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Joining us now with PIMCO Pacific Investment Management Company. Let me Cantrell expert on Washington, the dynamics of public policy. Oh, she's having she's seven. No, she's having a glue street breaks of breakfast like these, having a full English. Hi, the woman I love to hate missus Key sees you and goes how much Van Cleef can you wear? Let me joins us this morning. Okay, I'm a Lisa Cook. I've been a and I did not see doctor Cook.
I did not see her at checkson hole. She sort of slipped in and slipped down and I had to get back to feed the walk the dogs. But Libby, let's cut to the Chase Michigan State Bulletproof applied economics. She's studied under Berry icing Green at Berkeley. This is a front rate national economist in international economics. Why let's just start with the why. Why is this happening in your Washington.
Well, well, good morning, Tom. I mean I think that you know, broadly speaking, this president is really upset that Jay Powell will not cut rates, obviously, and he is trying to influence the Fed Board any way that he can. I think he's he is frustrated with the structure of the Fed Board, where there are stagger terms. As we all know, these fourteen year terms which are some intended to outlive any one administration.
On one president. But let me cut to the chase. You're expert on this, and this is what everybody's asking, whether they're for or against Ms. Cook. Where's a leg slight branch on this, where's the House and particularly where's a Phil Graham like Senate?
Well, so that is I think the big point is that this is in many ways self defeating for the president because of course, not only does this potentially not have the impact on the ill curve that he wants to see and mortgage rates and what have you, but it also makes the confirmation of any future nominee that much more difficult. Remember that in order to get confirmed, a nominee needs fifty votes in the Senate. Republicans right
now have fifty three. However, this is something that you all appreciate this nuance, but lots of financial press do not. The Senate Banking Committee, which is the first step to confirmation any nominee, cannot lose one Republican assuming Democrats vote
against that person. So that means that that by doing this, the President has focused attention on that confirmation process and in my view, makes it a lot more difficult for him to get anybody who has any whiff of partisanship or any whiff of you know, being able to be influenced by the President in terms of minetary policy. So again, sort of self defeating me from the market's perspective in the short term, from a rate protecting the short ure.
Yeah, it's really it's really funny. We only get Libby when summer recess is going on in the Senate and the Congress are out, and she actually can make her way up to New York. But Liby, I got to ask you this, you know, forget about you know, fit credibility for a minute. Let's talk about Intel. The US government's making eight point nine billion dollar investment in Intel's That's just the first of other investments that this government is going to be making in the private sector.
Yeah, again, And to bring Congress into this. In order for the president the executive branch to make an equity investment in a company, you need congressional authorization. And the President is using the Chips Act funding, the majority of Chips Act funding for this investment in that bill. Sorry to get all you know propeller head on you, but in that bill there is no actual authorization for an equity investment. So I think there's a question about the
legality of this particular veston. However, going forward, you would absolutely need Congress to authorize. And so no, I do not think it's a coming first.
Day and Friday. We want you to come in Thursday and Friday as well. I got to get back to doctor Cook. You know, frankly, everybody knows wonderfully closely into King Green. This is one of his great students at Berkeley. She's being run over the coals. Where is the senator from Idaho? I'd been in his office. Creto has potatoes lined up in his office. Where is Tim Scott of the Carolinas? Where are these senators just to have due process for against Trump? Due process? Where is it?
Libby and I would also add to that list where a Senator rounds, where is Senator Tillis, Where is Senator McCormick. I mean, these folks who you've just highlighted are all on the Senate Banking Committee. Senator Tim Scott of course being the chair of the Senate Banking Committee. And again this may sort of seem like, you know, kind of walky talk, but this is very important because this will be the first step for any nominee for the FED.
And again, by focusing the attention, the public's attention on the credibility of the FED, on the independence of the Fed, he just raised the stakes and raised the bar in terms of I think again getting his own nominee confirmed. And I would say Stephen Myron as well, who he wants to get in place by the September meeting. This makes it a lot more difficult. That was always going to be very difficult anyway, but this makes it even harder to Okay, I got.
