WEBVTT - Bloomberg Surveillance TV: August 19th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.040 Bloomberg Terminal and the Bloomberg Business app. Sarah Hunt of 0:00:37.080 --> 0:00:40.680 Alpi Saxon Words writing Investors scene positioned for positive earning 0:00:40.720 --> 0:00:44.400 surprises into twenty six, but we expect higher volatility as 0:00:44.479 --> 0:00:47.320 summer gives way to four. Sarah joins Usnaff for Marcom 0:00:47.360 --> 0:00:48.839 One is Sarah, good morning, it's going to see you. 0:00:48.880 --> 0:00:50.760 What's the source of that volatility going to be? 0:00:51.400 --> 0:00:54.440 I think the uncertainty that's coming around the timing of 0:00:54.440 --> 0:00:57.480 what's happening in tariffs, the timing. There was an announcement 0:00:57.520 --> 0:00:59.960 today that aluminum and steel in different products was going 0:01:00.280 --> 0:01:03.280 to be taxed at a different rate, and that did 0:01:03.280 --> 0:01:06.080 not include it did include goods in transit. I think 0:01:06.120 --> 0:01:09.640 all those kinds of things make for problems for potential earnings. 0:01:09.680 --> 0:01:12.440 I think the uncertainty around what spending is going to happen, 0:01:12.640 --> 0:01:14.800 something like what's going on with home depot not such 0:01:14.800 --> 0:01:16.560 a huge thing, not a big surprise, a lot of 0:01:16.600 --> 0:01:19.840 big ticket items, not so much people bought ahead of tariffs. 0:01:20.000 --> 0:01:22.200 But I think that there is some concern about what 0:01:22.200 --> 0:01:23.480 this is going to do to margins and what it's 0:01:23.520 --> 0:01:25.399 going to do to earnings, and that's going to I think, 0:01:25.520 --> 0:01:25.840 add to. 0:01:25.800 --> 0:01:27.320 All, Well, let's slay on this, which way do you 0:01:27.319 --> 0:01:29.119 think it breaks. Let's say we've got a company right 0:01:29.120 --> 0:01:31.800 now in America that was importing a lot of goods, 0:01:32.040 --> 0:01:34.800 a lot of pre tariff inventory of the goods they 0:01:34.880 --> 0:01:39.520 imported that were tariffed, they were absorbing that on margin. 0:01:39.640 --> 0:01:42.080 Do you believe that's going to lead to say, cost cutting, 0:01:42.440 --> 0:01:44.400 a labor market hit, or do you believe it leads 0:01:44.440 --> 0:01:46.160 to higher prices they're going to pass it on to 0:01:46.200 --> 0:01:46.720 the consumer. 0:01:47.000 --> 0:01:48.440 I think they're going to try to do both. I 0:01:48.440 --> 0:01:50.200 think they're going to try to get their costs in 0:01:50.200 --> 0:01:51.720 line as much as they can, and I think they're 0:01:51.720 --> 0:01:53.720 going to try to push price to the extent that 0:01:53.760 --> 0:01:57.120 they can. And the question really is, as these targets 0:01:57.120 --> 0:01:59.520 have been moving all year, did we get such a 0:01:59.520 --> 0:02:01.480 backup in demand that we pulled for a lot of 0:02:01.520 --> 0:02:04.640 activity And are we therefore going to see some softness anyway, 0:02:04.960 --> 0:02:06.880 or is this going to be so gradual that it's 0:02:07.040 --> 0:02:09.240 that it doesn't have as big an impact as a 0:02:09.240 --> 0:02:12.160 big one day slam dunk situation. And I think that's 0:02:12.200 --> 0:02:15.120 the question and how this plays into PPI and CPI 0:02:15.400 --> 0:02:18.560 because a tariff isn't really inflation itself. It's a tax, 0:02:18.760 --> 0:02:20.680 but it doesn't matter because if the price levels are 0:02:20.720 --> 0:02:23.280 moving higher, it doesn't matter to the consumer. It feels 0:02:23.280 --> 0:02:24.799 like a problem because prices are higher. 