GBP up on YouGov polls, JPY down on China optimism; German CPI

Rates as of 06:30 GMT

Market Recap

Well, it’s Thanksgiving Day today in the US. Since the holiday is on Thursday, many people will take Friday off as well and make a long weekend of it. Markets are usually quiet in the US. However, that doesn’t mean prices are stable – on the contrary, in thin markets they can move a lot. Volatility for the week is average.

The big mover overnight was obviously the pound, which soared on a YouGov poll showing once again that the Conservatives are not only in the lead, but on course to win an outright majority. “The release of our first MRP model projection for the 2019 election suggests that this time round the Conservatives are set for a majority. If the election were held today we project that the Tories would win 359 seats (a gain of 42 from 2017), Labour would win 211 (down by 51), the SNP 43 (up eight) and the Liberal Democrats 13 (a gain of one). Plaid Cymru would retain their four seats, the Greens would keep their single seat, and the Brexit Party would not take any seats at all.”

The UK Parliament has 650 MPs, so a party needs 326 to hold a majority by itself. YouGov is predicting a healthy majority for the Conservatives, meaning Brexit on schedule.

(MRP stands for “Multilevel Regression and Post-stratification”. You can read about the technique here, if you’re really, really interested: )

USD was little changed overall even though the US indicators were stellar: Q3 GDP was revised up to 2.1% from 1.9%, durable goods were +0.6% mom vs -0.9% expected, initial jobless claims fell substantially, and personal spending came in as expected at +0.3%. The only disappointments was that personal income didn’t grow at all, and the personal consumption expenditure (PCE) deflators – the Fed’s preferred gauges of inflation – showed inflation slowing a bit (the core PCE deflator slowed to +1.6% yoy from +1.7%). Nonetheless the news was considered bullish overall for the US economy, as indicated by the Treasury market: yields closed higher across the curve, led by the 2-year note (up 4 bps).

JPY is lower this morning, but was strengthening in early Asian trading. It gained throughout the day Wednesday, probably on optimism about a US-China trade deal after Trump told reporters that ““We’re in the final throes of a very important deal.” One of these throes was that the US Commerce Department yesterday released an “Advance Notice of Proposed Rulemaking” that will implement last May’s executive order on information and communications technology, and services supply chain security. Significantly, it didn’t name China as an “adversary nation” as was suggested in an earlier draft. JPY strengthened suddenly in early Asian trading when Trump signed into effect the bill to support Hong Kong protesters. However the reaction seems muted and I think JPY is likely to weaken further again today as China will probably ignore this slight.

Today’s market

There’s a surprising amount on the schedule today even without the US market being open.

First up today is the German consumer price index (CPI). The ultimate goal is the harmonized index of consumer prices (HICP), which is the national CPI measured the same way for Germany as it is for all the other EU countries. That won’t come out until later in the day. Before then, we get a steady drip-drip of the CPIs for various lander, or states, the first of which is Saxony. There’s no forecast for Saxony, but it’s closely watched anyway, as the national CPI tends to go the same way as it does.

Prices are expected to fall substantially from the previous month, but since they fell even more in the same month a year earlier, the yoy rate of change is expected to accelerate. That’s the right direction, but probably not enough to make anyone change their way of thinking about anything. EUR neutral

Then that’s basically it until the Asian day starts up, at which point we get the usual end-of-month data dump from Japan. JPY doesn’t seem to be that sensitive to any news about the domestic economy unless it happens to move the stock market significantly, but it’s worth monitoring these releases anyway. The Japanese economy has been surprising on the upside recently, moreso than the other major economies, although the upside surprise has been diminishing recently.

Two of the releases are more important than the others. The Tokyo CPI is expected to tick up a bit, but given that they just raised the consumption tax by 2 percentage points in the previous month, it’s pathetic. In any event it’s still so low that it won’t make much difference. JPY neutral

The employment data may be of more interest. The jobless rate is expected to hold steady while the job-offers-to-applicants ratio is forecast to edge down one tic. It looks as if the labor market has stopped improving. If wages haven’t started moving up by now – and they haven’t – then one wonders whether they ever will. And if wages never go up, then how will further BoJ easing create inflation? I have no answer, but I suspect no one else does, either. In any case, a downturn in the labor market, even one as tight as this, must be a worry to the BoJ. JPY negative

The industrial production figures are expected to be pretty poor, but they don’t seem to have much impact on the FX market from what I could discern.

Finally, Australia’s private sector credit is forecast to pause its seemingly inexorable decline, at least for one month, with a strong mom increase that will keep the yoy rate of increase stable. That should be at least neutral for AUD, if not positive.


A rant about Trump

As I said earlier in the week, since the US is closed today, I’m going to talk about our dear President Trump instead of the US economic indicators. Let me spell it out for you: the guy is sick. Not just emotionally, but physically. Until recently he spent nearly every weekend golfing. Does anyone really believe that he just popped into Walter Reed Hospital to do part of his annual physical because suddenly he had a couple of free hours? And that ever since, he’s been working in his private residence, not the Oval Office, simply because he can concentrate more effectively there? This raises the possibility of a medical excuse for him to either step down before the end of his term or not run in 2020.

Watch a video of him. He drags his right leg when he walks. His posture is odd when he stands – some say he’s wearing a body brace, some say a diaper.

His mental deterioration is clear. Watch this video, which contrasts how he spoke in 2015 with how he speaks now.

Notice also his use of his hands: in 2015 he was waving his hands all over the place, now they’re firmly on the podium supporting him.

On Twitter, do a search for #sockrocket. You’ll find him speaking about the stock market but pronouncing it “sock rocket.” He’s slurring his words. Why?

During a rally in Sunrise, Florida, Tuesday night, Trump claimed that people were trying to change the name of the Thanksgiving holiday – something no one has ever heard of – and that he beat “Barack Hussein Obama” in the election. He’s delusional. (It’s particularly frightening that the crowd roared in approval when he said this. Apparently facts don’t mean much to the audience, either.)

Trump recently called into “Fox and Friends” and spoke for 53 minutes, most of which was nonsense, lies, and repetitive complaining about his enemies. People who deal with dementia patients are quite familiar with this kind of ranting. Look at the faces of the Fox announcers as they listen; even these sycophants are having a hard time remaining polite and not rolling their eyes. He’s clearly losing it. I wonder if he’ll actually be able to run again in 2020, or if he will have to pull out due to medical problems.



The information and opinions in this report were prepared by Marshall Gittler. Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable, the author makes no representation as to its accuracy or completeness. This report is provided for informational purposes only and does not take into account the particular investment objectives, financial situations, or needs of individual traders. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy.


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‘The key is not to predict the future, but to prepare for it.’ Pericles, 500 BCE