Today is one of those days where I don’t see anything big and dominant to focus on in market news. Instead, it feels like a time to talk about a few things which are going on, and how they may be impacting the market. The most obvious item of focus is yesterday’s U.S. retail sales data, which came in below expectations. This should logically weaken the U.S. Dollar, as it suggests a lack of over-heat which means a slower pace of rate hikes. In fact, the U.S. Dollar Index has strengthened very slightly. It also might suggest a weaker stock market. The U.S. stock market has certainly fallen, with the benchmark S&P 500 Index down by almost 1%. Bears were getting a tail wind anyway from the firings of Tillerson and Cohen (Trump’s former chief economic advisor) and the sense of a Presidential Administration that doesn’t seem able to retain its key staff. We’ve had the tax cuts – what next? A trade war over tariffs? It is interesting how recent stock sell-offs seem to be highly positively correlated with rises in the Japanese Yen. If I see USD/JPY falling convincingly, I feel as if I do not even have to check the S&P 500 – it will be down.
There has been little input from any major central banks these days, except the Swiss National Bank which reported earlier today its Monetary Policy Assessment and LIBOR rate. There were no major changes or surprises, with the Bank maintaining a very dovish policy which includes a negative interest rate of 0.75%. The tricks they have pulled over recent years (like taking the Franc offline for an hour or so in January 2015) have probably done an excellent job of frightening off speculators wishing to use the Swiss Franc as a safe-haven. The SNB are protecting the Swiss economy which relies much more heavily on exports than on the banking industry. They would probably see themselves as having achieved this quite successfully. The Swiss Franc remains a strange currency, with a mean reversion behavior all its own. The SNB release had very little impact upon the Franc today anyway, with the major exchange rates remaining almost unchanged in a quiet market.