That is a big headache for the ecb that meets next week. Alix one of the worst performing currencies in march. Scarlet is here to look at those. Scarlet a new trend. Alix that is me. Thelet i was hoping for return of summer. Weakness in the u. S. Dollar is index felle bluebird fiverounding up straight months of losses. When you look at who performed better versus the dollar everyone except brazil. Commodity currencies for the biggest gainers. Down 6. 3 rial is down 6. 3 . A note published today says the dollar moved further than the shifting growth expectations would justify. The positioning to get the dollar down has been extreme, but what triggers a correction is not for castable. The feds leadership was more pressure on the dollar because lower rates for longer continue to pound the dollar. Forever and a day is the phrase i like the best now. The fed is willing to tolerate higher inflation to get fuller, higher employment. As much as we use the dollar index as shorthand for the performance the move is relative to other currencies and is an open question how long china and other countries will call tolerate their currencies escalating. Strongest since 2018. 1. 35. Nd is approaching uphave got a chart to pull that shows bullish bets on the euro since the dollar. We are talking one month of reversal. Much to the chagrin of the European Central banks. S. Guy we have a disinflationary environment once again in the euro. Let us bring in mark mccormick, global head of strategy. Run. Uro has had a good do you think the story has got further to go . Mark thank you for having me. In the short run tactically the euro is overdone, it is exhausted with positioning. We use other metrics in a model in terms of conditioning and the euro is running at levels that do not justify the price action. The point i would make is the shortterm tactical set up would argue for consolidation for the euro and some of these other major currencies, but not a big correction. Maybe 1. 32 and the pound. What we are seeing is exhausted trends which does create room for a bit of a tactical correction. Alix what is the driver . Is it going to be yield differentials, virus numbers, actual underlying economic data, i am confused as to what im looking at . Mark it could be the narrative, the numbers, Growth Numbers per day, the mortality rate for day is the most important thing. I would argue the feedback from covid and the u. S. Election is what is going to drive the dollar. It probably makes more sense to a lot of people, but covid numbers, Approval Ratings, Geopolitical Uncertainty, the spread between biden and trump have correlation amongst each other. We are coming out of the summer, risk markets usually selloff or see more volatility, but the market is very complacent on the u. S. Election. This is a blue wave and i would argue what we are seeing in the polling data and betting markets is there is a trump bump which would actually be a very strong catalyst to wake up the positioning and fx markets. That is going to become an increasing focus, but the virus still a huge factor. I was listening to pimco earlier and he was saying we should look weaker dollar is a positive sign. The fact they do not want dollars right now is an indication, potentially, things are heading in the right direction. Do you agree broadly with that sentiment . Mark i agree entirely. I think this is why the markets are not focusing on data the way they use to. We have seen so much change in our lives and daily structure on the way the economy works, but particularly for Financial Markets the data we used to rely on is not fast enough. If we get a Monthly Economic jobs report, something we already know came through, ability data, whether or not the government introduced a new lockdown, there is hyper data and it is a lot better at predicting where the markets are going and the economy is going. I would say the markets are starting to ignore some of the common factors and starting to look ahead to what the economy might look like next year. But again, we are going through a new regime so the right Market Pricing mechanism will be quick. However, it might not be accurate and getting with the future will look like as we navigate through these challenging times with covid and all the other things. And lack of inflation potential deflation, inflation turning negative since the first time in 2016. You have the flexibility inflation targeting etc. How does that play out in the currency markets . Mark the easiest way to think about this is we are almost moving toward nominal gdp targeting. An average rate of inflation we are not bound. 2. 5 ifn could be authorities can get that there. We want the economy to run hot, gdp above potential, basically saying we believe policymakers believe there is output. For, currencies it will be very important because rates will remain below levels implied by the Macro Economic outlook which is basically saying real rates will be suppressed at lower levels. What that will do is stimulate demand for equities, stimulate demand for assets which we talked about commodities. In this backdrop i think the market is going to look past deflationary sources in the euro zone. We already know next year inflation is going to be higher based on base effects. We know inflation is going to be coming back. We also know Commodity Prices are higher and that will provide a bump next year. Most importantly real Interest Rates will be lower. The point i would emphasize is a critical driver will be relative growth story, valuation story pushing against the dollar, and we should be focused on relative equities because Interest Rate differentials and centralbank policies are not going to be the main drivers. They are basically doing the same thing. We know the fed moved in average inflation targeting. If the anchor that with forward guidance, theyre not going to raise rates until inflation is above 2 which could take a long time. The focus is going to be on growth, valuation, and global equities. Guy does this table make sense . Mark i think it does in the context