To go to the Supreme Court. Damian wants to jump in here, folks, Lebby Cantrell. Where this with PIMPC you're with real expertise on Washington. If it goes and I'm speaking as a hack to the Supreme Court, do you see evidence that the Trump appointed justices will look at due process and tell their guy, no, you can't do that him.
Well, they've already made a special case for the FED, right, They've already in their footnotes in their recent judgment around firing other chairmen of independent agencies, they've already basically carved out and said that the FED is a special case and that that the threshold for firing the chairman or a governor for the FED is going to be different from firing somebody at the FTC, for example, which is also another which is another independent agency. So you know
who knows. I'm not. You know, I'm not. I'm not a lawyer, although sometimes I do like to play one on TV or radio, But I am not. But think think your point is a good one that in that this will this could very well be adjudicated by the Supreme Court. And the last thing the time I'll say this is I think this is by design. I think the President is fine challenging all of these norms because some of it will stick, and some of it has stick, and thereby he expands executive power in the process.
Good morning, ninety nine in Washington. Libby Cantrell with this is PIMCO on this is really important legal matter of due process with Lisa Cook, the governor of the FED. There are presidents pointed by the regional section. There are governors. There are a set of vice chairman, and there is a chairman chairman. Poull may come back to be a governor. Just walk away. We'll see in the spring of next year. Damien Sasaur with Libby Kentrell.
Well, I mean, I guess for me, is this a kill shot at the Fed? Bibby? I mean, you know he's been attacking the Fed. He's been attacking Powell. He's been attacking, attacking, attacking for so long now that the market just seems desensitized to it. I mean, do you believe and I guess you know you don't look at markets maybe as closely as others. Is any of this price then? I mean, could this result in greater dominick? Stop it?
I just want to I want to.
I want to, sir, Yes, I have expected doing d thanks job.
No.
So, I mean, you know we have been talking about a steeper yield curve really since the since the election, uh, partly because of deficits, partly because of concervative the independence of the Fed, and obviously that has been a way for us to make money for for our clients. I do think that the fact that we the equity market didn't really move all that much last night. The FX market kind of moved a little bit, but the you know, the bomb market's moved, you know, moving a little bit,
obviously in a super yeal curve. But I do think there is your to your question, There is sort of this desensitization, this imperviousness, if you will, to these moves. And I do think people are actually assuming that the Senate will do its job. I do think that they will assume the summer.
I mean, it's kind of the you know what I mean.
You're just thinking, Wow, I can get a break.
This is important. I want you to just said this because I think it's really important. John Farrell did a spectacular interview with the Secretary of the Treasury and the other person. People are saying, look, can Besson just I mean, I don't even know if best In plays golf. I mean, you know, it could takes some lessons with Damien he does, is beston going to come to the rescue here and appeal to the president for some common sense of due process.
Yeah, I mean, I guess that's that's an open question. I mean, what we know about this treasury is that they have been, you know, very responsive to participants in the treasury market that they had. You know that s Secretary Busset in particular has leaned done the President when he has seen really the long end kind of get you know, you know, potentially get away from market back back in April. So, you know, I think that we can rely on this treasury to at least hear the input.
But again, the president here is I mean, you know, he he has this sort of be in his bonnet. This is something that he wants to see change. Again. I just think that this is self defeated in many ways.
It's part unfair question. But Damian sort of alluded to it earlier. Does Pimko feel the long end is drifting away, price down, yield up, Japan and the rest.
Well, I mean, obviously we're seeing that with global gill curves, and so yeah, I think there is there's there're just a broader question about obviously about deficits about the political will around you know, any fiscal consolidation. Of course, we haven't seen any physical consolidation. We've seemed just just the opposite. And then a concern around you know, obviously inflation, which is you know, related to the independence of these central banks.
So yeah, I think that we have we have been kind of calling for and position for seeper yeal curves in many developed markets, you know, including in the US.
Libby when some summer recess ends, you know you're going to be getting back to work. You know it's going to be that sprint right to avoid the ever left work. Well, about myself, I'm internalizing I have to do this. But you know, for me, you know what are you going to be most focused on? You know, I mean, like I mean, we've just seen a lot of tax revenue. I mean hasn't been spent yet, but I mean these tarwerf the tariff revenue is there. Money is coming in.
I know there's the big concern about the fiscal But you know, what do you expect in that run up to the end of September when you know, when people were turning.
Yeah, So Congress comes back right next next week, and one big piece of unfinished business is to fund the government and avoid a government shutdown. The deadline for that is September thirtieth. I think again the market is desensitized to these arguments for good reason because it really doesn't necessarily affect the economy unless you see a prolonged government shutdown.
Yeah.
I do think that the chances of a government shutdown are.
Not non negligible, not negligible.
At all, and partly because you Democrats have very little power right now, and this is one lever of power that they can exert.
Olby Clinic, Thank you so much. Let me cantrell with this is Pimco here, and of course on the back and forth between the White House and the Federal Reserve system involving the governor. Lisa. Stay with us. More from Bloomberg Surveillance coming up after this.
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Its differently now with Kim Harvey at Duke University. We can do all sorts of different topics, but we need to get a briefing from Professor Harvey leading into the vice chair Lyle brainer will do that scheduling eleven. Man, it's doctor Harvey. Thank you so much for joining today. You were years ago a visiting scholar the Board of Governors of the Federal Reserve System. What is the Board of Governors? This is a set of offices in the Eccles building.
It is a setup offices, and when I was there, the offices were really old and needed repair. So it's kind of ironic that they're actually doing repair today so many years later. But it is an important part of the FED. A lot of the research is done there, and I was visiting scholar many years ago.
What does a governor do different than a Federal Reserve president, a vice chair like doctor Brainerd or the chair chairman Poul. How is a governor different? Yeah?
So the FED is organized so there's a central part of the FED, which is the Board of Governors, and then there are regional feds and each of the regional feds as a presidency. And then there's a rotation on the fo MC, which is the most important component. So the FOMC is the key committee that makes the decisions on the rates.
Let me bring in my colleague Damien Sasauer before Lyle Brainerd. We have Cam Harvey.
Cam, does the whole cook issue? Does this really change things? Does really change someone's outlook on the FED, on their ability to act? I mean, you know, what's the real world impact on what Trump is, you know, basically proposing to do here.
Yeah, it's pressure, So it's political pressure. And like, in a way, what we really value is an independent FED. So I've got some recent research that asks the question how important is it to be a reserve currency? And the US has got this privilege. So the people all over the world central banks hold US dollars. They hold not just the cash but treasury bonds, and that demand for the bonds actually reduces the yield, so it allows the US to have lower interest service cost on their debt.
It allows the US to have leverage. So it is a privilege to actually have this. So one of the key components of having a reserve currency is to have an independent central bank, and that's been challenged right now.
So I just want to ask you on that, right, I mean, because I agree with you, the dollars still the world's reserve currency. It's transactual dominance is unquestioned. But here's the deal. You know, will you know some of these appointments, some of the things that Trump is doing here, Will this give him greater access to what's going on inside the FED, the ability to really impact at the grassroots level, the way people are speaking to one another,
the way people are sharing data with one another. Is that really what we're talking about here.
So this is a very difficult issue because it could be that the FED is making a serious mistake. And I for the last couple of years have criticized the FED for keeping the FED punts rate too high, and then now all of a sudden in DC, they've jumped on that bandwagon.
So it is delicate.
The balance and the pressure here and there to get them to think about this more carefully could be useful.
Kim Harvey with this Duke University, we continue with Professor Harvey. We welcome all of you on an extraordinary Tuesday here in August. Damien SASA are in for Pallsphenia. I'm Tim King. Good morning across the nation, good morning in the Carolinas, and of course on YouTube, subscribe to Bloomberg Podcast. Our new digital experience. Really humbled by that excellence. Now, Damien sassare with Professor Harvey.
