The Gun’s Not Loaded!

Has anyone seen Semi-Pro?

Well if not, do yourself a favor, because despite being overtly cheesy, the R-rating and accompanying profanity make it one of the most underrated Will Ferrel movies in history. One of the more memorable scenes finds everyone playing poker and while I won’t recount what leads up to it (you can click and watch the whole scene for yourself), it culminates in this:

 

If you were tasked with making a short comedic film to help a layperson understand what the Trump administration has done over the last three days in terms of threatening to start a global currency war on the way to proving something about how serious they are with regard to their hardline stance on global trade, that would be the short film you would make.

 

This incompetence on full display in Davos this week has been all at once breathtakingly frightening and fall-in-the-floor funny. What started with Mnuchin landing in  Switzerland and immediately triggering a further slide in the dollar escalated dramatically on Thursday, first with Mario Draghi calling out a certain “someone” at the post-ECB meeting presser and then with Ray Dalio penning a scathing LinkedIn post aimed at that same “someone”. Then, just when it looked like things might spiral completely out of control, CNBC aired an interview with Trump which found the President pulling a “the gun’s not loaded!”

But by the time Joe Kernen got around to airing his “strong dollar” interview during which Trump attempted to demonstrate that the gun’s not loaded (“he shoots – he shoots himself in the wiener“), the damage had already been done in terms of further unnerving the rest of the world. Or, in other words:

Is everybody ok? We just literally dodged a bullet. Except for Cornelius.

Just look at this insane shit:

That’s the dollar, not Bitcoin or some two-bit Third World currency. And here’s the euro:

Just to underscore that, the dollar ended up posting its biggest gain this month after Trump’s comments. When you consider where it was Thursday morning, that is one wild ass swing. That move higher in the euro during the ECB presser ended up culminating in the single currency pushing above 1.25 for the first time since 2014:

And that was hardly all. Remember how we closed yesterday’s wrap? Here’s a reminder:

Oh, and it seems appropriate to close with the yuan, which is sitting at its strongest versus the dollar since November 2015, just ~two months after the deval.:

Well on Thursday, amid the early dollar drop, the offshore yuan strengthened past 6.30 at one point. At the highs, it was at 6.2965/USD – a level last seen on August 11, 2015, when China devalued.

And then there was the franc, which was all over the place. The seesaw started when Jordan told CNBC that “interventions [are] needed for adequate monetary conditions”. That would presumably mean weakening the franc, but instead it surged:

One trader tried to explain that by citing a “liquidation of short positions held by CTA accounts vs the euro and the dollar [and] poor liquidity.”

Somehow, U.S. stocks managed to make it through this boondoggle unscathed with the Dow up more than 100 points. Notably, the S&P has been in overbought territory for 16 consecutive days, the longest stretch in more than 20 years:

Gold took a dive just as Trump jawboned the dollar higher:

Treasurys were mixed on the day and pared early losses. There was a 7Y auction in there and some block trades and really, fuck it … here’s a 10Y yield chart which will have to do for now:

European shares didn’t have the luxury of waiting around for the Trump dollar “clarification”, so all they had to go on was the early surge in the euro which meant a lower close pretty much across the board:

Meanwhile, overnight in Asia, you’ll recall that headed into Thursday, H-shares were riding an incredible 19-session win streak which had driven the RSI on the Hang Seng China Enterprise Index to a cartoonish 90:

Well that streak was snapped today as the gauge fell 1.7% at the close in Hong Kong. The Hang Seng itself fell nearly 1%:

And the stronger yen (again, thanks Steve) finally weighed on Japanese shares, which fell: