Nobody Panic.

Only two things mattered this week: US fiscal policy and Jackson Hole.

And ironically, one of the reasons Jackson Hole ended up not mattering (i.e. being a non-event) is precisely because the political turmoil and outright gridlock in Washington is making it impossible for central banks to move aggressively ahead with normalization.

For the Fed, a big part of the equation is whether and to what extent fiscal policy is prepared to take the proverbial reins from monetary policy. Far from waiting eagerly for the baton (to mix metaphors), fiscal policy is at a dead end, with the debt ceiling looming and the odds of a government shutdown rising seemingly by the hour.

Of course everyone (including Cohn, Mnuchin, McConnell, and Ryan) all tried to reassure the public and markets this week, but it didn’t fucking matter because Donald Trump is all over Twitter lambasting lawmakers and running around the country shouting about holding the government hostage until he gets his goddamn border wall money.

Basically, everyone (and that includes Yellen) is trying to keep people from panicking, but the President is busy doing his best Jackie Moon impression (and “there will be no refunds – your refund will be escaping this death trap with your life“):

By the time it was all said and done, stocks did manage their best week of the month (best week in 6 for the S&P):

But all of the tension is obviously weighing on the dollar and yields, with the latter trending lower and now sitting near the lowest since before Sintra:

If you’re a dollar bull, then God bless you because you’re getting proper fucked. There was no reason to interpret Yellen as hawkish on Friday, so the default was to sell, and Draghi didn’t mention the euro, so the default was stay long the single currency.

The result, a multi-year low for a greenback that’s more “beleaguered” than Jeff Sessions after an early morning Trump Twitter ambush:

Here’s a look at the euro, which is sitting at its highest levels since early 2015:

European equities were largely unchanged on the week as investors struggled with the FX headwind and global uncertainty:

The SHCOMP had its best day in a year on Friday and is now back above 3,300 at its highs since the beginning of last year:

Staying in China for a moment, you really need to pay attention to the yuan. USDCNH is riding an 8-day winning streak – that’s the longest since at least July 2014. It’s just a matter of time before something snaps here in terms of the PBoC stepping in although this week they sucked more liquidity out of the system:

Overall, EM stocks are at 3-year highs as the snail’s pace of DM policy normalization emboldens the carry traders:

Oh, and carefully polished yellow doorstops had a freakout moment this morning when, in 60 seconds or so, gold futs totaling more than 2 million ounces traded apparently on someone’s poor interpretation of Kaplan:

(Nanex)