So, Cam, we know about the lag from monetary policy through to the real economy. You know, ray cuts just don't you know, have an impact on the everyday person overnight. Right, So talk to us about you know what if Trump gets out of his wish and he gets one hundred and fifty basis point cuts from the Fed before at the end of the first quarter of next year. I mean, if that were to happen, would that have any real world impact immediately?
Oh, would have a dramatic impact. So you're talking one hundred and fifty basis points, Yeah, sure, bring it off, very dramatic. So more likely we'll have a few cuts. But it's there is a lag, but the lag is not as big as you might think. In any kind you reduce rates, you reduce the cost of capital. And when the cost of capital is decreased, that means there should be increased business investment and consumers will do things like buy a house that they were kind of waiting
to do for the rates to come down. So I would say that if the rates did come down substantially, that that could be a significant boost for economic growth and potentially exactly at the right time where we're seeing a significant softening in the labor market.
Kim Hervy, we're talking to the wonderful Stephen England or a standard Charter about how everybody's looking at the mix of our economics the summer of twenty twenty five, and we're worried about substituting and substitution effect and what are we going to do with tariffs and all that describe for us the risk to our income effect of dampened income, dampened investment, damp and real Dare I say damp phenomenal GDP?
Is that a legitimate risk? Oh, it's definitely legitimate. So there's a lot of confusion over this teariff stuff. And just to be very clear, tariffs lead to a one time jump and price level. They're only inflationary if the tear freight continues to go up. And this is widely misunderstood. And it's also the case when you'd have tariffs, you would have a substitution effect as you mentioned, so you
substitute alternative goods. But your point on the income effect is very important that right now what we need is increase growth. So growth has been in the first half not very robust. And given this significant weakening in the labor sector, we need some policies that are pro grows and increasing tariffs is not pro.
Growth, Kim. You know, I was kidding a little bit earlier on when I talked about one hundred and fifty BIPs. But let's talk about the markets pricing, and right this minute, they're only pricing in an eighty percent probability of a step cut. They are only pricing in one hundred and twenty five basis points of cuts through the end of next year. That's equal to the fomc's dots medium of long term projections. It's right on the screws with the
one year one year usois op rate. Talk to us about the propensity for yields to go higher from here if what you're saying is true and the tariff impact has only been front loaded, and now we're going to see the impact on inflation.
Yeah, So again, let's be careful with the tariffs. A tariff could lead to a one time increase in prices, but it's only inflationary if it's a continuous policy of increasing tariffs. More seriously, tariffs could decrease economic growth. So
it is not a pro growth policy whatsoever. And that decrease economic growth could cause issues in terms of uh, you know, yeah, fewer firms going out to the debt market, the government having some issues and raising funds, so there could be a lot of like knock on issues with the slower growth in financial markets.
Obviously.
Well, Cam, I think it's timely that we're talking about growth. I mean, it's GDP week here in the US, you know, and as we look into the second half, you know, I'm just looking at you know, some IMF projections. I'm looking at some of the bigger banks here, a lot of them are projecting that China growth is gonna is going to fall and fall quite significantly here. You know, what are your thoughts there, What are your thoughts on the impact that China is having on the rest of the world.
So, China is obviously a very important engine of kind of world economic growth now so uh, and they are struggling in some respects, in particular in the property sector. As we've seen, they really need to grow, uh, and they need to grow more than the US needs to grow because they've got a demographic problem that's way more serious than the US Kim her So it's very important for them to have growth.
Kim Harvey with US Duke University. Kim, I want to make this personal as we go to a former vice chair of Brainerd Low Brainerd came out of Wesleyan with bulletproof academics, and I would say, Kim, somewhat like you. It's not Richard Claired the dynamics stochastic general equilibrium theory. It's much more of a holistic policy view. And I would suggest we get that from Lisa Cook as well out of ken Green and Berkeley. Explain the place of
policy centric economists at the FED, whether Harvey, Brainerd or Cook. Yeah.