0:02:24.840 --> 0:02:27.120 I remember a long time ago at the end of 0:02:27.200 --> 0:02:30.440 July when people said August tends to be volatile. Watch out, 0:02:30.480 --> 0:02:32.360 it tends to be the witching month. Well, we're up, 0:02:32.480 --> 0:02:34.919 you know, one point seven percent on the S and P. 0:02:35.080 --> 0:02:37.720 We've reached new high after new high. Sure we've been 0:02:37.760 --> 0:02:39.280 down for a couple of days, but down as sort 0:02:39.280 --> 0:02:42.000 of a relative statement, given that we're going nowhere, at 0:02:42.000 --> 0:02:44.760 what point are we just pushing off this volatility showing 0:02:44.760 --> 0:02:46.760 that the pain trade still is higher. 0:02:47.240 --> 0:02:50.359 So I think that right now we've got Jackson Hole 0:02:50.400 --> 0:02:52.760 coming up this week. If you recalled last year, it 0:02:52.760 --> 0:02:55.040 was the labor numbers in August that came in that 0:02:55.360 --> 0:02:57.880 really threw things off for the FED and people started 0:02:57.880 --> 0:03:02.200 to worry about the labor market day. It is uncertain 0:03:02.360 --> 0:03:05.160 enough that right now it's like it needs a push 0:03:05.280 --> 0:03:06.800 one way or the other. The fact that there is 0:03:06.960 --> 0:03:09.320 talks with Russia and Ukraine, whether they get to piece 0:03:09.400 --> 0:03:11.919 or not, that's probably a netpet benefit to most things, 0:03:11.960 --> 0:03:14.720 except potentially energy, which is not the worst thing in 0:03:14.720 --> 0:03:16.800 the world either, because that helps everybody else with lower 0:03:16.880 --> 0:03:19.440 energy prices. I think the question's really going to be 0:03:19.800 --> 0:03:22.600 where do we end up in terms of the consumer, 0:03:22.639 --> 0:03:24.880 and where do we end up in terms of inflation, 0:03:25.040 --> 0:03:27.560 and what happens to companies and are they laying people off? 0:03:27.680 --> 0:03:30.680 Does that affect the labor market? All those interplays are 0:03:30.800 --> 0:03:33.160 uncertain now, and I don't know how much clarity we 0:03:33.160 --> 0:03:35.119 get in three or four weeks, but you could see 0:03:35.120 --> 0:03:36.440 some money even data right now. 0:03:36.480 --> 0:03:38.760 A number of people are talking about trying to just 0:03:38.760 --> 0:03:40.440 get a little bit more defensive. We see that in 0:03:40.440 --> 0:03:42.840 the investment grades market, with US spreads getting to the 0:03:42.840 --> 0:03:45.680 lowest levels going back to nineteen ninety eight. And the 0:03:45.680 --> 0:03:48.480 theory here is there's going to be some weakness and 0:03:48.520 --> 0:03:51.360 potentially you could see it in a stiflationary type of feel. 0:03:51.640 --> 0:03:53.560 Are we getting to a place where the high flyers, 0:03:53.560 --> 0:03:56.600 the tech exposed stocks will continue to perform even as 0:03:56.680 --> 0:03:58.760 the rest of the market continues to just kind of 0:03:58.800 --> 0:04:02.880 grind nowhere because of that type of dynamic of sacflation. 0:04:03.160 --> 0:04:05.400 And because of the dynamic that there's still a lot 0:04:05.440 --> 0:04:07.440 of growth in that sector. There's still a lot of 0:04:07.440 --> 0:04:10.200 cash flow, and they're not being impacted as negatively as 0:04:10.200 --> 0:04:12.960 some of the companies that don't have the technology aspect. 0:04:13.160 --> 0:04:16.359 So as that technology throws through flows through, maybe you 0:04:16.400 --> 0:04:18.520 do get some margin expansion from that, right because that's 0:04:18.560 --> 0:04:20.240 the big argument about AI is that it's going to 0:04:20.240 --> 0:04:22.159 help us and it's going to help productivity, and that's 0:04:22.160 --> 0:04:23.880 going to help margin. So there's a little bit of 0:04:23.920 --> 0:04:26.679 an offset whether or not we get that. The big 0:04:26.680 --> 0:04:29.240 spend right now is still in technology. So those stocks 0:04:29.240 --> 0:04:31.520 are at a premium valuation for a reason because people 0:04:31.520 --> 0:04:32.720 can see through and see forward. 