Risk-on flows stall
Personal Income on deck
Nikkei -2.82% Dax 0.35%
UST 10Y 0.53
Oil $40
Gold $1975/oz
BTCUSD $11127

Asia and the EU
EU GDP -12.1%

North America Open
US PI/IS 8:30

Markets were subdued on the final days of the month with currencies flat across the board while equities saw little follow-through from the good news in FANG earnings.

With little newsflow in FX, currencies went into their usual summer stall last night keeping tight ranges in lackluster trade. The dollar strengthened mildly but it was nothing more than very tepid profit-taking as investor sentiment continues to be very negative against the greenback.

The weakness in the dollar appears to be much more than just a mere interest rate compression story, though that is certainly the dominant fundamental factor aligned against the buck. With 2 year at mere 11 basis points and benchmark, 10-year sliding toward the psychologically key 50 basis point mark income returns on a dollar-denominated fixed income are shrinking by the day.

But this particular selloff may be political as well as economic. With the US in a permanent state of turmoil at war with most of its allies as well at its adversaries, it’s global standing amongst the productive liberal democracies of the world at an all-time low, investors may be losing faith in the strength of US credit. This is clearly one of the reasons why gold is rising, but it’s not alone. Bitcoin is in the midst of a stealth rally as well having crossed the 11,000 marks without much fanfare. The price action in alternative currencies suggests that the dollar troubles may just be commencing especially if the political rancor, pandemic hotspots, and a reversal in the economic rebound from Q2 lows all combine to create a highly volatile start to autumn.

So far stocks have blissfully ignored the political problems in the US and yesterday’s banner earnings reports from most of the FANGS have validated the bull’s faith in the internet economy which dominates US indices. Stocks have managed to hold on to most of their post news reaction gains but have made no progress in the overnight session. The bulls will certainly try to push the indices higher with longs gunning for the key 11,000 level in the Nasdaq as the month comes to a close, but with prices now reflecting all the good news we may be setting up for profit-taking day if the expected upside momentum does no materialize at the New York open.