So one thing that's really important at the FOMC is to have diversity of viewpoints. So I'm always encouraged when there's some agreement. If it's just unanimous on everything, I'm worried about that. So we need to debate. And these are difficult times and we need a FED that has got a long term vision for the economy, that's willing to take some risk and is willing to admit that mistakes were made in the past, and most importantly to learn from those mistakes.
This has been well timed Kim Harvey, Thank you so much generous for you to be with us on this August morning, Dictor Harvey at Duke University, stay with us. More from Bloomberg Surveillance coming up after this.
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Now another headline across the Bloomberg terminal, this one the Washington Post. Who is Fed Governor Lisa Cook? And can Trump really fire her? To provide market economic perspective, Stephanie Roth joins us now as we've had some wonderful voices this morning as well, this uproar. Does the market look beyond it or can it actually adjust yield? The price of fixed income and all we do.
If Trump actually succeeds in firing Cook, the result should be ten year rates should be rising because this is a real risk about the credibility of the FED and inflation fighting, the fighting ability of that. So from that perspective, it should actually be quite negative for markets. We should see ten year yields rise as a result, the dollar significantly weaker, in equities down. This is a really market negative move to the extent that this actually can happen, although are basically.
It could help even your base cases, it can. I think that's what we see, Damien says are in the tape this morning.
Well, Stephanie, earlier this morning we had a Peter chieron and he proposed that the Fed should be enacting some form of yield curve control. What are your thoughts on that?
Yeah, I mean, I think that that's certainly a potential move because when we're thinking, when we see what the path of policy at this point, you're seeing, even though there's a pretty aggressive cutting path of the Fed, you still see that tenure yields are fairly elevated.
I think, do you think there's a commitment for the FED to expand its balance sheet going forward?
I don't.
I don't.
I don't think so. I think that would be sort of a troubling move. I don't think that's necessarily a good plan. So I think what we'll see is the Fed will do a cut in September and then beyond that, I think they're actually going to get a little bit troubled because inflation is likely to pick up pretty substantially.
This is the heart of the matter. I mentioned this eight times at Jackson Hole. I'm embarrassed to say I'm going to do it again, but it's germane. Do you perceive this as a one off twenty five beat move or Ali? Greenspan is a vector in place, is a process in place to have a set of fed RIG cuts.
The intention is never going to be to cut one time and then get sort of troubled by inflation.
I think that will be the reality.
Because certainly they're very much set up for the September cut. But what we'll probably see is employment look a bit better than what we saw in May and June, and then inflation look a little bit higher.
So what do you think about the end of twenty twenty six three percent terminal rate? I mean, how do we get there? Do you think we get there?
I don't think we get there. Interesting, I think we end up getting two to three cuts. I don't think we get to anything any close. Tennessily, where the markets priced?
You get some economic data this morning into a busy economic week. This has been underplayed in the doldrums of August. PCE Price Index on August twenty nine, I believe that's Friday. We've got all sorts of second look at GDP on August twenty eighth. Not much going on in the twenty seven, but right now some economic data here and again durables X transportation a better number, cap goods x Boeing a better number, and so you know, again it's a tea leaf and Joan Hassi has taught me to take this
three month moving average. But the bottom line is it's not all that bad. Philadelphia fed non manufacturing. Thank you Patrick Karker for the wonderful discussion in Jackson, OH is a pretty grim number, negative seventeen point five. But there's a set of economic data that I barely.
Thought the.
POK looks Yeah, it is. He did mention the eagles. I mean, I'm sure, Stephanie, is our economy slowing.