0:04:32.760 --> 0:04:34.839 At least I mentioned the investment great credit spreads. Let's 0:04:34.880 --> 0:04:37.400 find a compliment it's on that this is important, super 0:04:37.440 --> 0:04:39.880 tight tightiest level since when was it ninety eight d 0:04:39.880 --> 0:04:42.760 eight this side of this century, which is absolutely bone 0:04:42.800 --> 0:04:45.560 cause do you think that tells you more about confidence 0:04:45.600 --> 0:04:49.680 in corporate America or a lack of confidence in the treasury, 0:04:50.200 --> 0:04:54.680 in the US government and in fact for selvereigns worldwide. 0:04:54.920 --> 0:04:56.919 I think it probably has to do more with the 0:04:56.960 --> 0:04:59.720 confidence in the companies themselves and the balancees of the 0:04:59.720 --> 0:05:01.719 company themselves. I think there's a little bit of that 0:05:01.760 --> 0:05:04.520 on the sovereign side, because as debt levels rise globally, 0:05:04.800 --> 0:05:07.000 there is concern on the sovereign side that we hadn't 0:05:07.000 --> 0:05:09.800 seen prior to those massive increases in debt posts to 0:05:09.839 --> 0:05:10.839 financial crisis. 0:05:11.040 --> 0:05:12.239 But if you look at the way. 0:05:12.080 --> 0:05:15.880 That public companies at least have been managing their cash 0:05:15.920 --> 0:05:18.359 flows and balance sheets, there's a reason those spreads are 0:05:18.400 --> 0:05:20.599 so tight when it was a yield chasing operation. And 0:05:20.600 --> 0:05:22.960 the other one is they're in pretty good financial shape. 0:05:23.000 --> 0:05:25.640 There isn't a lot of credit weakness on a lot 0:05:25.640 --> 0:05:28.680 of the publicly traded stuff, so the IG and those 0:05:28.720 --> 0:05:31.120 spreads are very very narrow because there isn't a lot 0:05:31.120 --> 0:05:32.159 of daylight between that. 0:05:32.320 --> 0:05:35.240 Right now, there's another way of asking what John asked, 0:05:35.279 --> 0:05:37.760 which is, even with spreads at the narrowest since nineteen 0:05:37.839 --> 0:05:40.680 ninety eight, is there still value because there is any 0:05:40.720 --> 0:05:45.560 spread above benchmark government rates, given that their credit worthiness 0:05:45.680 --> 0:05:49.080 on some level might be better in some respects than 0:05:49.120 --> 0:05:50.000 the US government. 0:05:50.320 --> 0:05:51.719 I think that's one of the reasons that you saw 0:05:51.760 --> 0:05:54.040 some of those corporates be able to borrow at ridiculously 0:05:54.040 --> 0:05:55.920 low rates right because people looked at them and said, 0:05:55.920 --> 0:05:58.159 those stabilities of cash flow are way better than some 0:05:58.200 --> 0:06:00.760 governments that I've seen. I think in the end, there's 0:06:00.839 --> 0:06:03.880 always a place for fixed income when it has finally 0:06:03.920 --> 0:06:06.440 a yield, which it does if you're matching portfolios, if 0:06:06.480 --> 0:06:08.800 you're matching exposure, or if you're just looking for safety 0:06:08.800 --> 0:06:11.440 and preservation of capital. There's always a space for that. 0:06:11.760 --> 0:06:14.640 And I think that right now it's not a bad 0:06:14.680 --> 0:06:16.400 place to be if you know that you need that 0:06:16.440 --> 0:06:18.719 money in a short period of time. Longer term, do 0:06:18.760 --> 0:06:20.600 we think that rates maybe go higher on the long end, 0:06:20.800 --> 0:06:23.400 they could, it's unusual to stay this low for this long. 0:06:23.480 --> 0:06:26.440 A Corporate bonds a better hedge right now, a better 0:06:26.520 --> 0:06:29.720 safety play than government bonds, given the facts that they 0:06:29.720 --> 0:06:32.160 also have these strong balance sheets behind them. 0:06:32.800 --> 0:06:35.719 I think that the volatility in governments is much more 0:06:35.720 --> 0:06:38.160 policy driven than it would be for corporate so to 0:06:38.200 --> 0:06:40.120 the extent that you might see more volatility in the 0:06:40.120 --> 0:06:42.479 government market, and we have over the last year, which 0:06:42.520 --> 0:06:44.960 is more the last couple of years, it's more surprising 0:06:45.000 --> 0:06:47.760 to see that much volatility in government spreads, so to 0:06:47.800 --> 0:06:50.400 the extent that there's less vow in the IG market, 0:06:50.400 --> 0:06:52.240 I think that's not a wrong thought. 