Market update: The move higher continues after the US-Mexico deal, a worried ECB intervenes

11 Jun

by Mihály Tatár


Good Morning!


  • The Fed rate cut hopes – Friday’s US employment report was indeed quite weak – , now coupled with the relief of the US-Mexico border deal fueled the rally higher (SPX +0.47%, Nasdaq +1.05%, DAX +0.77%, Nikkei +0.33%, Shanghai +2.33%, US 10Y yield 2.15%, Mexican Peso +2% erasing all tariff-related losses. Note that Trump threatened that the tariffs against China will be raised if Xi doesn’t meet him at the G20 at the end of the month – but this was interpreted as a good news, since why would the Chinese President refuse?) To put the recent moves into perspective, the S&P lost 7% on the ’trade world war’ theme and came back 5% since the Fed verbal intervention, the DAX lost 6% and then regained 3%, Shanghai dropped 14% and regenerated 3%. (But let’s repeat the media mantra, ’the-US-is-shooting-itself in-the-foot’.) Naturally, the one-billion Dollar question for traders remains whether there will be a US-China deal before a Chinese (global?) recession starts, and this uncertainty could be seen on the very weak oil rally (WTI 53.60, Brent 62.50 USD – of course it didn’t help either that according to Rystad Energy, US oil production will spike to 13.4 million barrels per day by the end of 2019 – Texas alone 5 million barrels, more than any OPEC member other than Saudi Arabia.) After two weeks of losses, the Dollar bounced (EURUSD 1.1310, GBPUSD 1.2680) – somebody at the ECB had to realize they just made a huge mistake by not being dovish at the ECB meeting, because it was leaked that ’the chance of an ECB rate cut will grow if Euro ascends through 1.15 this summer. 1.15 might be tolerable, 1.20 could be critical’. (This of course begs for two questions: 1. Is the ECB sure it doesn’t manipulate its currency and the Eurozone growth of 2016-2017 was not mostly about Euro depreciation? 2. How long do they think Washington will tolerate the ECB not tolerating EURUSD above 1.20?). It’s no wonder the regional currency rally continued (EURHUF 320, EURPLN 4.26, EURCZK 25.60, even with a Hungarian inflation of 3.9% for May (and core inflation rising by 3.7%, a 11-year high).


  • While fourth-wave feminists demonstrated topless for the ’Free the Nipple’ movement (’why are men nipples allowed to be shown on social media but not female nipples’, this is not a joke – you see, there is a life threatening anti-female injustice here, Joe Biden should take this up as a campaign promise immediately) and Angela Merkel was talking about ’multiculturalism failing utterly’ again (this is like the EU army – repeating the obvious for years but then doing something else) – the media noise obscured the fact that Washington just wiped the floor with both the Mexican government (which, by the way, seemed to be super-relieved that there won’t be tariffs, and the EU (EU member states are quietly retreating from their Iran trade ambitions since the US announced it will target the freshly set up European trade vehicle (Instex), and its users with far-reaching sanctions. (How you interpret the developments of course depends on your world view – Californians showed their opinion by extending health benefits for illegal migrants – , but you can bet the Trump base was not disappointed by the last two weeks.)


Have a nice week,



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