We've slowed, but I don't think we're slowing from here. So Q two is probably the weakest point of the year, and then we'll see growth stabilize in Q three and then pick up into Q four. So Q Q two what happened in Q two If you think about it, especially when it comes to the employment data, it was a period of time where we had peak tariff uncertainty of thousands of people lost the work authorization. So it shouldn't be that surprising that payroll's growth was quite slow then.
But what we should say is it get a little bit better and being at the break even pace of payrolls growth is in the sixty to eighty thousand range. If we see payrolls run at that type of trend, then that's a solid economy.
So Stephanie, the reason you're I guess above consensus in terms of how the FED gets there at towards the end of twenty twenty six is it's going to be inflation, right, It's going to be higher prices, and that's going to
stay the Fed's hand. I'm curious given what's going on in the market today, given what's going on with cook, you know what if the I mean, do you have any doubt that the Fed's going to make a decision as they have based on the data or based on what they think the data is going to be, or is there going to be another element that goes into your calculus when you're trying to determine where policy rates are going to be in a year and a half time.
Yeah, I mean so, I think the disconnect at least between where I see the sort of the trajectory from here versus what the FED is looking at is the current trend in employment, which is.
Cannot be influenced by some of these moves that that Trump is making in terms of the ability of the FED. I mean, do you think that calculus? I mean, aren't you know governor's going to be incentivized to cut rates just to appease the president? Or is that not going to add all factor into your thinking.
I think the bigger factor here is going to be the next FED chair and how that shapes the leadership as opposed to as opposed to the pressuring of individual members. I think it's more about who's going to be in that seat and how do they sort of shape the narrative for the restaurant.
Smartest thing I've heard in twenty four hours, Stephanie Rawthip will research. Okay, this goes back to green Span and Lawrence Meyer's wonderful book, A term at the FED is a risk. Here we get back to a green, spanning and dominant chairman.
Is it's possible that will end up with a chairman that, you know, kind of makes the decisions for the rest of the board. That said, the people on the list, for the most part, are largely credible, somewhat institutional type of people, and if we get somebody like Waller, I would I would expect that the credibility will be maintained.
I did my video with Joe and Tracy at the horse farm and there was a horse like by the way, No, we didn't play guitar. We were by the campfire, but you know, we we we we didn't. We were trying to use Chris Hillman. We're tried really to sing some Desert Rose band but it didn't work out quickly. Here, uh, Stephanie Wroth the inflation data on Friday? Is it in the survey or could it be market moving?
I don't expect it to be market moving. We largely get most of the information from bp I, c PI and then import prices. Our expectation is cor PC comes in a point three.
To one.
Decimal points I'm sorry, decimal point.
We get somebody in that just goes to the round big figure.
You know in this environment you kind of can't do it because point three one is very different than point two. Seven point three one, of course, means that you are at risk of closer to something like round a point four. Our base cases that it shouldn't be market moving, it'll be something that rounds the point three.
In the case she's talking, that's the smartest thing that someone said in twenty four and more than twenty four hours. Bruce Kasman would agree with you. We're talking you have to go out a few decimal places here to really get a sense of what's going on in inflation.
This conversation happened at the new bar at the Waldorf Story by the Clock last night. Stephanie brought the bar to a complete silent moment. People were just like decimal points at the Waldorf Story of Bar. It's too much. We'll see Stephanie Roth. Don't go away. Thank you so much. We hope to see you the rest of this week as well. Stephanie Roth will research stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance podcast. Listen live each weekday starting at seven am Eastern on Apple coarplay and Android Atto with the Bloomberg Business app. You can also watch US live every weekday on YouTube and always on the Bloomberg terminal.
Joining US now, Jordan Rochester had a fixed strategy a missuo, Jordan, the world's turned upside down. You're out on LinkedIn. The value that you're doing is really good. Equities, bonds, currencies, commodities. Jordan Rochester, what is your best tool now to assess where we're heading?
Well, Tom, that's a very difficult question which tool.
I think if you look at the sort of growth momentum in the surveys, we're kind of operating blind as to whether surveys are good anymore about the hard data.
That's the tricky thing we have.