0:06:52.360 --> 0:06:54.799 Sarah, good to see you. Thanks for dropping by, Folful staff. 0:06:54.800 --> 0:07:07.480 Sarah Hanna of VAMPI Saxson Wood joining us not to 0:07:07.480 --> 0:07:10.720 build on the conversation. Retired Lieutenant General Robert Welsh of 0:07:10.760 --> 0:07:13.520 Academy Securities. Lieutenant General, Welcome back to the program, sir. 0:07:13.600 --> 0:07:16.480 We've been tracking the diplomatic effort in the United States 0:07:16.520 --> 0:07:18.880 in Alaska than down in Washington. Can you tell us 0:07:18.920 --> 0:07:22.000 what the realities are of this conflict on the ground. 0:07:24.120 --> 0:07:27.160 Yeah, thank you, John. You know, this is war's been 0:07:27.160 --> 0:07:29.680 going on obviously for a long time, and when we 0:07:29.720 --> 0:07:33.520 talk about a stalemate, Russia has been making slow progress 0:07:33.520 --> 0:07:35.760 on the ground. There's no question about that. It's a 0:07:35.880 --> 0:07:39.680 much larger country, it has a lot more military power, 0:07:40.520 --> 0:07:44.240 but it's been very slow progress. And the real challenge 0:07:44.240 --> 0:07:49.080 for Russia is that in today's modern warfare, the defense 0:07:49.280 --> 0:07:53.120 is more to an advantage than the offense, and Russia 0:07:53.240 --> 0:07:57.720 is running into that against the Ukraine belts of defense. 0:07:57.880 --> 0:08:01.360 And what we see clearly here is they're getting closer 0:08:01.440 --> 0:08:05.800 to the Ukrainian main defensive belts or their fortified belts. 0:08:06.240 --> 0:08:11.000 Is that's the area of the Dunesk region that Russia 0:08:11.200 --> 0:08:13.560 really would like to get their hands on for a 0:08:13.600 --> 0:08:18.000 number of reasons. It's part of the industrialized area of Dunesque, 0:08:18.120 --> 0:08:21.000 It's got a lot of key minerals that are in 0:08:21.040 --> 0:08:24.120 that area. But from a military standpoint, and that's where 0:08:24.120 --> 0:08:27.320 Putin is really focused. From a military standpoint, it has 0:08:27.360 --> 0:08:31.960 the key defensive areas around four major cities, and urban conflict, 0:08:32.440 --> 0:08:36.199 as military members know, is the toughest warfare to go through, 0:08:36.440 --> 0:08:39.920 and that's where Russia or Ukraine has their forces entrenched 0:08:39.960 --> 0:08:41.080 in this defensive belt. 0:08:41.200 --> 0:08:43.360 Lieutenant General, how much of a win, then, is it 0:08:43.400 --> 0:08:46.280 for Vladimir Putin to not have a ceasefire as some 0:08:46.360 --> 0:08:50.200 of the details of this potential trilateral meeting take place. 0:08:52.160 --> 0:08:55.920 That's a great question, Lisa. I think both the US 0:08:55.960 --> 0:08:59.000 and the Europeans did want to cease fire. In the 0:08:59.040 --> 0:09:03.160 situation is the Europeans and Ukraine, certainly in the US 0:09:03.240 --> 0:09:06.360 would like to end the war more than Vladimir Putin 0:09:06.360 --> 0:09:08.800 would like to end the war. So a sea fire 0:09:09.120 --> 0:09:12.600 helps end the war, stop the fighting right now, and 0:09:12.640 --> 0:09:15.360 stop the killing. As Donald Trump has put out, in 0:09:15.400 --> 0:09:18.199 the case of Putin, he would like to just continue. 0:09:18.240 --> 0:09:21.480 So these talks he continues to kind of slowly drag 0:09:21.520 --> 0:09:25.120 out because he wants these battlefield gains. The more gains 0:09:25.120 --> 0:09:28.160 he gets on the battlefield, the more leverage he has, 0:09:28.640 --> 0:09:32.080 and the possibility of a breakthrough that could happen, and 0:09:32.120 --> 0:09:35.000 he could even gain more gains and threaten more of 0:09:35.040 --> 0:09:37.880 the heart or the interior of Ukraine. 