leader Andrew Little is stepping down because his party’s polling number have not been Large. (“Goodbye everybody, I’ve got to go.”)