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MLB Trade Rumors and News: Dustin May and Luis Robert go down with long-term injuries

Joe Nicholson-USA TODAY SportsMonday was a rough one as two high profile players went down with serious injuries. The MLB Daily Dish is a daily feature we’re running here at MLBDD that rounds up roster-impacting news, rumors, and analysis. Have feedbac…

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Joe Nicholson-USA TODAY Sports

Monday was a rough one as two high profile players went down with serious injuries.

The MLB Daily Dish is a daily feature we’re running here at MLBDD that rounds up roster-impacting news, rumors, and analysis. Have feedback or have something that should be shared? Hit us up at @mlbdailydish on Twitter or @MLBDailyDish on Instagram.

  • Its never great news when a player ends up on the ground after attempting to run to first, but the news was particularly bad for Luis Robert and the Chicago White Sox. The young star was diagnosed with a torn hip flexor and won’t even be able to begin baseball activities for 12-16 weeks which very much puts his season in jeopardy. That White Sox outfield is looking awfully thin these days.
  • The Dodgers have their own injury problems. Dustin May left his most recent start in the second inning and on Monday, it was announced that he is going to have to undergo Tommy John surgery which put him out until at least some time next season. Its silly how much depth that Dodgers roster has, but they can’t really afford to lose too much more talent on the pitching side.
  • The Braves have placed Travis d’Arnaud on the 60-day injured list after undergoing a pretty rough sprain to his thumb that could be more serious than initially posed. William Contreras, the young 2015 international signee, will take d’Arnaud’s spot behind the plate.
  • Dustin May has landed on the 10-day injured list, a major hit to the Dodgers rotation. The 23-year old left Saturday’s game against the Brewers after just 27 pitches, tweaking his arm almost instantly and being pulled by a team trainer mid at-bat. Southpaw Mike Kickham has been called up from the minors to take May’s roster spot.
  • In some disturbing news, MLB has placed Roberto Alomar on the ineligible list, while the Blue Jays sever all of their ties with Hall of Famer. His name will be removed from the team’s “Level of Excellence” and his banner at Rogers Centre will be taken down following an investigation of sexual misconduct against him. He is now the only Hall of Famer on the ineligible list.
  • The Brewers have hit a rough speed bump early in their season, placing Corbin Burnes on injured list. While it wasn’t immediately reveals what sent the early NY Cy Young front runner to the IL, that eludes to the fact that this stint is COVID-19 related. If that is the case, we hope it’s nothing serious with long-term effects. The 26-year old is currently rocking a 1.53 ERA with 49 strikeouts over 29.1 innings, so without Burnes in the rotation for an extended period of time would really do a number on the Brewers rotation.
  • The Phillies got a bit of a scare on Wednesday as both Bryce Harper and Didi Gregorius were hit by back-to-back pitches from Genesis Cabrera with Harper being hit in the face and having to leave the game. Fortunately, it seems like he is okay and all of the scans at the hospital came back negative.
  • The Rays got some reinforcements for their pitching staff yesterday as Shane McClanahan, who was added to the team’s postseason roster during their World Series run in 2020 and has yet to make his regular season debut, was called up to the big leagues. He will get the start for Tampa on Thursday.
  • We had our first major-leaguer-for-major-leaguer trade of the 2021 season on Tuesday, as the Giants acquired outfielder Mike Tauchman from the Yankees in exchange for lefty reliever Wandy Peralta and a player to be named later. Tauchman has been buried on the Yankees’ depth chart this season but had a .353 OBP during his three-year tenure in New York and is an interesting addition to the Giants’ mix-and-match outfield group. Peralta, meanwhile, had a career season with San Francisco last year, and while he’s been inconsistent to start 2021, he provides some left-handed depth to the Yankees’ bullpen as they await the return of Zack Britton.
  • The Rockies have been poorly run for a while now, with general manager Jeff Bridich at the forefront of that mismanagement. They somehow made their relationship with their best player, Nolan Arenado, so bad that they had to trade him away and throw in a bunch of cash in order to do so. Well, Bridich’s time finally came as he and the team decided to mutually part ways on Monday.
  • The Astros have signed Martin Maldonado to a one-year extension, reports Mark Feinsand of MLB.com. The catcher is guaranteed $5M for the one-year deal with a $5M vesting option for 2023. It’s a low-risk, high-reward move for the Astros that at least buys them another year to find a replacement for Maldonado if need be.
  • Miguel Sano’s season has not been off to the best of starts. After really struggling to make contact through the first 10% of the season or so, Sano strained his hamstring during a doubleheader last week and had to be placed on the injured list. If you are looking for a silver lining, top prospect Alex Kiriloff is getting called up as a result of the roster move.
  • Neil Walker never made an All-Star team or won a World Series, but he had a very admirable 12-year major league career, playing seven seasons for his hometown Pittsburgh Pirates, winning a Silver Slugger Award in 2014, and making over $50 million along the way. Walker announced his retirement last week after going unsigned all offseason. He finished his career playing in 18 games for the Phillies last summer.
  • In a major blow to the Nationals’ offense, Juan Soto has been placed on the injured list with a shoulder strain. Injuries are always tricky, but for now, it doesn’t appear that Soto will miss much more than the minimum required 10-day IL stint.
  • Yasiel Puig, who has been unable to find a big-league job for a second straight season, has reportedly signed with Veracruz of the Mexican League and will attempt to revive his career there.
  • Christian Yelich has been placed on the injured list with an injured back. Fingers crossed we still get that comeback story we were all hoping for from him this season.
