Markets:
Trading on global markets showed a diffuse, inconsistent trading pattern today. European equities rebounded. Poor EMU eco data that caused quite some investor disappointment earlier this week, apparently moved a bit to the background. Both US and Chinese sources suggest that they are on track to have successful trade talks on a higher level as planned early next month. This positive trade atmosphere supported the bid for European equites as the region remains highly sensitive to frictions in global trade. Regarding the data, EMU M3 money supply unexpectedly jumped 5.7% Y/Y (from 5.1%). Corporate lending data were solid, too. As such the report can be seen as questioning Draghi’s/the ECB’s assessment that aggressive monetary stimulus is highly needed. Even so, the positive risk sentiment and EMU money supply data didn’t cause much upward pressure on EMU/core bond yields. Political noise from the impeachment investigation against president Trump maybe was slightly supportive for US/core bonds but for now it is no big issue for global trading. Technical factors (including end of quarter positioning) probably played a role. US eco data were second tier, but mainly positive. German yields decline between 1.& 2 bps across the curve. 10-y intra-EMU spreads versus Germany show only modest changes (+2 bps/-2bps). US yields decline between 3 bps (2-y) and 5 bps (30-y). The Fed raised the amount for today’s 14- repo from $30 bln to $60 bln, but demand ($72.8 bln) still surprised supply.
Recent trends of USD strength and at the same time euro softness continued today. The trade-weighted dollar (DXY) (temporary) surpassed the 99 level and is near the 99.37 2019 top. At the same time, EUR/USD intraday tested the 1.1926 2019 low. We didn’t see any high profile news. Recent soft EMU data and the Fed voicing a wait-and-see stance before deciding on further rate cuts suggest that the dollar will maintain comforting interest rate support in the foreseeable future. The hunt for USD liquidity was maybe a temporary USD supportive factor too. For now, the test is rejected. EUR/USD is trading in the 1.0950 area. The (MT) picture in USD/JPY is much different. The pair today held a tight range in the upper half of the 107 big figure and by far doesn’t show a similar upside momentum as is the case in USD/EUR, suggesting underlying euro weakness.
Sterling lost slightly further ground against the euro and the dollar today, as the standoff between UK PM Boris Johnson and (a majority) of Lower House PM persists. The tone of the confrontation is becoming ever more tense. On the Brexit negotiations, UK officials are reporting progress, but an agreement is still a long way off. EUR/GBP is trading in the 0.8870 area. Cable hovers in the mid 1.13 area.
News Headlines:
The whistle-blower who sparked the democratic investigation against US President Trump said in a letter addressed to the chairmen of the House and Senate Intelligence committees that he “learned from multiple US officials that senior White House officials had intervened to ‘lock down’ all the records of the phone call (between US President Trump and Ukrainian President Zelensky), especially the word-for-word transcript of the call that was produced — as is customary — by the White House Situation Room.” The House Intelligence Committee is set to question the acting director of national intelligence, Maguire, later today.
UK Members of Parliament voted to reject a short recess to allow for the Conservative Party Conference to take place in Manchester from Sept. 29 to Oct. 2. If they had accepted it, Parliament would have adjourned for a week starting today.