0:09:38.160 --> 0:09:40.640 As we hear more about security guarantees, it's some sort 0:09:40.640 --> 0:09:44.880 of agreement between the US and Europe to guarantee is 0:09:45.000 --> 0:09:47.840 some sort of support to Ukraine. Do you feel more 0:09:47.960 --> 0:09:50.640 encouraged or less encouraged? Do you still kind of feel 0:09:50.640 --> 0:09:51.720 like the jury's out. 0:09:53.400 --> 0:09:56.079 Now? I think very encouraged after what's happened over the 0:09:56.160 --> 0:09:59.040 last few weeks. There's no question that the meeting yesterday 0:09:59.080 --> 0:10:01.760 at the White House was historic. I don't think we've 0:10:01.800 --> 0:10:06.199 ever seen that many national leaders along with the leader 0:10:06.200 --> 0:10:09.640 from the EU and the NATO secretary, we haven't seen 0:10:09.679 --> 0:10:13.200 anything like that the White House. That really shows is 0:10:13.320 --> 0:10:17.480 the power, the unity, the strength that NATO is bringing 0:10:18.000 --> 0:10:21.480 and the ability to kind of call less power for 0:10:21.600 --> 0:10:25.320 collective security. And that's a key thing here that Vladimir Putin, 0:10:25.400 --> 0:10:29.040 throughout this conflict has tried to break the NATO alliance, 0:10:29.120 --> 0:10:32.560 tried to break the US from NATO. And if anything 0:10:32.679 --> 0:10:35.520 with this showed around that table yesterday is those leaders, 0:10:35.559 --> 0:10:38.120 as Ali had said, have really kind of come around 0:10:38.200 --> 0:10:41.080 the table to show Putin that there is a lot 0:10:41.080 --> 0:10:44.959 of strength here. And it's not only military strength that's here. 0:10:45.480 --> 0:10:48.440 We know Russia has continued their wartime economy to build 0:10:48.440 --> 0:10:51.199 their military, but the economic strength that you see from 0:10:51.200 --> 0:10:54.360 the group that goes around the table it is much 0:10:54.480 --> 0:10:58.160 larger than Russia is, and Putin knows that. 0:10:58.320 --> 0:11:01.360 Lieutenant General. Just a final question, you mentioned NATO the 0:11:01.360 --> 0:11:04.720 details of this security agreement. In your opinion, why does 0:11:04.760 --> 0:11:07.360 it need to live outside of NATO, Why is that 0:11:07.440 --> 0:11:10.360 so important and what does that tell you about really 0:11:10.400 --> 0:11:13.480 the nature and strength of that overall agreement in the future. 0:11:15.000 --> 0:11:17.600 Now, John's great question. I think the key thing is 0:11:17.600 --> 0:11:20.360 is if you look at Putin's objective from the very beginning, 0:11:20.880 --> 0:11:25.040 is to rebuild the former Soviet Union and break NATO. 0:11:25.559 --> 0:11:28.480 That's his goal, that's an objective and a red line 0:11:28.480 --> 0:11:33.440 for him from the very very beginning was Ukrainie and 0:11:33.480 --> 0:11:36.560 not joining NATO. And from the beginning President Trump as 0:11:36.600 --> 0:11:39.920 he came into office, laid that down that he knew 0:11:39.960 --> 0:11:42.080 that would be a red line and took that off 0:11:42.120 --> 0:11:45.880 the table, and the Europeans supported that. And so now 0:11:45.960 --> 0:11:48.800 when you get to some type of security measures, it 0:11:48.880 --> 0:11:51.880 is so important to have security measures that when the 0:11:51.920 --> 0:11:56.240 fighting stops that there were security guarantees, and that is 0:11:56.280 --> 0:11:58.200 going to be the devil in the details as we 0:11:58.280 --> 0:12:01.280 go forward, and Putin will not want to have an 0:12:01.360 --> 0:12:06.760 Article five type security arrangement. And what that means is 0:12:07.240 --> 0:12:12.240 that we would be supporting Ukraine through the European countries, 0:12:12.640 --> 0:12:15.280 those that are in NATO with the same type of 0:12:15.400 --> 0:12:18.559 support that they would get as if Ukraine was in NATO. 0:12:18.880 --> 0:12:21.960 It was a very interesting approach that Trump took and 0:12:22.040 --> 0:12:26.559 pulled that out of his hat, and Vladimir Putin listened 0:12:26.640 --> 0:12:29.120 to that and initially said he would take a hard 0:12:29.160 --> 0:12:30.600 look at that. So I think that is going to 0:12:30.600 --> 0:12:32.840 be the key thing. And Zelenski is going to push 0:12:32.920 --> 0:12:35.640 you very very hard to get those type of disservances 0:12:35.679 --> 0:12:37.800 from the large militaries. 