Friday’s US Non-Farm Payrolls came in better than expected at 224,000 new jobs created. It prompted the following Presidential Tweet, “Strong jobs report, low inflation, and other countries around the World doing anything possible to take advantage of the United States, knowing that our Federal Reserve doesn’t have a clue! They raised rates too soon, too often, & tightened, while others did just the opposite”
The Reserve Bank of Australia cut the Australian Benchmark interest rate on Tuesday to 1%.
In Turkey, President Erdogan fired the governor of its central bank. It had raised interest rates in September in order to curb inflation and give a boost to the Turkish Lira. Mr. Erdogan believes that high-interest rates cause inflation. He wishes to cut interest rates to boost growth.
Several dynamics to consider; trade-wars, currency-wars, government interference in central bank policymaking, bubbling US equity markets, not to mention US/ Iranian tensions, Brexit, and the UK leadership choice. To me, the market is uneasy and has the potential to be far more volatile than the S&P volatility index suggests and so it’s either time to stand aside or (if you haven’t already) start hedging, in effect protecting downside risk. And for me the stand-out currency/bullion safety hedges are long gold, long yen and long EURGBP.
A US rate cut in July may give one last boost to US markets, but I feel it’s downhill from there. And then we can all spectate as high-frequency algos trade against each other and distort markets to the downside as they tend to do when risk is taken off the table.
This week, the main market drivers will be the FOMC minutes on Wednesday and the testimony of Fed Chair Jerome Powell to the House of Representatives Financial Services Panel on Wednesday and the Senate Banking Committee on Thursday.
The US Consumer Price Index inflation gauge for June will also be released on Thursday and is expected to fall to 1.6% Y/Y.
Canadian interest rates are scheduled for release on Wednesday and are expected to remain unchanged at 1.75%. China CPI is also out on Wednesday and is likely to print 2.7% Y/Y for June.
In the UK, leadership hopefuls Hunt and Johnson will continue to garner support for their respective challenges. Postal ballots have been sent out to Conservative party members and a new leader will be elected on 22 July.
Perhaps Conservative party members will heed the words of the late George Ortiz, art collector and philanthropist, “Most of the politicians in the West have forgotten their mission and consider politics a career; their ego projections, self-interest and power more important than their call to serve humanity. They are responsible for not giving the right example and for our failing ethical and educational standards.
Materialism has impaired our courage, but it is not materialism that is at fault. It is the escape into materialism, it is a refusal of most men to develop their potential and assume their responsibility.”
These are wise words and relevant the World over.
Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.
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