Would, Wouln't or Shouldn't (Daily Close)
While EUR traded generally softer yesterday, GBP weakness returned including vs. EUR as political tensions remained that could redefine British politics. T. May faces opposition from pro-EU Tories who want to keep close ties to the bloc. The next step could be a vote of no confidence in her government. This motion would potentially pave the way for a full-scale general election, which could result in the Tories being thrown out with socialist Labor leader Jeremy Corbyn installed as Prime minister, Bloomberg reported. It would probably be a better outcome than B. Johnson but in both cases, most analysts concur about the negative impact this would have on GBP. BoE Governor Carney talked about the need to hike rates on a strong job market but perhaps he was also mindful of the perspective of a more severe political crisis to talk rates up. The initial 14% decline in Netflix was quickly forgotten and papered over (see US Stocks, Equity sector performance ,TechCheck ) by a relatively a relatively dovish Fed Chair Testimony. J. Powell, while referring to the need to further hike interest rates “for now”, insisted on the need to do so at a moderate pace, leaving question marks on the dot plots and the extent of remaining rate hikes. The curve is signaling the increased risk of a recession but the Fed Chair minimized the importance of this signaling (which remains a reliable and time tested early signal of upcoming recessions). In the meantime, stocks powered 0.5% ahead with the Nasdaq printing a new high, trading again at the top of their Bollinger bands with risk reversals suggesting option traders are embracing this rally as well. D. Trump who came under a torrent of criticism from both Democrats and Republican for casting doubt on the U.S. findings that Russia meddled in the 2016 election said he accepts the intelligence findings that Russia would, would not or should not have intervened in the presidential campaign but did not retreat from comments savaging Special Counsel Robert Mueller’s investigation of Russia’s election meddling. What would the US do if Russia was not its foe? Russia fell from the top 10 list of holders of US Treasuries in the TIC report published yesterday as selling continued unabated and going into Gold most likely as usual which is or rather should not be the reason why Gold is relentlessly going down European shares outperformed with the Dax gaining 1%, supported by a weaker euro and as the European Commission President Jean-Claude Juncker prepared to meet with Donald Trump in Washington next week to explore the possibility of starting negotiations on reducing car tariffs for several key trade partners. Volkswagen also reported it saw its sales jump 8% in Europe during the first six months of the year. Credit spreads were broadly tighter with bond yields ending largely unchanged. As we indicated above, gold was bombed out, dropping to USD1228 (from UD1242) while stock markets opened lower but as stocks recovered, gold forgot to do the same, likely under the pressure of determined short sellers. We have no idea how long this manipulation can continue. At the same time, bitcoins rallied by +14% (+24% MTD, -48% YTD), on no news as some investors seemingly rushed to buy fake money. For what it is worth and as N. Roubini reported in a tweet, Tether who used to manipulate Bitcoin just printed another 200mn of fake money. So this may be just another case of manipulation of bitcoin to suck more believers in the crypto space.
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