We went into the weekend with a strengthening dollar, as investors try and call bull on the Fed’s plans for a rate cut…

It was the data that did it: Retail sales in the US rose by half a percent and industrial production had a similarly good run, leading to questions over whether the Fed can justify a rate cut this week. The move undid, in a single afternoon, the drift to a weaker dollar that took most of last week to manifest and if we don’t get something more than just words from the Fed on Wednesday we could see highs for the year printed by the dollar.

There’s a good example in The Wall Street Journal on examples of pre-emptive rate cuts being a good thing, which is worth a read.

Ex Fed member Stanley Fischer has said that Trump will oust the current Fed chairman, Jerome Powell, if he gets another term in the White House. Trump appointed Mr Powell, but has continually derided him and would be happier if he controlled monetary policy directly!

Elsewhere: Protests in Hong Kong resumed at the weekend with an estimated 2 million people taking to the streets! The hearing of  the extradition bill had been suspended, but this isn’t enough to satisfy protesters that it won’t be quietly reintroduced at a later stage.

There’s an interesting piece in The Telegraphtalking about how Washington can hurt Hong Kong at any time, by ceasing to recognise its independent status at the WTO. If it did that then Hong Kong would be subject to the same tariffs as China and would also end its access to sensitive technologies and really put the brakes on its economy. Worth a read.

The Damage that can be done by the US technology sanctions is apparent, as Huawei are apparently going to see a 40-60% drop in smartphone exports. That’s 40-60million handsets! They’re lucky that they can try and offset this drop by selling more in their domestic market. The sheer size of the Chinese consumer base could make these numbers up all by themselves, but with upgrade cycles closer to 24 months than 12, it’s not a long term solution.

Oil continues to make the news, with concerns that prices will rise if tensions/attacks continue. The price driver isn’t the lack of oil, but the increasing cost to insure the infrastructure and supply chain that gets it out of the ground, across the globe and into useful product. Tensions between Iran and the US continue to grow and Iran have said they’ll scale back their nuclear commitments. The steps include increasing stockpiles of enriched uranium and the production of ‘heavy water’. These moves would almost void the nuclear accord.

This move from Tehran comes despite Europe showing more willing to work with Iran to continue to trade, including using a new barter system for exchange of goods to be able to avoid the US’s sanctions. Reuters has the story.

Today we’ve got a very light data calendar, so investors will be left to ponder geo-politics and central bank policies. We’d hope they don’t get too lost in their thoughts, as neither is particularly inspiring!

Have a great week



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