August 28. USD under assault

–Friday’s Jackson Hole speeches resulted in a weaker dollar and flatter curve. The ten year yield declined 2.4 bps to end at 216.6, with a new recent low in 2/10 to 83.4 bps (-1.8 on the day) and a new ytd low in red/gold euro$ pack spread to just 52.375. Dollar index making new low, not only due to differences in interest rate policy, but because of mounting issues confronting the US, including the debt ceiling and budget, Trump’s threat to pull out of NAFTA. I suppose Afghanistan, Venezuela and N Korea also play into the equation, as does Tillerson’s “Trump speaks for himself” comment. EUR currently 119.33, a new ytd high, having started the year below 105. USD also at a new low vs China yuan at 6.6270. The weaker USD should be considered as a positive for US manufacturers, but the flatter curve suggests an utter lack of forward inflation. Though it’s not particularly predictive, I would also note that the ten yr tip to treasury spread notched a new recent low of 175.7. New highs in EEM indicate a search for better growth opportunities.
–Obviously huge damage in Houston will require federal stimulus. Oil this morning is lower, likely due to storage problems, while RBOB is at a new high. Gold is again above 1300 this morning. Shorts in interest rate futures will likely be squeezed going into Friday’s employment release.

Posted on August 28, 2017 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

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