We started this program with some
weakness in the dollar. That seems to
have paired even just in the last 50
minutes or so and Guy was making the
point at the top of the program that
maybe the market's not reacting all that
much. Certainly FX markets not reacting
very much to the to the Lisa Cook story.
Is that because we knew it was coming?
Maybe bond markets are reacting a little
bit more. What's your takeaway so far?
>> Good morning, Anna. You're right.
Markets are largely shrugging this off.
Initially, they did react to the
headlines. The reason we've kind of
erased those moves is because uh first
of all, we got the report that Lisa Cook
will challenge the the kind of decision
and the evidence is very much they'll
likely win. Trump has no just cause for
allegations of fraud. They're not yet
proven. Now, even if they're they're
proven, then he can remove Lisa Cook,
but that will take some time. So, it's
likely if Lisa Cook sues to reinstate
her job, she will win that fight, which
means Trump's not going to get the
change in the Fed in any immediate
basis, which means that from the Fed's
point of view, it's the status quo. So,
you shouldn't get any direct impact on
the front end yields in the dollar.
However, you've got to make an
assumption now. Does Trump kind of go,
okay, I was wrong and back down and
forget the story. That's not been his
motto's operandi so far. So, you've got
to assume that he's going to double down
on his public attack on Fed
independence, Fed credibility, and that
is an undermining of US institutions. So
it's not a set binary moment just yet,
but it's yet another blow and a big
blow. It's a really clear kind of
politicized move here because doesn't
have just cause. It's not a legal
process here, an attack on US
institutional credibility. So that is
ultimately bad for long-end yields uh
sorry bad for longend bonds which will
see longend yields rise. It'll be bad
for US stocks. It'll be bad for the
dollar. It's not yet a tipping point,
but there will come one because this is
another negative for US assets.
Is the trade war restarting as well,
Mark? I we've just been talking about
India. We can come to that as well in
more detail in a moment, but we're now
talking about digital taxes once again.
You got all kinds of other issues being
thrown around. Are we back to having to
price in trade deals that we thought
were done maybe not being done?
>> I don't think the trade war ever really
went away. I'm not sure war is really
the white right kind of word for it.
It's it's a kind of it's an a US attack
on the global trade system which the the
global trading system is so far being
relatively resilient to. Uh are they
going to continue suffering more
attacks? Almost certainly. I mean Trump
even you know before this one was
talking about his semiconductor chips
are coming in another two weeks. He's
always constantly promised uh maturity
for these threats. So of course we know
that trade is going to continue being
problem and it's going to continue
costing businesses and consumers and
affecting global growth.
Mark, in our last uh 40 seconds or so,
there has been a question of seasonality
in September. Historically, the market
always tanks. The equity market always
tanks in September. What do you think
could be the potential catalyst or the
straw that breaks the camel's back here?
>> We have a lot of catalyst, don't we?
We've got Nvidia earnings. We've got
inflation data. There's core PC, but I
think at the CPI one's even more
important. We almost know it's going to
be higher. It's going to undermine the
idea the Fed's going to cut, which is
what everyone's betting on at the
moment. We've got jobs data to come.
Now, it's an interesting one, the jobs
data, because it comes really weak.
People will get really worried at the US
economy and say, "Okay, those rate cuts
that are already priced are going to
come, but maybe we've got a recession
coming." If it comes in strong, well,
then it completely undermines those rate
cuts. So, either way, it seems like
lose-lose for stocks. Plenty of
catalysts, negative catalysts on the
horizon the weeks ahead.