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Video / 28 August 2017 at 7:55 GMT

From the Floor: Cornered Trump at war with Dems, GOP — #SaxoStrats

#SaxoStrats
   • Focus returns to US on Trump, debt ceiling deadline
   • Yellen's Jackson Hole speech 'likely to go down in infamy': Hardy
   • Oil prices higher as Hurricane Harvey plunges Texas into chaos
   • Core bonds continue strong trend post-Jackson Hole
   • Gold testing resistance as USD weakens

SaxoStrats
By Michael McKenna

While the weekend's Jackson Hole central bankers' summit was largely a non-event as far as market movements go, Saxo Bank head of forex strategy John J Hardy says that Federal Reserve chair Janet Yellen's complacent speech, in which she reiterated her claim that no new crisis is on the horizon, "is likely to go down in infamy".

Given the inflamed political climate in the US, as well as the continued progress of those trends, including "Fed-driven inequality", that helped to create it, Yellen's view appears likely to provide much quotation fodder if and when financial markets respond determinedly to the continued unrest.

As things stand, however, the situation remains one on strong macro readings, weak inflation, and "wait-and-see" central banks. All of this, in Saxo Bank head of fixed income strategy Simon Fasdal's view, creates a "goldilocks" environment for bonds, and both core and emerging market bonds continue to rise into Monday's session.

In the US, President Trump's controversial pardoning of Arizona immigration hardliner Joe Arpaio brings his administrations clash with a decades-old bipartisan consensus into sharp relief. As the Deptember 29 deadline for the US' debt ceiling draws nearer, Hardy says that the country's divided politics – which see a populist president at war with both the Democrat and Republican parties – are likely to attract more attention from markets.

In the meanwhile, EURUSD continues to rise as the USD retreats, with hardy saying that the 2012 level of 1.2040 is the next area of focus.

EURUSD

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Source: Saxo Bank 

South of the US' divided capital, Hurricane Harvey hit the Texas Gulf Coast hard, with Houston seeing widespread flooding and production dropping by  700,000 barrels/day in shale terms and 300,000 b/d from offshore producers.

In crude oil terms, Saxo Bank head of commodities strategy Ole Hansen reports that prices are rising but the impact is overall limited as plunging refinery demand contends with the production cuts for influence. RBOB gasoline, he adds, currently sits at a two-year high.

"We are likely to see some crazy data from the next suite of US inventory reports," adds Hansen, with the hurricane's impact sure to be felt in the next releases from the EIA.

Finally, gold prices are challenging resistance again on the continued furore surrounding the Trump administration, the unresolved situation in North Korea, and a softer USD.

Donald Trump
A cornered president is a volatile one... at least if that president 
is Donald Trump. Photo: Shutterstock 

Michael McKenna is senior editor at Saxo Bank

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