Transparency

By Molly Schwartz, Cross-Asset Macro Strategist at Rabobank

Yesterday, G-20 finance ministers congregated in South Africa, though several delegates were noticeably absent, like Scott Bessent from the US. Bessent, of course, wasn’t playing hooky alone, as other truants included counterparts from Argentina, Australia, and France. That said, Bessent’s empty seat garnered special attention as the United States is not only the world’s largest economy, but is the source of global trade turmoil as Trump issues trade letters left and right.

Given the absence of communique from the G20 (at the time of writing), markets have turned their attention elsewhere, like economic data. Retail sales data out of the US registered an increase in pace from 0.1% m/m to 0.6% m/m, which was accompanied by stable jobless claims. The markets were pretty resistant to this data, closing the day near the opens with some minimal choppiness around the time the data were released. It should be noted that retail sales are published in terms of value, not volume. That means that this print was impacted by the recent pick up in US inflation, but signals some resilience in the American consumer.

In an environment clouded by uncertainty and obfuscation, we can look to none other than US President Trump as a source of transparency. Indeed, yesterday afternoon, White House Press Secretary Karoline Leavitt said that “the President has been very transparent about his displeasure with both the policies and the management of the Fed.” While tactful, it may also be the understatement of the century. After the retail sales data release, Trump publicly pushed for rate cuts once again truthing “’Too Late:’ Great numbers just out. LOWER THE RATE!!! DJT.” The rates market was unconvinced by Trump’s plea, with investors still positioned for around 1.7 cuts by year-end, the same positioning as before the data were released.

But while rates were unimpressed, equities marked new gains as the S&P 500 continued to climb upwards, setting new all time highs, breaking through $6,300. Meanwhile, USD also appeared to strengthen as the best performing G10 currency on a one-day basis, and maintaining its status as the best performing G10 currency month-to-date.

On the other end of the spectrum, AUD made for a pitiful performance, depreciating 0.63% against USD after the Australian unemployment rate rose to 4.3% in June–the highest rate since November 2021. A cut at the August 12 meeting had already been largely priced in by the market, but the recent labor data drove investors to price in around 45 more bp worth of cuts by 2025 year-end.  

Elsewhere, yesterday was CPI day, with releases hot off the press in the Eurozone. Eurozone aggregate CPI inflation final June estimates printed at a steady 2.0% y/y, while prices increased at a rate of 0.3% m/m. As these were final estimates, markets had already priced in these CPI data and neither European rates nor EUR saw much action.