  • I guess the best way to go out is on your terms. Yankees first baseman/outfielder Jay Bruce retired after Sunday’s game. Bruce leaves the league as a 14-year veteran and three-time All-Star.
  • The Nationals have placed Stephen Strasburg on the 10-day injured list. A recent MRI has shown inflammation in his right shoulder after a start last Tuesday that raised some eyebrows. He’s currently 0-1 with a 6.30 ERA over his first two starts this season.
  • Since being a highly heralded pitching prospect who was drafted #3 overall, Carlos Rodon has had to overcome several severe injuries and the label as a “bust” in his career whether it was fair or not. For at least one night, though, Rodon showed everyone what he was capable of as he threw a no-hitter (and nearly a perfect game if not for a 9th inning HBP) against the Indians.
  • James Paxton had the opposite of an ideal start to the season, as Tommy John surgery was recommended for the Mariners starter. He threw just 1.1 innings before leaving his season debut with an arm injury. Paxton is set to return to the mound in mid-2022, also missing that season opener.
  • A’s reliever Trevor Rosenthal underwent thoracic outlet surgery, Martin Gallegos of MLB.com reports. The 30-year-old kicked off this season on the IL because of a shoulder problem. While the procedure is usually a 12-week recovery period, he will be re-evaluated in eight weeks. The closer spent this offseason hunting for a long-term deal that would hopefully keep him planted for a while. What he ended up with was a 1-year, $11M deal with the Athletics. After a monster comeback in 2020, pitching a 1.90 ERA over 23.2 innings pitched between the Royals and the Padres, this feels like a devastating blow for any sort of late-career renaissance. Fingers crossed for Oakland fans that he ends up back in the bullpen sooner than anticipated.
  • The Yankees made a somewhat surprising addition, acquiring veteran infielder Rougned Odor from the Rangers in exchange for minor league outfielders Antonio Cabello and Josh Stowers. The Rangers are responsible for paying all but the league minimum to Odor, who they previously designated for assignment, and the Yankees will take a chance on a hitter who is capable of dominating right-handed pitching but has struggled to make contact in recent seasons.
  • Orlando Arcia was widely considered one of the top prospects in baseball about five years ago, but he’s mostly been a disappointment since arriving in the big leagues. The Braves will see if they can turn his career around after acquiring the 26-year-old shortstop from the Brewers in exchange for relievers Patrick Weigel and Chad Sobotka. Arcia will initially report to Atlanta’s alternate training site.
  • MLB has pulled the 2021 All-Star Game from Georgia due to new voting restrictions, and they’ll now host the Midsummer Classic at Denver’s Coors Field (we’re already excited for that Home Run Derby).
  • The Angels have signed David Fletcher to a five-year, $26M extension, reports Fabian Ardaya of The Athletic. The second baseman slashed a career best .319/.376/.425 over 230 plate appearances last season. While he offers almost no power at the plate, he’s consistent and has a jarringly low strikeout rate. The extension will begin this season and extend through 2025. The 26-year-old wouldn’t have been arbitration eligible until after this season and wouldn’t not have hit free agency until after the 2024 season. There is also a club option and buyout of $8.5M and $1.5M, respectively.
  • The health and safety protocols that the league has put in place for the 2021 season have been a hot topic given that we are amidst a vaccine rollout that should, in theory, make existing out in the world much safer and easier. Monday, MLB sent out a memo to teams saying that if at least 85% of a team’s roster becomes vaccinated, that the health protocols they are operating under will be relaxed.
  • The White Sox, fresh off an impressive run to the postseason last year, are primed to win the AL Central this year, but things just got a bit harder. It was announced last week that slugger Eloy Jimenez ruptured his pectoral tendon and will miss around 5-6 months of action as he recovers. While the White Sox do have a good number of quality bats in their lineup, Eloy’s injury is really going to put their depth to the test and place a lot of pressure on some young guys to perform.
  • One of the more exciting guys set to hit free agency after this season is shortstop Carlos Correa who, despite having trouble staying healthy in his career, would be one of the biggest names on the free agent market if he made it there. It was reported that the while Astros did offer an extension to him, Correa considered the offer so low that he now seems resigned to test the waters in free agency after the season.
  • While it doesn’t look super promising that the Astros are going to be able to lock up Carlos Correa and already lost George Springer to free agency, they did get some good news last week as they were able to lock up Lance McCullers with a five-year extension. It isn’t the marquee extension/signing they probably need to prolong their competitive window, but hey....progress.
  • After signing a one-year deal with Toronto over the offseason, former All-Star reliever Kirby Yates may never get a chance to pitch in a Blue Jays uniform. Yates underwent Tommy John surgery, knocking him out for the entire 2021 season.
  • The Royals and Salvador Perez have agreed to a monster contract extension. The deal will keep Perez in Kansas City for four more years to the tune of $82M. Slashing a career .269/.300/.449, the 30-year old was a cornerstone of the team’s 2015 World Series run. The extension also comes less than two years after Perez had Tommy John surgery and missed the entire 2019 season. Despite that, the Royals seem to have no intention of letting the franchise icon leave any time soon.
  • A few seasons ago, MLB tested out some new rules in the minor leagues that ended up being used in the major leagues, including the extra inning rule where a runner started each extra inning on second base. Now, it looks like MLB is eyeing some other changes with new rules getting tested out in the minors during the 2021 season. Such changes include an automated strike zone, limits on the shift, limits on pickoff moves, and changes to the physical bases designed to lead to less slipping and less collisions on the basepaths.

