Impeachment sparks a flight INTO the dollar?!?
Sept 27. 2019
–The dollar index settled at its highest level since May 2017 as EUR posts a new low testing 109. Economies with dollar based loans are likely to encounter stress, though effects appear minor thus far. Stocks slightly weaker due to impeachment uncertainties. WeWork was downgraded to ‘hoping to survive’ as the company halts all new lease agreements. Rates eased yesterday, with tens down 4.5 bps to 1.685%. Reds through golds up 3 to 4 bps. Oct/Nov and Nov/Jan FF calendars little changed; both are indicating around 50/50 odds of an ease at the Oct and Dec FOMC meetings; slightly more likely in December. FFF0 settled unch’d at 9840.0, 27 bps above FFV9 so the market is sure of at least one more cut prior to year end.
–New buyer yesterday of 10k EDZ0 9900c for 14.0 ref 9853.0; settled 13.75 vs 53. Not a particularly large trade, but since I have cited the EDZ0 9800/9900 risk reversal, worth noting. The 9800p settled 7.75, so the rr settled 6.0 for the call. EDZ9/EDZ0 remains the lowest one-year calendar at -51.0, down 1.5 on the day. A bias toward lower rates continues.
–News today includes Personal Income and Spending expected +0.4 and +0.3, with the Fed’s preferred measure of inflation, Core PCE prices expected 1.8%. Durables expected -1.0% with Core capital goods orders expected 0.0. Michigan Sentiment also out, perhaps important given a weak consumer confidence reading last week. Clarida speech yesterday again brought up the idea of a change in policy that would let inflation run above target in an effort to ‘make-up’ for previous shortfalls.
