Manipulation machinations

Posted by: Paul Donovan

30 May 2019
  • China is not a currency manipulator. So says the US Treasury. China is probably manipulating its currency – but to stop it from weakening, not to weaken it more. The US has not named anyone a currency manipulator for a quarter of a century, so this is not a positive development for markets. It is more like avoiding a possible negative development.
  • Markets are concerned about the global growth outlook, as the uncertainty around global trade and supply chains hurts investment. However, a modest inversion of the US yield curve is not a recession signal. That sort of thing might have worked forty years ago, but we are not living in the 1970s any more.
  • US first quarter GDP will be revised today, probably down. There are many more revisions to come, but markets tend to lose interest after the initial release. The composition of GDP is a guide to how much of a slowdown to expect in the second quarter.
  • The Euro area is quiet – Spanish inflation and retail sales data are not a market focus. There is a Bank of England speaker, but what can a UK central banker do these days except make quiet, incoherent sounds of despair over Brexit?

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