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Government

August Monthly

Fear that the spread of the Delta mutation of the covid would disrupt the global economy spurred the unwinding of risk-on positions. Interest rates fell, and the traditional funding currencies:  the US dollar, Swiss franc, and Japanese yen, strengthened..

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Fear that the spread of the Delta mutation of the covid would disrupt the global economy spurred the unwinding of risk-on positions. Interest rates fell, and the traditional funding currencies:  the US dollar, Swiss franc, and Japanese yen, strengthened most in July. While major US indices set new record highs, as did Europe's Dow Jones Stoxx 600, the MSCI Emerging Markets Equity Index fell 7%.

The preliminary July PMI reports were below expectations in the US, UK, and France.  Japan's composite PMI has been contracting since February 2020.  There has been some re-introduction of social restrictions in parts of Europe.  The UK's "Freedom Day" (July 19), when mask requirements and social restrictions were supposed to be dropped, turned into a caricature as the Prime Minister and Health Minister were in self-quarantine due to exposure, and the number of cases reached the highest level in 5-6 months. 

Given the large number of people in the world that remain unvaccinated, the challenge is that the virus will continue to mutate.  Moreover, even in high-income countries, where vaccines are readily available, and stockpiles exist,  a  substantial minority refuse to be inoculated. This is encouraging the use of more forceful incentives that deny the non-vaccinated access to some social activity in parts of the US and Europe.  In the US, the vaccines have been approved for emergency use only, and broader approval by the FDA could help ease some of the vaccine hesitancy.  Yet, rushing the process would be self-defeating.  An announcement still seems to be at least a couple of months away.  

In some countries, the surge in the virus even where not leading to hospitalizations and fatalities, maybe tempering activity and postponing more "normalization" like returning to offices.   The increase in the contagion has also prompted several companies to postpone plans to have employees return to offices. In other countries, like Australia, the virus and social restrictions are having a more dramatic economic impact.  Its preliminary July PMI crashed to 45.2 from 56.7, the lowest since last May.  Although many countries in East Asia seemed to do well with the initial wave, they have been hard hit by the new mutations.  For some, the recovery already had appeared to be in advanced stages.  

Floods in China, India, Germany, and Belgium add to the economic angst.    A freeze in Brazil sent coffee prices percolating higher.  Wildfires in Canada stopped the downside correction in lumber prices.  While rebuilding is stimulative, in the first instance, the natural disasters could be inflationary as transportation and distribution networks are impacted. 

The market reacted by pushing down nominal and real interest rates.  In late July, the US 10-year inflation-protected note yield (real rate) fell to a record low near minus 1.13%  Ten-year benchmark yields in the US, Europe, Australia, and China were at 4-5 month lows.  Expectations for rate hikes by high-income countries eased, and Beijing surprised investors by cutting reserve requirements by 50 bp (freed up ~$150 bln of liquidity).   

Still, other central banks, like Russia who hiked rates by 100 bp in late July, are pushing forward.  In Latin America, Brazil, Mexico, and Chile are likely candidates for rate hikes in August.  The market anticipates additional rates hikes from the Czech Republic and Hungary.  On the other hand, Turkey's central bank meets under much political pressure to cut rates.  Inflation is not cooperating, and it reached 17.5% in June,  a new two-year high.  Yet, the Turkish lira downside momentum eased, and this alone, in the face of a stronger dollar, meant it was the best performing emerging market currency last month, up about 3.0%.  Its 12% loss year-to-date still makes it the second-worst performing emerging market currency so far this year, behind the Argentine peso's nearly 13% decline.  

The Federal Reserve does not meet in August, but the Jackson Hole symposium (August 26-28) may offer a window into official thinking about the pace and composition of its bond purchases.  Under that scenario, a more formal statement would be provided at the end of the September FOMC meeting (September 21-22). Chair Powell has pledged to give ample notice about its plans to taper.  This means that the initial timing of the beginning of the tapering may be vague by necessity.  Many expect the Fed to begin reducing its bond purchases either later this year or early next year.  

The debt ceiling debate may add another wrinkle.  The debt ceiling waiver expired at the end of July.  There are several different ways that Treasury can buy time.  There are many moving parts, and it is hard to know exactly when Secretary Yellen would run out of maneuvers, but she probably has around two months.  In the past, the uncertainty was reflected in some T-bill sales.  Recall it was the debate over the debt ceiling (the government has already made the commitments or spent the funds and now has to pay for them) that prompted S&P to remove its AAA rating for the US in 2011. 

Meanwhile, Beijing is waging an internal battle to retain control in the technology and payments space.  It has also stepped up its antitrust actions and moved to make it more difficult for internet companies to have IPOs abroad. At the same time, the US threatens to de-list foreign (Chinese) companies if they refuse to allow US regulators to review their financial audits.  This is more than quitting before getting fired, though at the end of July the US announced that concerns over risk disclosures have prompt it to freeze applications for Chinese IPOs and the sale of other securities.  Its efforts to turn the private schools into non-for-profits are driven by Beijing's domestic considerations, but foreign investors--hedge funds, a couple US state pension funds, and provincial pensions in Canada appear to have been collateral damage.  Even the Monetary Authority of Singapore had exposure.

The jump in Chinese yields and the drop in equities that pushed the CSI 300 (an index of large companies listed on the Shanghai and Shenzhen exchanges) 21% below the February peak prompted some remedial measures by officials.  They succeeded in steadying the bonds and stock markets, and the yuan recovered from three-month lows as July wound down. However, both the disruption and the salve, the selling of industrial metals, coal, and oil from its strategic reserves, demonstrate the activist state that gives foreign investors reservations about increasing allocations to China.  To draw foreign capital, officials may be tempted to engineer or facility a strong recovery in shares and the yuan.  