0:12:37.200 --> 0:12:39.200 Of the bright. True, and we all wanted to say, 0:12:39.520 --> 0:12:52.560 Lieutenant General, we appreciate its time. Kit jokes of self 0:12:52.600 --> 0:12:55.320 gen writing. The more prices rise in the data, the 0:12:55.360 --> 0:12:57.520 worse it will be for the economy, and the feed 0:12:57.600 --> 0:13:00.359 should focus more on the labor market as a result. 0:13:00.559 --> 0:13:03.679 If they do that, the dollar will be vulnerable. Kit 0:13:03.760 --> 0:13:05.640 joined us now for more, Kit, welcome to the program. 0:13:05.679 --> 0:13:07.760 So let's talk about this FX market driven in the 0:13:07.760 --> 0:13:10.400 first half of this year by perceived capital flows. Do 0:13:10.440 --> 0:13:12.360 you believe that in the second half of this year 0:13:12.760 --> 0:13:15.199 it will be driven by rate differentials? And why. 0:13:18.040 --> 0:13:20.920 Rate differentials up to appoint expectations about growth which are 0:13:21.200 --> 0:13:24.080 which are often the same thing. But but yes, I think. 0:13:24.120 --> 0:13:27.560 But people are genuinely uncertain and sense of at the 0:13:27.559 --> 0:13:29.840 moment they're uncertain, but aware of the fact that the 0:13:29.840 --> 0:13:32.240 world is very long dollars because we've all put so 0:13:32.280 --> 0:13:34.760 much money into the US equity market, because money is 0:13:34.760 --> 0:13:36.520 gone to the US treasury market, because the US has 0:13:36.559 --> 0:13:38.840 been out performing for so long, and that if the 0:13:38.840 --> 0:13:43.440 economy slows, rates need to come down significantly, then then 0:13:43.480 --> 0:13:45.520 some of those some of the returns people have enjoyed 0:13:45.760 --> 0:13:48.840 are pretty vulnerable. I think the market's confused about the 0:13:48.840 --> 0:13:51.880 short term rate story, but confident that the bit the 0:13:51.960 --> 0:13:55.720 answer is is the US economy slowing a little or 0:13:55.800 --> 0:13:59.120 is it in more danger of a more significant significant slowdown? 0:13:59.200 --> 0:14:02.160 And that means we're overreacting to every single piece of 0:14:02.200 --> 0:14:05.400 macroeconomic data, with the exception perhaps of the really sort 0:14:05.400 --> 0:14:07.920 of minded data we saw yesterday, but we're lining up 0:14:07.960 --> 0:14:10.400 to overreact to each piece we get going into September. 0:14:10.520 --> 0:14:13.040 Taking a step back kid Earlier this year, it seemed 0:14:13.040 --> 0:14:15.320 like a one way freight train of cell dollars sell 0:14:15.320 --> 0:14:17.640 the United States. That was the trade, and pretty much 0:14:17.720 --> 0:14:19.400 everyone lined up behind it. 0:14:19.440 --> 0:14:19.960 Is it over? 0:14:20.080 --> 0:14:22.280 We've kind of plateaued and kind of shifted around this 0:14:22.400 --> 0:14:25.200 level for a couple of months. Now, are we seeing 0:14:25.240 --> 0:14:27.520 sort of the end of the cell the America trade 0:14:27.680 --> 0:14:30.440 and going back to this sort of nuance to overreacting 0:14:30.440 --> 0:14:32.920 to every data point, type of landscape. 0:14:33.440 --> 0:14:35.160 I think the data will decide that. I think the 0:14:35.240 --> 0:14:37.800 question then is whether the US economy is slowing significantly. 