Between Syria, trade tensions, and the US special investigator into Russia’s attempt to influence the US election, market participants are cautious as they wait for another shoe to drop. The US equity market recovery yesterday has short coattails as markets in Asia and Europe struggle. Bond yields are mostly softer, and the US 10-year note yield is dipping back below 1.80%.  

The US dollar is mixed, with small gains against the dollar bloc and small losses against the euro, yen, and sterling. The sense is that whichever shoes drop; the headline risk is dollar negative. The euro closed above CHF1.18 yesterday for the first time since January 15 and is at its best level since the SNB gave up its franc-cap. Elsewhere the Russian ruble continues to fall (~-1.3%), but the Russian bond yields are little changed.  According to central bank figures, foreign investors owned a record 34% of Russian bonds. The sanctions announced before the weekend spurred the sales of the bonds and currency. 

The US reports March CPI, and the Fed releases its minutes from the March FOMC meeting. The risk is on the upside of the market expectation for a flat CPI, which due to base effects, would rise by 2.4% from a year ago, up from 2.2%. The core rate is expected to have increased by 0.2%, and this would lift the year-over-year rate above 2.0% for the first time in a year as some factors that the Fed has suggested were transitory are proving so.  

The FOMC minutes are drawing more attention than usual. The March meeting was Powell’s first and a rate hike was delivered. However, ideas that the minutes will reveal much insight into what officials were thinking about the rising trade tensions or the thrust of fiscal policy, which the CBO estimated this week would produce a $1 trillion deficit in 2020, two years earlier than previously expected, may be disappointed.