Open: New York Session | Forex, Metals, Oil, Agriculture July 26, 2020



The historian Harold James titled his piece on Project Syndicate, “Late Soviet America,” that foretold the end of what he called “dollar hegemony.” Dollar weakness could boost equities in the short term, he said, adding that “ultimately it weakens as the debt situation is really remarkably bad for a developed country.” The lack of a common bill market may also limit the euro’s ability to gain a significant market share from the dollar. He said the dollar would be pressured to the downside as deficits rise. While we expect a cyclical decline in the dollar, we don’t anticipate that the dollar’s role in the world economy, as the numeraire is going to change anytime soon.


Industrial commodity and gold stocks look good too. On a side note, I was barraged by people responding to this tweet – the gold bugs were telling me the Fed would pay for everything through inflation.


Looking forward, however, the cartel of major oil producers have optimistic projections for world oil demand to recover during the second half of 2020 and into 2021. Brent has tried and failed twice to breach this level this week and a third attempt looks likely very soon. The exchange has sought permission from SEBI to launch options on spot in guar gum, soyabean, refined soya oil and chana. Both the IEA and EIA anticipate global oil demand to increase in the months ahead as well according to their respective monthly oil reports. The price of Brent has nudged higher over the week with little in the way of any macro-news to either accelerate the trend or cause it to change direction. Brent is finding support from the upward sloping 20-day moving average, an indicator that is has respected since early May. less Crude oil price action has staged a monumental recovery since the commodity traded in negative territory this past April.

United States

The Trump administration and Republican lawmakers have maintained that their aim was to “repeal and replace” the health care act, despite showing no alternative plan. The bottom line is that the Fed and government will have our backs next year and probably in 2022 too which is favorable for owning risk assets. President Donald Trump, who famously resisted wearing a mask and stressed that mask-wearing recommendations from his public health experts weren’t requirements, this week changed his tune. One, it quickly added as many members as possible thus greatly expanding its geographical extent, and two, it lost that single unifying factor in the form of USSR. Earlier this month, Downing Street dropped a pledge to maintain bans on chlorinated chicken and hormone-fed beef, as post-Brexit trade talks ramp up with Washington. However his comments come after Liz Truss, the international trade secretary, refused to tell MPs about the proposed deal in case the US trade negotiators were listening.

Each week, well over a million readers turn to John Mauldin to better understand Wall Street, global markets, and the drivers of the world economy.


The therapy candidate is under review in the European Union. Avapritinib has the potential to be the first treatment in the EU indicated for patients with PDGFRA D842V mutant GIST. Of course, for Germany, France, and Italy to successfully resist US encroachment they would first need to transform the EU into something closer than a federation. Boris Johnson is to urge GPs in England to prescribe cycling as he launches a major public health drive aimed at tackling obesity in response to the coronavirus pandemic. The EU’s Recovery Plan entails the issuance of a collective bond.