Beijing is also meeting resistance from abroad.  Its aggressiveness in the region, including the aerial harassment of Taiwan and rejection of the Arbitration Tribunal at the Hague regarding the United Nations Convention on the Law of the Sea (that pushed back against Chinese claims in the South and East China Seas). Over the past few weeks, the situation has escalated. The UK announced it will station two naval vessels in the area.  Japan has promised to defend Taiwan should it be attacked by China.  The US has not been that unequivocal.   The EU has been emboldened.  Latvia became the first EU member to open a representative office of "Taiwan" instead of Taipei.  

Many wargame scenarios are premised on China attacking Taiwan, but this does not seem to be the most likely scenario. Top US military officials have testified before Congress that Beijing wants to have the ability to invade and hold Taiwan within six years based on comments from President Xi to the People's Liberation Army.  Yet, if China senses that the status of Taiwan is truly changing, it could move against the Pratas Island, which is off the east coast of China and the south tip of Taiwan.  It is closer to Hong Kong than Taiwan.  It is an uninhabited atoll with a garrison.  Taking this island would send a signal about its determination, with the costs and risks of invading Taiwan. It is true to the ancient Chinese idiom about killing a chicken scares the monkeys.  

Bannockburn's World Currency Index, a GDP-weighted basket of the top dozen economies, rose fractionally after falling 1% in June.  The two largest components after the dollar are the euro and yuan.  The former slipped by was virtually flat near $1.1860 and the latter softened by less than 0.1 %.  The yen, with about a 7.3% weighting in the basket, was the strongest, gaining about 1.25% against the US dollar.  Sterling was almost eked a 0.5% gain.  The Indian rupee slipped 0.1%, while Brazil's real was the weakest currency in the index, falling by about 4.6% in July.   

The BWCI rose by 6.5% in the last nine months of 2020 after falling by 3.2% in Q1 20 as the pandemic struck and structural dollar shorts and safe-haven flows favored the dollar.  It fell by 1.5% in Q1 21 as if correcting the previous advance.  It rose by 1.1% in Q1.  More so than bilateral exchange rates, the BWCI gives the impression that broadly speaking the dollar's losses from last year are being consolidated more than reversed. 

Dollar:  The greenback's two-month uptrend stalled in the second half of July, sending the momentum traders and late longs to the sidelines. The dollar's pullback had already begun before the FOMC meeting at which the Fed lent support to priors about a tapering announcement in the coming months.  The next opportunity is in late August. The weaker dollar tone that we expect to carry into August could create the conditions that make a short-covering bounce ahead of the Jackson Hole symposium more likely.  Some assistance,  like the moratorium on evictions, ended on July 31, and others, like the federal emergency unemployment compensation (where states continue to participate), are finishing in early September. Meanwhile, the Biden administration appears to see some of its infrastructure initiative approved in a bipartisan way and the other part through a reconciliation mechanism that it can do if there is unanimous support from the Senate Democrats.  Inflation remains elevated, and Treasury Secretary Yellen and Federal Reserve Chair Powell warned it may remain so for several more months but still expect the pressure to subside.  The price components of the PMI have eased in the last two reports. There appears to have been some normalization in used car inventories that also reduce the pressure emanating from the one item alone that has accounted for about a third of the monthly increase of late.  

Euro:   The leg lower that began in late May from around $1.2265 extended more than we had expected and did not find support until it approached $1.1750 in the second half of July.  A trough appears to have been forged, and the euro finished near the month's highs.  Technical indicators favor a further recovery in August.  Overcoming the band of resistance in the $1.1950-$1.2000 shift the focus back to the highs.  The low for longer stance by the ECB may be bullish for European stocks and bonds.  The Dow Jones Stoxx 600 reached new record highs in late July.   Bond prices are near their highest levels since February-March.  The IMF raised its 2021 growth forecast for the euro area to 4.6%from the 4.3% projection in April and 4.3% next year from 3.8%.  The economy seemed to be accelerating in Q3, but the contagion and new social restrictions may slow the momentum.  Inflation is elevated about the ECB's new symmetrical 2% inflation target, but it pre-emptively indicated it would resist the temptation of prematurely tightening financial conditions.  The debate at the ECB does not seem about near-term policy as much as the commitment and thresholds for future action.  

