Ok, well this was an interesting week.
If you thought things were batshit crazy in Washington before, it turned out you hadn’t seen anything yet, because this week saw i) Trump attempt to shame Jeff Sessions into resigning, ii) the “Mooch” calling Steve Bannon a “cocksucker” and Reince Priebus “a fucking paranoid schizophrenic,” in an angry phone call to The New Yorker, iii) the Boy Scouts being forced to apologize for a speech the President gave at a jamboree, iv) “repeal and replace” crashing and burning for the umpteenth time, and v) Trump banning transgender folks from the military via Twitter.
We also got the Fed, which came out dovish and sent the dollar careening lower. They even gave themselves an “out” on balance sheet normalization in case something goes even more horribly awry in Washington.
Here’s what happened in stocks (“something snapped” on Thursday):
The VIX was simple: there was a crash to record lows just as the Fed statement hit and then there was the spike to an 11-handle on the Kolanovic note:
10Y yields were higher on the week, rising sharply in the lead-up to the Fed only to fall sharply after the statement hit. Yields spiked again on Friday morning with bund yields after the hot German CPI data and then retreated lower after the GDP and ECI miss in the US:
In FX land, the euro was the story, as the common currency blew past its August 2015 peak after the Fed statement:
But the real story was EURCHF, which rose above 1.12 for the first time since the SNB abandoned the floor and proceeded to move even higher on Friday after German CPI data came in hot, reinforcing the idea that the ECB may soon pull some kind of trigger although we don’t know exactly what a trigger-pulling would look like yet:
To be frank, the franc plunge has a whole lot of folks talking.
The loonie surged on Friday on the back of the best Canadian GDP showing since 2000:
And the aussie is still sitting near two-year highs as it’s going to take more than some jawboning from the RBA and one weak CPI print to derail expectations for a hawkish shift and damp the effect of higher commodity prices:
Oh, and do keep tabs on the yuan, as USDCNH basically matched its early-June-short-squeeze low following the Fed – beyond that and it’s all the way back to October:
As far as the broad dollar, this is all you need to grasp:
In Germany, the DAX closed lower again on Friday, and is now down more than 2% since the automaker collusion story broke late last week:
European stocks were lower across the board to close the week as tech, auto, and tobacco shares weighed:
Some folks are concerned that the relentless ascent of the euro could eventually throw a monkey wrench in European shares:
Oil headed for its best weekly gains in 7 months on the back of all kinds of bullishness tied to falling stockpiles, Saudi promises, and signs that US operators are starting to rein in spending plans.
“In a big way, we’re having a switch of market expectations from one that thinks these inventory problems are going to persist forever and ever to a situation where increasingly markets are starting to believe in this whole rebalancing, particularly in the United States,” Bart Melek, head of global commodity strategy at TD Securities said today.
WTI crossed its 200-day MA on Friday:
Gold jumped after the Fed and then again on Friday after the GDP miss to hit its highest level since mid-June: