Trump continues to Twitter fighting against the fed

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Trump continued the Twitter attacks on the fed. One of the last tweets on the subject already trusts the easing of the fed, but at the same time, skepticism regarding the ability of the fed to act aggressively: “The E. U. and China will further lower interest rates and pump money into their systems, making it much easier for their manufacturers to sell product. In the meantime, and with very low inflation, our Fed does nothing – and probably will do very little by comparison.
Too bad!” [The European Union and China will cut interest rates and pumped money into their systems, which will greatly facilitate the sale of goods to their producers. At the same time on the background of very low inflation our fed doesn’t, and probably will do too little compared to them]. In another tweet, trump has said that a small reduction in interest rates by the fed will not be enough.
We expect that the fed will not be overly aggressive, but will do everything necessary to prevent the strengthening of the dollar, at least until the end of autumn. The dollar remains the most attractive currency among the major currencies, as only high-quality dollar-denominated debt are now to find at least any significant positive returns.
This fact does not give him much to loose, but attempts at correction in the dollar index from the current levels in the area of 98 yet to be, and now is as good a time to sell the dollar short stop, based on a correction by the results of the imminent fed meeting. Accordingly, we suggest buying EUR/USD from the current levels.
We are long on EUR/GBP, which reaffirms our vision, developing the offensive above 0.9 in the direction of 0.93. We have many times in recent months, said that the coming to power in Britain, Frank hawks, such as Boris Johnson, dramatically increases the chances of Brickset without a contract, and the related risks are strongly undervalued by the market. Sobriety starts right now. We are now set on further weakening of the pound as the us and the European currency.
Oil last week showed bullish momentum is weak: the theme of the tanker war has not yet received the power of development. Accordingly, commodities are not received from the petroleum support, and sank. We believe, however, that against the dollar, they still receive some support by the results of the imminent fed meeting.

The ruble

The ruble shows a well-pronounced dynamics, showing some weakness along with other commodity currencies. Before the last meeting of the Bank of Russia there was a lot of speculation that it could be a kind of “black day” for the ruble, and the reduction in the rate together with the accompanying statement will give a strong impetus to the weakening of the ruble. We agree that in the medium term, the ruble will weaken in the long term we remain a consistent bearish on the Russian currency, however, some extreme pessimism about it in the moment, don’t share. On the contrary, the results of the fed meeting, the ruble may again try to develop short-term improvements.
However, this may prevent policy. The period of serenity investors regarding the risk of sanctions is likely to be breached in mid-August. “Awake” finally, American hawks parliamentarians again began to put pressure on trump with the requirement to enter against Russia sanctions package “for Skrypalia”.
Also very negative on the exchange rate of the ruble may impact Russia’s desire to strengthen its presence in the middle East.
There are news that Iran and Russia plan joint military exercises in the Strait of Hormuz. Such explicit support for Iran by Russia in its conflict with the United States, if implemented, dramatically increase the sanctions risks. The news is that, now remaining in the ruble, it is necessary to exercise extreme caution. Mid-term we continue to advise to buy the dollar, believing that in the fall it will be more expensive 65.

The stock market

S&P-500 still stalled around 3000, producing a weak short-term bullish momentum. Fearing the growth of middle East risks that we recorded earlier profit on their long positions, and now out of the market. We expect that after the fed meeting bull market will increase, but if after the fed meeting will be a correction “in fact”, we will redeem it. We are preparing to re-build longs in the American papers.
As for the Russian market, we continue to believe it is weaker than the us. If not the last strong movement in Gazprom, the market would have looked frankly poorly.
Gazprom soared on news of a strange deal in which a very large investor bought at a substantial discount to the market shares that Gazprom has sold “daughter”. The market felt that the transaction price (200+ per share) identified strong support, and the paper will now focus on growth from him. We believe that the paper is not to grow but rather will return to this level. By itself, the news that someone gave non-market transaction will allow to earn more than 5% on an empty place, for us, rather negative, not only for Gazprom but for all of the shares of quasi-public corporations. It’s like, if I may say so, “stablizie” the ownership of certain large investors ahead of the so-called “transit authority”.
Dmitry Golubovsky
FG “Kalita-Finance”