 

(July 30,  indicative closing prices, previous in parentheses)

 

Spot: $1.1870 ($1.1860)

Median Bloomberg One-month Forecast $1.1885 ($1.1950) 

One-month forward  $1.1880 ($1.1865)    One-month implied vol  5.3%  (5.6%)    

 

 

Japanese Yen: The correlation of the exchange rate with the 10-year US yield is at its highest level in a little more than a year (~0.65, 60-day rolling correlation at the level of differences).  The correlation of equities (S&P 500) and the exchange rate is in the unusual situation of being inverse since early this year.  In early July, it was the most inverse (~-0.34) in nine years but recovered to finish the month almost flat. The yen rose by about 1.4% in July, offsetting the June decline of the same magnitude. Its 5.7% loss year-to-date is the most among the major currencies and the second weakest in the region after the Thai Baht's nearly 9% loss. The JPY110.60-JPY110.70 represents a near-term cap. The JPY109.00 area should offer support, and a break would target JPY108.25-JPY108.50.   The extension of social restrictions in the face of rising covid cases is delaying the anticipated second-half recovery.  The preliminary composite PMI fell to a six-month low in July of 47.7.  

 

Spot: JPY109.85 (JPY111.10)      

Median Bloomberg One-month Forecast JPY109.85 (JPY110.70)     

One-month forward JPY109.80 (JPY111.05)    One-month implied vol  5.4% (5.4%)  

 

 

British Pound:  Sterling reversed lower after recording a three-year high on June 1 near $1.4250 and did not look back.  It dipped briefly below $1.38 for the first time since mid-April on the back of the hawkish Fed on June 16 to finish July at new highs for the month and above the downtrend line off the early June highs.   A convincing move back above $1.40 would confirm a low is in place and a resumption of the bull move, for which we target $1.4350-$1.4375 in Q4.  The postponement of the economy-wide re-opening until the middle of July, and a central bank looking past the uptick in CPI above the 2% medium-term target, weighed on sentiment.  The central bank will update its economic forecasts in August, and both growth and inflation projections likely will be raised. The furlough program ends in September, and it may take a few months for a clear picture of the labor market to emerge.  Nevertheless, the market has begun pricing in a rate hike for H1 22.  

  

Spot: $1.3905 ($1.3830)   

Median Bloomberg One-month Forecast $1.3930 ($1.3930) 

One-month forward $1.3910 ($1.3835)   One-month implied vol 6.6% (6.5%)

  

 

Canadian Dollar:  The Canadian dollar reached its best level in six years in early June (~$0.8333 or CAD1.20) but has trended lower amid profit-taking and the broad gains in the US dollar.  The usual drivers of the exchange rate:  risk appetites, commodities, and rate differentials were not helpful guides recently.  Canada has become among the most vaccinated countries, and the central bank was sufficiently confident in the economic outlook to continue to slow its bond purchases at the July meeting despite losing full-time positions each month in Q2. Speculators in the futures market have slashed the net long position from nearly 50k contracts (each CAD100k) to less than 13k contracts in late July.  The downside correction in the Canadian dollar appears to have largely run its course, and we anticipate a better August after the heavier performance in July.  Our initial target is around CAD1.2250-CAD1.2300.  

 

Spot: CAD1.2475 (CAD 1.2400) 

Median Bloomberg One-month Forecast  CAD1.2435 (CAD1.2325)

One-month forward CAD1.2480 (CAD1.2405)    One-month implied vol  6.8%  (6.5%) 

 

 

Australian Dollar:  Since peaking in late February slightly above $0.8000, the Australian dollar has trended lower and by in late July briefly dipped below $0.7300, posting a nearly 9% loss over the past five months. The 50-day moving average ~$0.7570) fell below the 200-day moving average (~$0.7600) for the first time since June 2020, illustrating the downtrend after the strong recovery from the low near $0.5500 when the pandemic first stuck.  The combination of a low vaccination rate and the highly contagious Delta variant forced new extended lockdowns for Sydney and social restrictions that have sapped the economy's strength.  It will likely slow the central bank's exit from the extraordinary emergency measures.  Indeed, the Reserve Bank of Australia is likely to boost its weekly bond-buying from A$5 bln to at least A$6 bln.  A convincing break of $0.7300 could open the door for a return toward $0.7000, but we suspect the five-month downtrend is over and anticipate a recovery toward $0.7550 over the next several weeks.  

