E Market Briefing For Wednesday, June 19

Exporting 'deflation' - from Europe, not just China, may be the single most influential impact on markets; and what allows the Fed maneuvering room, at the moment, to either retrieve (cut) their last nudge higher; or simply wait another month to watch data, and perhaps the outcome of G20.  

The President's thinly-veiled (not even) attacks on Powell and even ECB head Draghi (or at least pressing for parity with Europe which is not how this should be played) 'if anything' should embolden Chairman Powell to resist a further intrusion by the Executive branch on the Fed's independence.  

Sure, I realize the Fed sees the political inference; and Trump was correct months ago about the Fed's prior hike being unjustified (almost slipped by saying not justified, which would acknowledge economic slippage vs. growth surge they were claiming). However, today's pressure (along with progress in having talks with China, and a strong stock market) argues for the Fed to do nothing, but perhaps lip-service to keeping their eyes focused on 'data', and acknowledging certain sluggish aspects to the economy, while blaming 'trade' uncertainties if they'd like as well. 




In sum: as the players' 'deck was shuffled' Tuesday morning (varied hands being played at what evolves into a global poker game), it becomes apparent that the Fed can easily recognize economic slippage at the same time they have 'cover' to not move ahead of a G20 outcome, now that President Trump says he'll have an 'extended meeting' with China's Xi. 

Prior to today, I thought the most we can expect from Osaka is some sort of 'outline' of areas to be addressed; or simply a commitment for negotiators to resume talks (especially if both sides embrace what was originally outlined, or as Trump says, 'a deal we had they walked-back from on several points') .. well the markets will be sufficiently comforted and the Fed can stall.

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David Newson 8 months ago Member's comment

Nicely done.