Euro Dollar Parity Is Off the Table if Biden Wins Election

Sonia, the road to hell is paid for. Good and political intentions, isn’t it? And here is the Biden stall. We understand we get more details next week, but either way, tariffs are going to live, and they’re possibly going to live longer and higher if there’s a change of administration in the White House. We’re seeing a small reaction in high beta of Aussie and Yuan this morning. But your first take on the prospect of more targeted sanction on more targeted, more targeted, not sanctions, more targeted tariffs, Excuse me. Well, obviously the big question is why it is coming now as you commented, just mentioned sort of been the Biden’s administration’s policy to have terrorists in place. They haven’t exactly been much kinder in that regard than Trump is. But now there is an election coming and feel that maybe this is also an attempt to take away some of the trade discussion away from the Trump camp and to show that the Biden administration is well would still take action vis A vis particularly China. As far as the currency market is concerned, as you mentioned, there hasn’t been much of an impact and I think there won’t be because currently, well, first of all, we’re still lacking some detail. But also I think the market is really looking for the election and the threat of a Trump win, which would then of course mean and probably an escalation of the whole tariff tariff situation. And that would have a much bigger impact on this market, but have a much bigger impact in terms of inflation. I want to get a sense from you of where we are. Yes, if we saw quite a bit of a shift in narrative 1. Jobless claims. One week’s jobless claims of over 230,000. Panics because in New York schools closed for for a break. But I want to get a sense from you, a lot of the idiosyncratic data at the moment is bumping into one another, isn’t it? And this is what Victoria Clark had to say, Veronica Clark had to say over at City, The evidence is building that the labor market is poised for a sharp weakening. Labor market indicators are flashing yellow or red, and they’re raising concerns about a nonlinear rise in unemployment. Now, as Danny and I, we chatted to one another this morning. She’d be on later. This brings back the dual mandate aspect. It could make a reappearance. You’ve got to cut for jobs, not for inflation. Are are the indicators flashing yellow for you at the moment? Is there enough there to be worried? No, I don’t think that it’s fair to say that they’re flashing anything at this moment. I mean we have seen a couple of slightly weaker prints, slightly weaker. I mean this market, this labor market is still very, very strong and it it, it’s just one of those things that we’ve been seeing for the last six months. I mean Mark is just rushing from 1 Extreme into the next. I mean I remember earlier this year, you know 160 basis points of rate cuts were priced and then it’s all been priced down. There was talk about rate hikes, you know, suddenly we get two or three prints of slightly softer data and everyone’s rushing to the opposite direction. Again, it’s just it’s just uncertainty. I think people feel very unsure about where things are going to go and I think have very little conviction and with this leaves these massively volatile swings. But the US is obviously experiencing a very, very mild slowdown. But I mean, I don’t think we’re at this point where we have to talk about flashing warning signals. And I, I think, you know, let’s be honest, we’ve been still waiting for this labor market to weaken for a really long time. I think this point, we can probably safely say that a massive weakening isn’t going to happen, OK. And with that backdrop, I mean, the dollar has been exceptional. US exceptionalism is a dominant force, divergent and Fed remaining higher for longer relative to their peers. I look at the G10 complex, there’s not one currency has challenged the dollar. The yen’s on its knees, the Swiss franc is under pressure and the Norwegian krona has also dropped by over 6%. So if we’re at 2 cuts in the USA and three potentially in Europe, do you throw in your parity call because you say the euro has held up quite well. So I’m curious to get an update. It’s like we bring you on once a month, what the heck, why not, let’s have an update on the parity call. Well, we still have our, we have, we have the Trump Perico to call if Trump wins the election. We still think that the euro has significant downside, but assuming that Biden wins and you know over the next few months as well, I don’t think that’s going to happen simply because you know as you’ve mentioned the market is pricing two cuts for the Fed, it’s pricing in three for the ECB. We’ve seen this all being priced in and we’re still trading where we are trading today. So it I fail to see the surprise in Europe. If anything the data has been slightly better than expected. I mean it’s a mild, mild recovery from really low levels, but you know it’s getting better and in the USI think we’ve priced in about all the good surprise of the positive surprise that we can. So I don’t really see what’s going to push your dollar down unless of course, we get a clear lead for Trump in the vote and in the polls. And I think that will be all the supportive. But unless it happens, I’m not a big fan of the parity still. OK, well, we just thought we’d check in with you on that. Now, look, I applaud everybody in this market. I applaud bond traders, equity traders, but I hand a gold prize to the FX traders because they are just want to test the Bank of Japan and the Ministry of Fantasy going, come on, yes, come on, come on. Is that all you got? 60 billion. Show me, show me a little bit more. I mean, if you look at a way that I mean nobody really, really he’s losing credibility because he’s talking about a monetary policy response. So he’s vaulted from, you know, a dovish situation to talking about a monetary policy response. And still the FX market go sell yen, sell yen, sell yen. So where do they test him and and do you think he still has credibility? Well, we’ve always said it’s going to be a really risky business to intervene because there’s a fundamental reason for this, for why the yen is so weak. And that has to do obviously with still the the ultimately still very expansionary multi policy stance in Japan also has to do a lot with the massive spread differential between the US and Japan and that’s all still in place. So unless the Bank of Japan is willing to come out and actually give us a timeline on a reduction of asset purchases, which is ultimately I think what they probably need to do, then the end is going to remain weak. And at this point, as you said, it’s become kind of a game between the NYF and the BOJ on one hand, on the market on the other hand. The best they can hope to achieve and one arguably could say that they have had some success with that, is to stabilize the end at low levels. But if they’re if they should try to aim for an appreciation of the end, I think that’s going to be a massive uphill struggle unless again, they are willing to take a bigger leap in terms of their policy stance.