 

Spot:  $0.7345 ($0.7495)       

Median Bloomberg One-Month Forecast $0.7425 ($0.7610)     

One-month forward  $0.7350 ($0.7500)     One-month implied vol 8.9  (8.5%)   

 

 

Mexican Peso:  The dollar chopped higher against the peso in July and reached a high near MXN20.25 on July 21. It trended lower and, in late July, fell below the seven-week trendline support near MXN19.90.  After finishing June less than 0.1% weaker, the greenback lost about 0.4% against the peso in July, which was the fifth consecutive month without a gain.  The other notable LATAM currencies were the weakest three emerging market currencies (Chilean peso ~-4.1%, Colombian peso ~-4%, and the Brazilian real ~-3.8%).  If the upper end of the dollar's range has held,  a break of MXN19.80 may warn a test on the lower end of the range (~MXN19.50-MXN19.60).  The 5.75% year-over-year CPI for the first half of July and the highest core inflation for early July in more than 20-years keep expectations for another rate hike intact when Banxico meets on August 12.  The market has another hike priced in for the September 30 meeting as well.  The dispute with the US over measuring domestic content for auto production under USMCA could undermine Mexico's role in the continental division of labor, but instead, producers in Mexico may choose to pay the WTO auto tariff standard of 2.5%.  The IMF's latest economic forecasts revised the projection for Mexican growth this year to 6.3% from the April projection of 5%.  

 

Spot: MXN19.87 (MXN19.95)  

Median Bloomberg One-Month Forecast  MXN19.94 (MXN19.97)  

One-month forward  MXN19.95 (MXN20.02)     One-month implied vol 10.5% (10.7%)

  

 

Chinese Yuan: The dollar spent most of July within the trading range that had emerged in late June found roughly between CNY6.45 and CNY6.4950. The range was maintained even after the PBOC unexpectedly cut reserve requirements by 50 bp (announced July 9). However, Beijing's more aggressive enforcement of antitrust, discouragement IPOs abroad, making private education non-for-profit without foreign investment triggered sales of Chinese shares. It helped lift the dollar in late July to around CNY6.5150, its highest level in three months and just shy of the 200-day moving average.  The pursuit of domestic policy objectives appears to be putting at risk strategic goals.  A drying up of capital inflows from spooked foreign investors may have slow efforts to liberalize capital outflows that could eventually lead to making the yuan convertible.  At the same time, China's actions give a timely example of what holds the yuan back from a significant role in the world economy and why a technology solution (e.g., digital yuan) will not suffice.  As the dollar briefly traded above the upper end of its recent range in July, the risk is that it slips through the lower-end range, which could spur a move toward CNY6.40.  

 

Spot: CNY6.4615 (CNY6.4570)

Median Bloomberg One-month Forecast  CNY6.4555 (CNY6.4360) 

One-month forward CNY6.4780 (CNY6.4815)    One-month implied vol  4.0% (4.7%)

 

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Economics

Black women face a persistent pay gap, including in essential occupations during the pandemic

This year, Black Women’s Equal Pay Day arrives 10 days earlier than in 2020 (August 13). If this seems inconsistent with current realities, it is.

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This year, Black Women’s Equal Pay Day arrives 10 days earlier than in 2020 (August 13). If this seems inconsistent with current realities, it is. That’s because the August 3, 2021 date is based on the comparison of median annual earnings for full-time, year-round workers reported in the 2020 Annual Social and Economic Supplement of the Current Population Survey (CPS). Since the reference year in that survey is the previous year—2019—the earlier date is more a statement about pay equity during the pre-COVID period of historically low unemployment than the impact of the pandemic. 

Based on hourly wages available for 2020, the pandemic’s effect on pay inequality in 2020 is challenging to interpret since job losses were concentrated among low-wage occupations, which has the effect of skewing the distribution toward a higher average that is less representative of the workforce as a whole. These lower-paying jobs were concentrated in leisure and hospitality and education and health services—industries that employ a disproportionate share of women.

In fact, the pandemic’s effect on pay equity during 2020 is less about a relative difference in dollars per hour and more a matter of a disproportionate share of women—and Black women in particular—becoming unemployed and thus wageless. Nearly 1 in 5 Black women (18.3%) lost their jobs between February 2020 and April 2020, compared with 13.2% of white men (see figure below). As of June 2021, Black women’s employment was still 5.1 percentage points below February 2020 levels, while white men were down 3.7 percentage points.

