The only threat to the dollar is a big fat recovery in China

Outlook:

We like to think conditions in the US economy are dollar-determinative. Slowing growth due to the trade war and shutdown, okay, but some genuine signs of robustness, to be verified by payrolls tomorrow. We can justify a pro-dollar attitude on the fundamentals. Besides, there's no competition. China and Europe are on the ropes. Japan is marginally okay but the UK is a wreck. The only threat to the dollar is a big fat recovery in China or a proactive stance in Europe. These seems somewhat dim prospects at the moment, but just wait—everything is relative.

What are the chances the ECB's new TLTRO initiative will work to goose bank lending and growth? Not all that great. Instead of pushing out the date for the first hike from end of summer to year-end, the ECB should have said it was pushed out indefinitely and perhaps replaced by a cut. Well, it's kind of hard to cut when the primary refi rate is already zero, so that would mean some other form of stimulus, like a renewed and bigger QE. Draghi has his work cut out this morning.

We could easily get a Trump push-back against the too-strong dollar as early as today. It probably won't work, but don't get too cocky about the trend.

Political Tidbits: Former Trump campaign CEO Manafort is sentenced today—he faces up to 24 years in prison, a life sentence. The Trumpies note his crimes are not related to Russian collusion but rather to various frauds, something that is emerging in Trump's own case. Nobody doubts this sleaze cheated banks and insurance companies as well as contractors and Trump University students. Tigers and stripes. But as the Dems wisely note, it takes popular outrage to push impeachment. Nixon resigned because his own party jumped ship. The current crop of spineless Plubs are not doing that. We may get neither an indictment nor impeachment. But we will get charges, perhaps in a sealed indictment, on financial crimes, including violation of Campaign Finance Law. One pundit said Trump must run for reelection to fend off those charges for another four years.

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