of what has been driving cable. Highs,s have marked new the dollar is off 10 from the highs we saw prelockdown. That thesense to me markets are moving into an antidollar trade. The fact that u. S. Rates are 25 basis points below means that the other natural reserve currencies are going to rally. I think the key point is why are markets not moving with cable, yen, swift . What the market is rewarding are highquality reserve currencies that are Clear Alternatives to liquidity,llars with decent fundamentals, and more room for policy accommodation would you do not have any emerging markets. Alix good stuff. Mark mccormick, thank you for sticking with us. This is bloomberg. I am alix steel with guy johnson in london. This as Bloomberg Markets european close. If we are in a dollar demise, what does that mean . Mark mccormick is still with us. We get terrible gdp numbers from brazil and india, but then you have a tailwind of the weaker dollar. What will win out and where . Mark i think the weaker dollar will solve both. Em lagged largely because covid. Covid is an accelerant. Countries have, in developing markets, not shared as well as others. Latin america has been a big lagger in managing and dealing with covid. I think what is clear is that the outperformance would come through asia. They have done a better job managing covid. Obviously, that is something behavioral, and structural, and economically people know how to deal with throughout asia. That has been part of the broader system. If you think about the rotation, it favors asia at the expense of latin america. Chinese equities are one of the bestperforming assets to date. Within the structure Eastern Europe performs well because it follows euro. Poland and hungary will follow norway with a euro. But again, were probably not going to see a big pickup in turkey, south africa, brazil, and some other economies that are having a much tougher time. I would say the rotation is stronger for asia, latin america will be the lagger, but moving forward the way this plays out depends on whether joe biden or donald trump or president. Walk me through that because i was going to ask you about this. We get toward the election. China is going to be a big part of the election. The asian story when it comes to the fx markets continues to be dominated by china. As we focus policy on china out of washington what does that mean . What does that mean for associated currencies . Mark i would think about a what wek like this have with a biden presidency is a turn to form poly orthodox. Policyrstand foreign orthodox. We understand that with a trump policy we could get hawkish relationships. What matters is the style and substance in a way that policy is delivered. With a biden presidency you see Geopolitical Uncertainty will remain elevated where it has been the past 25 years, but a much lower level and the strength of the dollar, particularly against emerging markets, correlates well with the rise in uncertainty. If we have a lower level of Political Uncertainty under a biden policy, especially the way they are delivering it, that would benefit those broad dollar it would benefit them against a broad dollar. You would get a weaker broad dollar. If trump were to win, it is challenging because i do not think we recreate the last four years. What we see is probably a rotation into euro cable, yen, swift but the em currencies will lag. Hadn the ability they have to disrupt trade and economic policy, so the markets are not priced for this right now. One way to think about it is as trumps Approval Ratings and odds have declined chinese equities have a rally. That is one way to think of a reversal of this if trump were to narrow up, or actually gain momentum, in the next month or two. Alix how and when do you play that . Mark i think you Start Playing it now. Consolidating pretty much against everything. Peaking, these speakin other assets will cluster around it. The u. S. Real rate is angering everything. You have a repressed real rate and you basically have risk asset on the one side and had beta currencies and global equities, and on the other side you have Investment Grade credit and the dollar. If there is anything that disrupts the positioning on one side, the other side is that paul will come back to some degree ball will come back to some degree. On ore either Dollar Dollar off. If we go through a modest pullback, that would benefit the dollar against most major currencies, but i would argue that would be an opportune time to resell the dollar for a deeper pullback to 2021. Guy what is the highest beecher beater on the dollar . Mark the pound is higher and in emerging markets it will be brazil, turkey, south africa. They tend to have the highest betas at this stage. Alix mark mccormick, thank you a lot. Global head of ethic strategies. Always good to get your perspective. This is bloomberg. It is time for the Bloomberg Business flash. Mostis a sign that apples important product is holding up in the midst of a recession and pandemic. The company asked suppliers to build 75 million 5g iphones for later this year. Apple anticipates the shipment for the next generation could hit 80 million in 2020. As much as 5 billion will share. Their capitalizing on highflying stock. A share slip made it more accessible to retail investors. The stock is up almost 500 this year. More than 50 former mcdonalds franchisees are suing say they were pushed to set up shop in crimeridden areas. Ey said they would denied denied financial business. Mcdonalds denies the accusations. We spoke to the ceo of the car brand rollsroyce and accidentally showed the stock of the unrelated Aerospace Company of the same name. That is your Bloomberg Business flash. Guy thank you very much. Whyus get the latest on german lawmakers will start an investigation into the companys collapse. Berlin us from is benedikt kammel. Who is most in the firing line . Potentially is at risk from this investigation . Benedikt today was day to of the parliament reinvestigation and nobody seems particularly satisfied with the answer they