Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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Morning Brew July 27 2021
Erik Schafhauser
Senior Relationship Manager
Summary: Next Up the Nonfarm Payroll
Good Morning
Weak Start into September
While Equities take a break in their decline yesterday, the dollar continues to gain strength overall.
The three US Indexes gained minutely but with decent volume and broke a 4 day loosing streak. All gained less than 0.5%. Most movement was in AMD and Nvidia which lost heavily on the ban of AI chips to China. Nvivia lost 7.6% and AMD 3%.
The GER40 broke below the 12864 support, if the 12438 fails to hold, 12000 is a likely target acc to Kim
In FX the USD Index is testing new highs with GBPUSD at 1.1545, EURUSD below parity, USDJPY at 140.30 and near at least verbal intervention territory.
Gold and Silver are looking dangerous from a technical as well as a fundamental perspective as we are trading 1700 and 17.80. 1680 is key support in Gold.
Oil remains weak on demand worries.
China will implement its audit agreement with the United States announced last Friday and will strengthen communication with foreign institutional investors, a senior Chinese securities regulatory official said on Friday.
The G7 are optimistic on imposing a price cap on Russian oil in an attempt to keep the pressure on Russia while maintaining the flow.
Group of Seven finance ministers are expected to firm up plans on Friday to impose aimed at slashing revenues for Moscow's war in Ukraine
We are expecting the German Trade Balance and the EU Producer Prices ahead of the nonfarm Payroll. The last will be the key event with a consensus expectation of 300k, an unemployment rate of 3.5% and a 0.4% rise in average earnings.
While it is unlikely that there is any shift in the longer term sentiment of higher rates and inflation for longer, traders and investors will look for clues if we should expect a 50 or 75 bps hike in September.
In high inflation periods, tangible assets and commodities should prosper over the longer term. As commodities are quite technical to trade, with expiry dates and lot sizes not always intuitive, Mutual Funds and or ETF are quite interesting here.
Trade safely!
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