0:14:38.480 --> 0:14:41.000 You know, a currency can't go down as fast as 0:14:41.040 --> 0:14:43.800 the dollar did, or go up as fast as currencies 0:14:43.840 --> 0:14:46.960 like the euro did for very long. An inflation targeting 0:14:47.000 --> 0:14:52.120 central bank reacts to fast currency moves, and economy reacts 0:14:52.120 --> 0:14:55.120 to fast currency moves. So the move we had in 0:14:55.160 --> 0:14:57.720 euro dollar from one o two up to one eighteen 0:14:57.920 --> 0:15:00.720 was too fast. We have to take time out. Whether 0:15:00.800 --> 0:15:02.880 that takes us to one twenty five or we get 0:15:02.960 --> 0:15:07.040 stuck here depends on how much or how little the 0:15:07.160 --> 0:15:09.520 US economy slows in the next three months. I would 0:15:09.520 --> 0:15:12.360 have said, and if we got a repeat of last 0:15:12.360 --> 0:15:15.480 month's payroll numbers, if we've got something genuinely soft, then 0:15:15.480 --> 0:15:17.040 I think we're going to head off into the middle 0:15:17.040 --> 0:15:18.800 of the one twenties for eur dollar. We've got another 0:15:19.200 --> 0:15:21.320 five to ten percent weakness in the dollar in this 0:15:21.360 --> 0:15:26.160 cycle to come. But you know, I wouldn't want to 0:15:26.160 --> 0:15:28.560 overinterpret some of the data that we've had in the 0:15:28.560 --> 0:15:31.600 summer and extrapolate it out blindly as saying that is 0:15:31.640 --> 0:15:35.200 what's definitely going to happen again. If the inflation hit 0:15:35.240 --> 0:15:38.720 from tariffs isn't too big, the economy is not going 0:15:38.760 --> 0:15:42.000 to slow too much, and are very gentle easing in 0:15:42.120 --> 0:15:45.120 US growth doesn't justify much dollar weakness at all. 0:15:45.160 --> 0:15:46.840 So let's build on that. Right now, we're looking at 0:15:46.920 --> 0:15:49.640 one sixteen eighty eight on the euro dollar cross. You're 0:15:49.680 --> 0:15:51.680 saying it could go into the mid one twenties if 0:15:51.680 --> 0:15:53.600 you do see some sort of significant weakening in the 0:15:53.680 --> 0:15:55.440 US economy heading. 0:15:55.120 --> 0:15:55.960 Into the fall. 0:15:56.200 --> 0:15:58.240 What are the key data prints that you're looking at. 0:15:58.360 --> 0:16:01.360 What would constitute that type of weekakness that would really 0:16:01.400 --> 0:16:03.720 cause that type of depreciation in the dollar. 0:16:05.640 --> 0:16:07.560 So we would set ourselves on that route if we 0:16:07.560 --> 0:16:10.680 saw weakness that suggested not recession or anything, but that 0:16:10.680 --> 0:16:13.280 the Fed's got significant rate cuts to make that we're 0:16:13.320 --> 0:16:15.480 going to get yields down, that the things that have 0:16:15.640 --> 0:16:19.520 made people pour them poor their money into US assets 0:16:20.120 --> 0:16:23.200 need to be questioned, at least temporarily. So if we saw, 0:16:23.560 --> 0:16:25.360 you know, if we saw a player le number in 0:16:25.400 --> 0:16:27.440 the United States that was I don't know, say only 0:16:27.480 --> 0:16:29.840 up one hundred thousand or weaker than that at the 0:16:29.840 --> 0:16:32.640 beginning of September, I think that would concern people. If 0:16:32.680 --> 0:16:36.160 you saw weakness in the housing market beyond a small correction, 0:16:36.280 --> 0:16:40.800 if you saw softness in real personal spending as consumers 0:16:40.840 --> 0:16:43.480 scale back in the face of higher prices, then I 0:16:43.480 --> 0:16:46.720 think you'd be sort of forming that that kind of backdrop. 0:16:47.120 --> 0:16:50.400 The advantage for the consumer who's critical in this is 0:16:50.440 --> 0:16:53.440 if the inflation data continues to be held back by 0:16:54.040 --> 0:16:58.360 lower energy prices. So if low energy prices offset tariff increases, 0:16:58.680 --> 0:17:01.720 or if tariff increases aren't fed through to US consumers, 0:17:01.960 --> 0:17:05.520 it all softens the economic blow and the downside of 0:17:05.560 --> 0:17:06.480 the dollar is reduced. 