ON DECK FOR WEDNESDAY, SEPTEMBER 11
KEY POINTS:
- Markets have spoken. Trump lost the debate.
- US CPI probably won’t materially change anything for the Fed
- Weakness in the UK economy humbled forecasters
I had a great day marketing the global outlook in NYC yesterday with the number one question everyone was asking being ‘are you going to watch?’ The debate, of course, not today’s US CPI that probably won’t move the dial much if at all.
Markets are whispering that Trump lost the debate to Harris while sounding and looking like an old, totally crazy, angry bully with a tired dog-and-pony act. Let’s see what polls show, but election proxies like US equity futures are slightly lower, PredictIt betting is giving the edge to Harris. The dollar is broadly softer perhaps on less safe haven demand and less concern that Fed rate cuts would be thwarted by looney tunes tariffs. Bitcoin is down because of Trump’s hate-on toward the dollar and courtship of the cyber crowd. The MXN, yen and several Asian pairs are among the currency leaders partly on slightly less worry toward potentially very misguided US trade policy. Charts 1–3 show election odds with some pending updates in the debate’s aftermath. Of course, relative polling matters less in the US given the role played by its Electoral College.
The other focus today will be on US CPI for August. Overnight releases were limited to the UK and were weak.
US core CPI (8:30amET) is widely expected to print at 0.2% m/m SA with 55 of 64 (64!!) forecasters expecting such a reading and the tails roughly even. The Cleveland Fed’s nowcast leans slightly toward 0.3%. At this stage let’s just get to the numbers and the clean-up. I doubt the release will matter much to Fed pricing or tip the balance on 25 or 50 with 25 likeliest opening salvo.
Chart 4 is a reminder that even SA inflation data may be following the same seasonally distorted pattern toward hot readings earlier in the year and cooler readings over the summer.
The UK economy struggled in the batch of releases for July that humbled UK forecasters. GDP was flat (+0.2% consensus). Industrial output reversed the prior month’s gain (-0.8% m/m, +0.3% consensus). Construction output fell -0.4% (+0.5% consensus). Services grew slower than expected (0.1% m/m, 0.2% consensus). And the trade deficit widened by more than expected. Peachy.
And so as you might expect, the gilts front-end is outperforming other global benchmarks and sterling is underperforming gains by other crosses against the USD this morning. There is still little priced for the BoE’s September decision, and November’s pricing increased slightly and is over -30bps.
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