Its summer and people want to wear the least amount of clothing to stay cool and remain modest yet that minimalism has unintended consequences. Somethings are best left to the imagination. Perhaps naked central bank talk should take note. The lack of big news overnight and the minimalist approach of central bankers to changing anything leaves markets holding the weekly trend – USD is sharply lower – blamed on politics rather than the FOMC - with EUR the leader while GBP languishes in Brexit political doubts and JPY gains on the margins even as the carry trade wins everywhere. The RBA Debelle’s speech make clear that the RBA minutes were misread by the market – just because everyone is talking about higher rates doesn’t mean the Australians will follow, nor does discussion of a neutral rate 2% away from the present rate mean anything. If AUD falls, that suits the RBA. So be it. The contrast with the New Zealand FinMin was stark – as Joyce noted the stronger NZD reflects stronger economic fundamentals -“The New Zealand economy and New Zealand businesses are performing very well at these current levels,” NZD gains on the day. Minimalist action for a minimalist world all of this drives the summer carry trade. The focus that started the evening trading was on the US special prosecutor Mueller expanding his investigation into Trump’s business dealings with Russia. No stone left unturned to get to the full picture. This ups the risk that Trump may try to fire him, and that the Republicans lose faith in their leader. Lack of any legislative progress after 8 months puts the Trump reform agenda at risk and puts the hope for lower taxes at bay – driving some fears for a larger confidence drop in business into 4Q. The excuse of politics doesn’t fully cover that both the ECB and BOJ remain too easy for the global recovery and that they are missing an opportunity to normalize while the sun is shining. Then again, there isn’t any inflation. Thus, we get the zombie production explanations that QE and negative rates impede the natural business cycles that washout the inefficient and drive up productivity in the longer term. The USD weakness isn’t only about EUR or other strength or US politics, it’s also about the ongoing weaker data with Philly Fed yesterday and the 2Q earnings theme of retail destruction from Amazon driving deflation everywhere nagging the markets. The USD at 2Y lows against the EUR and 1Y lows for the USD index suggests the unintended consequences of minimalist FOMC hikes isn’t enough to cover the unpleasant realities of the present. This means the hope for a summer bounce is going to have to wait for the weekend and more news. The Channel support for USD is 94 then we have to go to 93.02 and June 2016 lows.

Bitcoin (BTC) has tripled and then halved since late March Even at BTCUSD 2000 issuance amounts to $33bln Historic volatility is high (80%) but implied volatility is higher (97%) The introduction of derivatives and an interest rate curve suggest financial deepening

Safety never takes a holiday. While many saw the month of June as difficult, few were terribly concerned. Like taking a flight many sleep through the obligatory safety presentation, or perhaps, more accurately, when you go to the movies to you mentally pay attention to the exits and sit that much closer to them? The urge to find some safety trades against a ½ year of low volatility, high carry, high risk trades seems at odds with the new central bank urge to edge towards the exits of extraordinary easy money policy sparked by years of weak growth, low inflation and crisis. Markets spent much of June flipping from fears of a policy mistake by the Fed over rate hikes with inflation still below target and oil off over 8% on the month. The flip of fear from other central bankers joining the FOMC and following the advice of the World Bank to take advantage of global growth to try and normalize rates. This set the tone for the June Track Idea Dinner where a great group of analysts, portfolio managers and investors met to discuss their best ideas and worst fears.

My take away from the FOMC rate hike today – it’s in the singular focus of the Fed to normalize rates even in the face of weaker data and less confidence in fiscal policy stimulus. The previous data dependency that replaced forward guidance has been transformed into a race to get to normalization before there is an outside shock or ahead of what should be happening per the Phillip’s Curve – namely wages going higher as unemployment goes down.