EUR 8.46 For Business Accounts Only

The Morning Track ratcheting-up

- The Morning Track – Ratcheting up by Bob Savage
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The “what will Powell do” fears seem less dramatic than “what will Trump do” as markets flip the calendar to August. The ratcheting up of trade fears counterbalances the fear of central bankers normalizing. Trade war focus returns with Trump administration proposing raising tariffs to 25% from 10% on the $200bn in Chinese imports, however, US Treasury Secretary Mnuchin and Chinese Vice Premier Liu are looking for ways to restart negotiations. This maybe the reason August gets exciting with FOMC meeting today expected to clearly lead to a September hike. But the Fed isn’t the only one ready to act.
• India RBI delivers 25bps hike as expected. The central bank kept its forecast for GDP at 7.4% for 2018-2019. "The progress of the monsoon so far and a sharper than the usual increase in MSPs of kharif crops are expected to boost rural demand by raising farmers’ income," the MPC said.
• Korea November Hike being priced. Some BOK board members stressed the need to raise rates sooner rather than later, according to minutes from the July 12 policy meeting released.
• In addition to the FOMC today, we still have Brazil COPOM, UK BOE, Czech National Bank and Mexico central on the docket for tonight and tomorrow.
Overnight focus was not on either trade or monetary policy as much as on economic data with the global Manufacturing PMI reports mostly softer and troubling to the future outlooks which are beginning to show the wear and tear of trade war talk and rate hike normalizations. This is August and it’s a hard month to trade traditionally, with the first few weeks light and the last one usually filled with those ready to get ahead of Autumn change. The risk mood today is weaker as fears are ratcheting up across all three factors – trade, rates and economics – leaving the news from the US a key driver and the USD up trend a barometer for trouble.