There was not much to chew yesterday beyond the Trump-Putin meeting in Helsinki and a most instructive press conference (which can bee heard here ). It seems that hard wired democrats and the press nearly suffocated, hearing D. Trump say that the US/Russian relationship was at its lowest point... until a couple of hours when their meeting began and by the positive congruence conveyed at the conference between the two men which contrasted with the way Trump treated German Chancellor A. Merkel, Europe in general and to his dirty meddling in UK politics last week (pushing B. Johnson).
Still, yesterday’s press conference was candid and tainted with mutual respect. It actually shocked many people that D. Trump treated V. Putin the way he did but you can only play the comedy for so so long. V. Putin did support D. Trump in 2016 and he said as much yesterday, citing as a reason the fact that D. Trump was more open towards opening himself to Russia. US indices closed mostly unchanged after trading slightly lower for the whole day. European shares and the Dax did a bit better, supported by Deutsche Bank’s 8% rally after beating earnings. The dollar was weaker “across the board”, i.e. also vs. most EM currencies which fared well ... for a second day. A bullish outlook on RUB seem justified to us on the prospect of some normalisation in US/Russia tensions and we hold the same view on MXN, even more so that speculative longs have all been purged. We noted yesterday that last Friday’s speculative COT report (link) was mostly long USD which is an additional reason to be cautious on the USD near term. Most likely, we will hear Fed Chair Powell tone down tightening expectations later this week, reflecting tame inflation numbers and perhaps also fears of a trade war linked slowdown... The Presidential invitation not to overdo it, may also play a role at the margin. After all, the Fed is also (if not mostly) tightening to preserve a yield advantage in FX and bond markets and to facilitate the international funding of US fiscal imbalances. Given the ECB and BOJ “wait and see” attitude on monetary normalisation, what the Fed has already done secured a relative advantage and the instauration of a dollar risk premium which might be sufficient for now and a good enough reason for Fed Chairman Powell to guide additional tightening expectations lower. Yesterday, the dollar dropped slightly vs. EUR except against GBP which suffered from PM May’s increasingly difficult position in Brexit negotiations (she lost the support of another Minister yesterday and she needed the votes of three opposition members for her Brexit amendmwnts to go through yesterday). She said that a new referendum is excluded but it might not suffice to satisfy hardline Brexiters and she looks increasingly at risk. If she is forced to leave, it will be ‘all shuss” down for sterling in our view. Boris Johnson held the view earlier that a hard Brexit could be fought by making the currency more competitive. Some modest upside risk also exists from expectations of an August BoE tightening. Gold tried to hold prior to close fractionaly lower yet again. Gold is in need of a break that will surely come one of these days (as long as we do not have to hold our breath)...The situation in the physical silver market is also extremely tight for what it is worth in a market that is heavily manipulated in the derivative paper market. Yesterday, US retail sales came in as expected and Chinese GDP suggested some slowing in the Chinese economy. We are puzzled by two things; the fact that intentions to purchase homes and cars are falling sharply in the US which gives some credence to the idea of a peaking economy. And the fact that momentum is fading as well. Overnight Netflix disappointed and dropped 14% overnight. US indices are defying gravity because of sharebuybacks and the Nasdaq performance while the Nasdaq is being led by a narrow list of fang stocks. Netflix is one of them. This is a delayed and abbreviated version of our premium subscription based report published ahead of the US and European session every day. 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