Market update: Nothing stops the Dollar, metals fall, strong European growth data

15 Aug

by Mihály Tatár

 

Good Morning!

 

  • Watching the volatile Turkish Lira bouncing (+10% on Tuesday, then losing 3% this morning, who needs Bitcoin for adrenalin), stock markets at least ceased dropping (SPX +0.64%, Dow +0.45%, DAX +0.00%, Warsaw +0.39%, but as usual Shanghai -1.55%), with traders starting to look at the contagion theme more selectively. (The downward spiral in the US-Turkish relations continued, in the meantime, with President Erdogan calling for a boycott of IPhone and raising customs taxes on US goods from rice (+50%) to passenger cars (+120%), while Trump signed the bill blocking the delivery of the superior F-35 fighter jets). Nothing stopped the Dollar appreciation, however, and the EURUSD dropped to 1.1320. (As discussed months earlier, with rival currencies being a complete mess, the only thing standing in the way of a brutally strong Dollar is Trump himself, who, I guess, will eventually get very angry and will threaten Germany and the ECB directly.)  The Dollar moves were quite a spectacle and given that the majority of analysts forecasted an EURUSD of 1.25-1.35 for this year, sidelined everything else in currency trading (GBP 1.27, EURPLN 4.308, EURHUF 322.90): The celebrated Eurozone growth data (Germany +2.3% Y/Y in Q2), the British unemployment rate falling to 4% – the lowest since 1975 -, and regional GDP surprising to the topside again (Poland 5.1% Y/Y, Hungary 4.6%, Slovakia 4.1%, Romania 4.1%, with the exception of the Czech Republic’s  2.4%). The trade war fears and the strong Dollar together kept commodities under pressure (Copper -2%, that’s -21% for this year, Zinc -3%, that’s -32% – I guess the Trump infrastructure proposals would be needed to stop this washout -,  WTI 66.80, Brent 72.30 USD), and it’s worth noting that Gold is falling like a stone: It fell under 1190 USD, having traded not so long ago near 1400 USD. (This is actually quite underreported: Either Turkey’s potenital collapse is not significant for the market as a whole and there will never be serious inflation, or Gold is simply not a good asset to protect yourself with. This should be breaking news for many: Countless portfolio managers, sovereign wealth funds and private investors have been purchasing Gold in the last decades feeling good about themselves – remember, during the crisis the saying was that the Dollar would eventually collapse and 1800 USD in Gold is just the beginning.)

 

  • After deafening silence, the mainstream media began to cover the events during which 100 cars were firebombed in Sweden by ’youths’, clearly putting the Swedish government, including the Prime Minister, in shocked disbelief. Of course, ’a strong answer’ has been promised (which so far was that the police warned the parents of the attackers), and it’s not hard to forecast that this will help the once generally hated anti-immigration, EU-sceptic Sweden Democrats at the upcoming elections. (1998: 0,4%, 2002: 1,4%, 2006: 2,9%, 2010: 5,7%, 2014: 12,9%, 2018: ?)

 

 

Have a nice day,

Mihály

 

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