The fact that we are talking about this every year reflects the stubborn, structural nature of pay inequities which is manifold. Occupational segregation limits Black women’s access to higher-paying occupations. But, even when employed in the same occupation, pay discrimination results in lower earnings for women relative to men, including among essential workers as we show below. The lack of a national paid leave policy means that women are more likely to take unpaid time out of the workforce and have breaks in their work and earnings history. The combination of these factors means that, on average, women start their careers with a pay gap that they are never able to close.

The infographics below take a closer look at average hourly earnings of Black women and non-Hispanic white men employed in major occupations at the center of national efforts to address the public health and economic effects of COVID-19, based on our previous analysis of CPS microdata from 2014-2019. These occupations include front-line workers in health care and essential businesses like grocery stores, those who have borne the brunt of job losses in the restaurant industry, and teachers and child care workers. As these figures show, equal pay for Black women workers is long overdue.

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Government

If Hospitalizations Lead Fatalities: Prospects for Florida

With large shares of populations vaccinated, case counts are no longer a good predictor of fatalities arising from Covid-19. Hospitalization might prove better (and ICU hospitalizations even better). The statistics do not augur well, particularly for…

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With large shares of populations vaccinated, case counts are no longer a good predictor of fatalities arising from Covid-19. Hospitalization might prove better (and ICU hospitalizations even better). The statistics do not augur well, particularly for Florida.

Source: GS CovidTracker, August 2, 2021.

Obviously, Florida remains a big problem when you consider its 21 million population, and that it accounts for 5.1% of US GDP (as of 2019Q4). For comparison, California, as the economically largest state, accounted 14.8%.

Here is IHME’s latest fatalities forecasts, from July 30.

Source: IHME, July 30th forecast.

The IHME forecast presented above was not include in the July 26th CDC ensemble forecast. At the time of the CDC ensemble forecast compilation, IHME’s forecast was above the ensemble forecast, but not at the very top.

Source: CDC, July 26 ensemble forecast.

Since it’s hard to see, here’s a detail.

Source: CDC, July 26 ensemble forecast.

The IHME forecast available as of 7/26 was for about 1000 fatalities per week, compared to the ensemble forecast of a bit below 600. The IHME forecast was at the top of the 95% band. A new ensemble forecast should be released on 8/4.

It’s clear why Mr. De Santis wants to avoid the specter of Covid-19. The late summer and winter waves clearly slowed Florida’s recovery. Rising deaths might spur — if not additional public health measures such as mask mandates that the governor has banned — then increasing aversion by those who perceive risks associated with going about business as usual.

Figure 1: Florida Reported deaths due to Covid-19 (black, left log scale), nonfarm payroll employment, in 000’s, s.a. (teal, right log scale).  NBER defined recession dates shaded gray. July observation for deaths is IHME forecast.  Source: IHME, BLS, NBER, and author’s calculations.

I expect risk aversion to induce a reduction in consumption of high contact services. If mask mandates and other public health measures were imposed, that might lead to a greater short term reduction in economic output (although in the long run, total hours might be higher, as in the Eichenbaum pandemic/output model).

Any lessons to be gleaned from the past episodes? The employment losses thus far can be decomposed into two groups — the high contact services associated with leisure and hospitality services, and everything else covered in nonfarm payroll employment.

Figure 2: Florida employment relative to 2020M02 in leisure and hospitality services (blue bars), and in rest-of-nonfarm payroll employment (tan bars), in 000’s, s.a.  Source: BLS, and author’s calculations.

You can see that leisure and hospitality employment recovery stalls out in July-August 2020, and January 2021. If the rise in deaths occurs as forecasted in Figure 1, then

All this takes place in the context of already slowing growth, as far as we can tell (these indicators run only through June).

Figure 3: Florida Coincident index (black), real GDP (purple), and nonfarm payroll employment (teal), all in logs, 2019Q4=0. NBER defined recession dates shaded gray. Quarterly data for coincident index, employment converted from monthly to quarterly by averaging. Source: Philadelphia Fed, BEA, BLS, NBER, and author’s calculations.

 

 

 

 

 

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