0:17:06.840 --> 0:17:09.000 We're all still wrestling with this, and I imagine many 0:17:09.000 --> 0:17:11.280 on the committee that Federal Reserve are wrestling with the 0:17:11.400 --> 0:17:13.920 very same thing, which begs the question going into Jackson Hole, 0:17:14.160 --> 0:17:16.920 just how much can we expect NEIL data. Renmack, don't 0:17:16.960 --> 0:17:20.119 expect a strong signal at Jackson Hole. Jonathan Pinglely ubs 0:17:20.160 --> 0:17:22.159 if you're looking for ray cuts, he says, quote, I 0:17:22.200 --> 0:17:23.639 don't think he's going to lock it in. 0:17:24.000 --> 0:17:24.160 Kit. 0:17:24.240 --> 0:17:25.639 Do you think he's going to lock it in in 0:17:25.680 --> 0:17:26.400 a few days time. 0:17:26.640 --> 0:17:29.919 I'd be surprised if he locks it in. But the topic, 0:17:30.080 --> 0:17:33.439 the topic of the symposium is the labor market. The 0:17:33.520 --> 0:17:35.359 labor market is going to be the thing that tells 0:17:35.440 --> 0:17:37.840 us what's happened to the economy. So we should hear 0:17:37.880 --> 0:17:41.160 a really interesting set of discussions about how they feel 0:17:41.200 --> 0:17:43.800 about the labor market and how they feel about labor 0:17:43.840 --> 0:17:48.040 market tightness relative to softness and employment gains. And if 0:17:48.119 --> 0:17:51.560 I get any hints from that, will I will jump 0:17:51.600 --> 0:17:54.119 on them to provide me with a clue to what 0:17:54.160 --> 0:17:59.040 they'll do. But you know, I think that again, if 0:17:59.040 --> 0:18:00.960 the job's numbers are week at the beginning of September 0:18:00.960 --> 0:18:03.720 after what we saw last month, frankly, the game's up. 0:18:03.840 --> 0:18:06.200 So that'll tell us what happens, But it'll be it'll 0:18:06.240 --> 0:18:08.720 be a very interesting supposion on the labor market. 0:18:08.760 --> 0:18:10.879 Okay, just before you go, what's more likely over the 0:18:10.960 --> 0:18:13.199 next twelve months or so that we get three four 0:18:13.359 --> 0:18:15.520 five rate cuts from the Federal serve or Arsenal win 0:18:15.560 --> 0:18:16.240 the league. 0:18:18.720 --> 0:18:22.080 Three four five. I think Arsenal I've got a decent 0:18:22.160 --> 0:18:25.560 chance of winning the league. Probably, it's probably I'm slightly 0:18:25.640 --> 0:18:28.119 more optimistic about that than about anything in the US economy, 0:18:28.119 --> 0:18:29.119 which is all up for graps. 0:18:29.160 --> 0:18:32.000 Okay, thank you, sir, kit Chu's there a sebchen Okay, 0:18:32.040 --> 0:18:34.359 thank you very much. On the FX market and a 0:18:34.400 --> 0:18:46.800 little bit of Premier League football, pre amisserer of JP 0:18:46.880 --> 0:18:49.880 Morgan writing the dual mandate is intention but we think 0:18:49.880 --> 0:18:52.960 a September twenty five basis point rate cut is likely 0:18:53.240 --> 0:18:55.560 and a sign or for more cuts to come as 0:18:55.560 --> 0:18:58.480 the feder removes the level of restriction in monetary policy. 0:18:58.560 --> 0:19:01.800 For more pre adjoints round a table, pray, good morning, 0:19:01.880 --> 0:19:03.879 it's going to see RBC has talked about this. A 0:19:03.960 --> 0:19:05.880 lot of people are focused on. It is the long 0:19:06.040 --> 0:19:10.120 end becoming unanchored from the front end, not just domestically 0:19:10.359 --> 0:19:12.240 but worldwide when you look at the bond market at 0:19:12.240 --> 0:19:12.639 the moment. 0:19:13.040 --> 0:19:14.920 So I'm glad you bring up the global side because 0:19:14.960 --> 0:19:18.720 I think that's absolutely important. Global term premiums are correlated 0:19:19.040 --> 0:19:22.840 the fact that we have fiscal expansion globally, the fact 0:19:22.840 --> 0:19:25.040 that there isn't that much demand for long duration is 0:19:25.080 --> 0:19:29.440 the reason why UK, German, Japanese long end yields arising, 0:19:29.480 --> 0:19:33.040 and that's raising US rates as well. But I mean, 0:19:33.080 --> 0:19:37.600