Overnight markets were mixed. The Trump tweet about Apple needing to make iPhones in the US hit Asia but Europe shrugs is off. The weather effect on statistics starts the day with Japan EcoWatchers bouncing in part because of such. One has to wonder if the same shows up in the China CPI and PPI.  The inflation focus this week is key with US CPI/PPI later the driver for whether FOMC expectations about pausing in 2019 are realistic. The Turkey GDP coming in near enough to expectations was a relief trade for EM and the plans for shorting EM in September may pause accordingly. This means we are all going to return to watching the USD as a barometer and wonder if the US is at that dreaded as good as it gets stage or if we are in a world that is getting better all the time. This isn’t so easy to tell from the myriad of data points we all watch and collect. The USD up because of safe-haven flows, tax repatriation, FOMC rate hikes, and the carry trade – all that matters but its offset by the other story this week – namely, the big budget deficit in the US and its funding. Expect the focus on bills and bond sales to matter to the USD picture and to the favorite failed to trade for macro in 2018 – short US bonds. The 3.05% level in 10-year looks important still. What this means for the rest of the world seems obvious as well. Higher US rates equal more EM pain. For a rather quiet day after a busy week, markets are likely to tip-toe into new risks until after they hear from the BOE and ECB Thursday, all of which makes today perhaps the easiest day of the week. USD bulls can still see a way to 97 while the bears need a break below 94 to get seriously excited. 

Question for the Day: Is weather the real driver of risk? The earthquake and typhoon last week in Japan hit the economy – just how much remains to be seen. The storm Gordon in the Gulf last week drove up and down the price of oil. The storm on its way to the US SouthEast is worth considering as the next risk for surprise in a market all but asleep with the view that divergence of capital flows to the US will remain until China or the US say something different.