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Reflect & Prepare

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Reflect & Prepare

While the economy continues to strengthen, US assets remain in demand and there is little in the trade tensions which seems to be hurting Wall St stocks, Treasuries or the Dollar.  Earlier this week, we got the latest inflation figures which saw the CPI rising to 2.3% in the core rate, and this keeps the Fed very much on track to raising rates by 4 times this year - 2 already done. 



Reflect and Prepare

The US economy continues to show an accelerating pace of expansion based on more recent numbers, and this has prompted forecasts of Q2 growth in excess of 4.0% from host of pundits.  As such, the Q1 final reading of 2.0%, which was 2 tenths off the previous estimate was largely ignored.  In the previous session, the goods trade balance saw a reduction in the deficit to the tune of $4bln in May, and while durable goods orders were a mixed bag, there is little to suggest economic divergence between the US and its major counterparts will not continue to widen - for now at least.  There is however a much higher USD, and this in part looks to have been a resurgence in Treasury buying, with equity outflows heading for the US given growth prospects and attractive yields.  Looking on from here, stretched exchange rate levels are back in focus and are a key bugbear for central bankers - as we have seen with the EUR and the ECB, and earlier in the year, US Treasury Sec Mnuchin was accused of talking down the USD.  Looking at the greenback now, these accusations are long forgotten. Rhetoric may start to pick up again when looking at the CNY rate in light of the trade tensions which may start to ease.  China has unveiled an easing of investment curbs in areas such as banking and agriculture, while at the start of the week, president Trump said he would desist from using harsh measures on China.  We move into Q3 next week and with it US payrolls is on the agenda.  US ISM PMIs will also make for interesting reading. 



Debenhams - are things getting worse for the high st?

So its seems results from Debenhams are not getting better, as the high st. continues to crumble. This massive name looks to be one of the hardest hit as the share price is at practically to lowest point in its trading history. This morning the Co. reported group like-for-like sales over 15 weeks down 1.7% and group gross transaction value for 41 weeks down 1.6%. The only ray of sunshine is the online business which is 16% higher over the last 15 weeks. 



Reflect & Prepare

The burning question for USD based assets was whether the FOMC would firm up their dot plot for 2018, shifting the bias from a median 3 hikes to 4.  Hiking for the second time this year, the Fed raised the Fed funds target rate to 1.75-2.0% and projections duly shifted to hike a further 2 times later this year, confirming the Fed's acknowledgement of the strong US data which has been serially delivered in recent weeks and months.


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