got. One person put it little has been cleared up. Another said the government is stonewalling. What we are getting is a full parliamentary probe, germany doing what it does best a postmortem into what happened. To answer your question the person who is probably uncomfortable is the finance minister because this parliamentary probe means it will drown into next year and possibly bump up against the elections that are happening in september. He certainly does not want to have his name too closely affiliated with a scandal, but this is something they will have to manage in the next couple of months. So far, nobody is looking happy with the outcome. Alix here in the u. S. Things can drag on forever and some people literally forget about it. There could be severe consequences. Were scenario be . Benedikt we could get a similar scenario here as wewould in the u. S. People start forgetting about it and scandals grow old at some point. We saw a couple of years ago with the diesel scandal. At couple of years later people were like, oh yeah, they had forgotten about it. This is quite technical. People are not as affected and it is interesting given the quiet implosion of the business, but will people feel as passionately about it the next couple of months . If the opposition can make it stick and really make the connection between the government and who knew what, when, what sort of lines of communication, if they can keep the alive, then it could become damaging. If it turns into something the normal man and woman industry do not understand or care about that deeply, it might fizzle out. Guy will change happen as a result of this . Will there be a more effective regulatory structure that will make sure this kind of thing does not happen again . Benedikt that is the hope and this is certainly what the government and everyone involved has vowed. It was interesting to see how slender the staffing is at some of these regulators. Not many people involved in the policing of these companies. Also in terms of process they were not classified as a financial company, they were classified a technology company. Therefore there were different people looking at this then should have looked at it. In the future they will certainly look at staffing levels, they will look at the lines of commit occasion, who is in charge at one point, what role does the regulator play, what role does the marketplace play, what role does the bank play . All of these different constituencies they will come under scrutiny and certainly in this long, indepth probe that is something that will come out of it. Will we get more regulation . Most certainly because it is an embarrassment on the german marketplace to see the First Company implode. We have never had that before. Wirecard obviously excluded from the Financial Market conversation, but there were implications. We are going to continue on the european markets a little bit later on. It is not related, but will be significant. Enedikt kammel, thank you let us talk about the markets in europe. Kammel, thank you. Let us talk about the europe markets. The ftse is down. Hsbc is down. The eurodollar backing away 120 mark. This is bloomberg. Hike coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. He scores stanley cup champions. Touchdown only mahomes. Expect anything different . The big events are back and xfinity is your home for the return of live sports. So youre a small bor a big one. You were thriving, but then. Oh. Ah. Okay. Plan, pivot. How do you bounce back . You dont, you bounce forward, with serious and reliable internet. Powered by the largest gig Speed Network in america. But is it secure . Sure its secure. And even if the power goes down, your connection doesnt. So how do i do this . You dont do this. We do this, together. Bounce forward, with comcast business. Guy 30 seconds until the end of regular trading this tuesday. London is back great equities on the back foot. Down. 4 . Treasuries positive most of the day. Fading into the close. The stoxx 600 is still trading 365. We got through 400, we got well beyond 400. When you think about the relationship between u. S. Markets and the european markets and the recovery catch up story, the levels are important. We will talk about the rebalancing on the 600 later on. That takes place we get the news after the close. Say, london returning. We are playing catchup great we have the london market closed yesterday. Hass coming back and it to deal with the headwinds of the currency. The ftse 100 down 1. 83 . Hsbc having a significant downside to the market. The dax is more positive, the cac 40 fairly flat. Europe is looking for a sense of direction. Lets talk about the currency. The currency has been more exciting than the equity market. Currency markets have been dull for a long time. The dollar move is certainly starting to turn a few heads. It got through 120 earlier on. We have faded that move, and particularly the leverage, taking note of where we are and how fast we have come. We were talking about this earlier on. We faded the move. We are still positive on the day. We are still trading at 1. 1952. We also have the pound on the move. A selloff at a similar time. Cable still trading 1. 3440 on an day we have seen indication from the u. K. Government that a deal on brexit will not be easy. The pound keeps going higher. We will hear from Andrew Bailey tomorrow. He is giving testimony to mps. Pay attention to that. A big focus. In terms of the focus, lets get back to sectors. Technology on the front foot in europe. That is part of this rebalancing story we will be talking about in a moment. The mining stocks continue to move higher. A big move and copper. There is a dollar factor. Travel and leisure at the bottom end of the market, banks at the bottom end of the market. Hsbc. That show you what is going on. Hsbc huge heavyweight stop down 41 . Downside int to the the banking sector. Astrazeneca starting the huge phase free trial phase three trial related to the covid vaccine. Conti down in germany. This is a huge supplier of car parts to th