The risk-on and risk-off barometer remains the USD and given that the US dollar index is up on the day and equity markets are mixed – it’s all about the US data and further political stories ahead. Many think the risk of Trump impeachment rose so the risk should logically be lower but for the fact that its August and the real event will be if Republicans lose control of Congress in the November mid-terms.

Today, markets are steeled for more political headlines but they aren’t just about Trump. The Australian leadership challenge grabbed early headlines overnight. The Senate there voted down a no-confidence motion but FinMin Bishop is the now running for Liberal Party leader against Turnbull.

The UK grabs some headlines as the government releases its “no-deal” Brexit contingency plans, but Raab remains upbeat. Of course, pain trade in EM today is Trump-related with ZAR off 1% on tweet that the US will look into recent farm seizures, raising the risk that South Africa could be the next victim of sanctions/tariffs. Land reform in South Africa remains unfinished and complicated business. The economic data today was the mainstay for the week and its mixed as well with Japan better, Europe overall better even as manufacturing stutters in Germany, it gains in France, and though overall export orders have the smallest rise in 2-years, Services counterbalance. Confidence is waning there and it’s clear that Trump trade issues matter. The US/China talks are not expected to stop the start of $16bn in tariffs today but many still see NAFTA and a US/China deal into the mid-terms. This macro hope matters to how to play the rest of the day and week as there is clearly fear about the Trump/Fed relationship and the role of the USD in the entire mess. The lesson for investors is that politics matter and that Australia is a teachable moment. The downtrend in AUD since January as helped steady the economy against geopolitical headwinds from the US and China but the politics opens another 0.72 test again.

Question for the Day: Did the FOMC minutes matter? If you look at the price action after the minutes you would say no and perhaps that isn’t a surprise but it should be. The focus on US rates mattering to Emerging Markets and global leverage has been one of the key themes for 2018. The fact that the markets have ignored the FOMC minutes is telling. There is more to be had in Jackson Hole than speeches. The connection of Fed members to the rest of the G20 banking world is at play and this makes the Jackson Hole event a bigger turning point for studying FOMC reaction functions. The biggest issue for the FOMC minutes was that this US economy is on track and seems set for needing more rate hikes but the outlook for the next 12 months seems more cloudy and uncertain. Politics matter even for an apolitical Federal Reserve. The risk for many maybe in the certainty of the rate hike path.