It's especially tricky in the UK, but it's also becoming a problem with the US with this recent berless thing. But I think if you take into account, the overall message from an average of the surveys is that US growth had a pretty a soft spot around tariffs, of course, but maybe things aren't so bad.
Tom.
The equity market tells you that. I think profit margins amongst firms tell you that. So a mixture of those two factors.
Jordan. You know my friends Joe up In and Bruce Kasman over at JP Morgan. They're looking for, you know, a divergence, so to speak, between US inflation and that in the Eurozone slash UK. Talk to us about that. What are you seeing, you know, grassroots, you know, boots on the ground in terms of price pressures. Is there anything there?
Yeah.
What's really fascinating about this cycle is because the Bank of England and the ECB have cut rates by more and you've got a bit of a different sort of narrative amongst their central bankers for the UK inflation sticky.
It's frustratingly so.
A mixture of exogious factors such as food price inflation but also tax changes by the chance of herself, have led to inflation being on a level towards three and four percent that is very uncomfortable for the Bank of England. The ECB a little bit different inflations hovering around too. They're very happy about that. They're letting everybody know how happy they are about that, and a sort of mission success message has been given out over the past couple
of meetings. But their growth outlooks are very different to the US. The US still has exceptional growth compared to Europe and the UK in terms of their productivity, in terms of their entrepreneurism. Yet in the US the debate is more concerned about the impact of tariffs and inflation raising inflation, raising inflation, so you go definitely a divergence in central bank opinions, where in the UK it's sticky
inflation but they want to cut. In the US it's potential inflation and they are concerned about cutting or not.
Jordan, I've survived thirty five years of covering emerging markets, specifically because I've not had the you know what, to get parish on the dollar. Curious to hear your thoughts there. I mean, is there any length here to this, you know, this dollar weakness story.
It's gotten harder.
I've got to say, I'm very surprised by the reaction in markets to a chair Pals speech at Jackson Hole last week. Of course, the initial knee jerk made complete sense to me. But what's been surprising since and we were out yesterday in London on the bank holiday, is the lack of a follow through and in fact the dollars come off in terms of it come back against
the euro at least. And that's a mixture of factors such as the French politics heating backup, but it's also market saying, look, we've got another CPI, we've got another NFP print before the actual FED meeting. Maybe we shouldn't go gun ho into this and fully priced in a rate cut because the market's not pricing in a full rate cut for the September meeting. Instead of twenty five, we're around twenty two on the screen right now.
I thought we'd be closer to twenty five.
So the big surprise for me is that we've not gone a bit more full blast into pricing in that rate cut lean to a weeker dollar. But bigger picture, I think the equity flow story into European equities we've seen banks outperform and defense outperform this year will be one of those factors that keeps the sort of long euro short dollar view in play. And then for the yen, I think the en out performs the dollar because of the banks of hats hiking cycle.
I mean, it's sure, I look at all this and I go okay, but where can I make money? Do you have a currency pair that's a speculation out six months a year now did you find really attractive?
Well, we're currently short dolly en and scratching our heads. Why that's it should be? All rates point to a much lower dolly en in terms of rate spread.
So strong cooperating Jordan?
Yeah, you know that right, it's not cooperating. The long euro trade we haven't got on. It looks a bit tired, but I do think it will be on a one
twenty handle going into next year. And if you want to kind of avoid the dollar, you could be looking at short euro sterling expressions as well, because whilst the Bank of England view is very dubbish from myself compared to the market pricing, I think the ECB pricing is a bit out of whack and we should be pricing in a bit more dubbishness from the ECB next.
Year, dovenish. Okay, So so what's your about using euro yen as a is like the euro yena and stereo.
Jordan was going to talk about the Antipodeans, Oh, listen to you now.
I think we're going to stick to just short Dolliyen is our clear ethics expression, and there's a lot there's lots of rage trades to be doing as well.
Okay, Jordan, Ryandchester, thank you so much.
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