♪ >> today we get the scorecard for the trump era. investors watch for wage growth. the buildout bank swings back. out bank swings back. there is only so much monetary policy to do. this is "bloomberg surveillance pickup

take a look at what is happening to the stoxx 600. it will be the third straight drop. the bloomberg dollar spot index is low. the u.s. jobs report later. -- 180,000 jobs to be added. on track for the third weekly drop. the biggest weekly gain. investors focus+++

outputs from the u.s.. i could be bloomberg first word news. >> robert mueller is using a federal grand jury in washington to help collect information in the alleged meddling in the 2016 election and possible collusion from the trump camping. -- trump camping. president trump has lashed out at the russia investigation. he denied any collusion with moscow and said it was a total fabrication. know there were no russians in our campaign. there never were. we didn't win because of russia. we won because of you. >> in australia, police say they had stopped when of the most sophisticated terrorist plots the nation has ever faced. raidedterrorism police several suburbs last saturday after uncovering the scheme, which was allegedly inspired by

the militant group islamic state. in dubai, a blaze has engulfed one of the tallest residential towers. it was successfully evacuated with no injuries reported in the blaze brought under control. rbs has chosen amsterdam as its post-brexit eu hub. revenue held steady in its core businesses. >> we are announcing we are in advanced discussions with the dutch national bank about setting up a small european headquarters. a very logical market force. we have a bank there. it has the right licenses for us. >> global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.

i am nejra cehic. this is bloomberg. wage growth will be in focus when we get us -- when we get the latest jobs growth from the u.s. average earnings also are seeing slowing slightly. eye on thelose numbers, which will set the scene for the annual symposium later in the month. we will also get a scorecard for the first 64 months of donald trump's presidency. let's begin valentin marinov. -- dollarerg style spot index at its lowest level since may 2015. is today's jobs report going to stop it in its tracks? does the bearish momentum continue? today's report want to bring much substance to change investments.

it is in line with consensus. when it comes to average our earnings, which is the most important part, we are somewhat above, but you cannot describe that as an overheating labor market or boosting prospects so high. no real change in the near-term output for the dollar on the back of that release. you look at the option market. it is in the price at the moment. mark: let's look at a couple of charts. start with this one. trade over cycles in early 2000 and made 1980's when we saw the dollar declines. when the dollar bear market happens, it tends to last a decade. what can we learn from those previous times? valentin: the dollar has already

rallied quite a bit. the question is, whether we are dealing with a local or not. i haven't seen a peek in the rally. add a like to do is to second line to the chart, which is the funds rate. peaks find out the dollar after the fed tightening cycle. it was the case in the 1980's and the year 2000. unless the fed is in hiking rates, you should be careful calling for the peak in the dollar. just an observation. we are highlighting that at the start of the year, where we are calling for a stronger dollar, there was policy normalization by the fed. the market is not entirely convinced by the fed, but i haven't seen a client who says

they are going to cut rates or do more qe. the fed tightening cycle is here to stay. before long, the dollar will find some support. mark: does this chart support that? withtin: it is consistent our position measures. evidence that the dollar is starting to look undervalued. even the canadian dollar starting to look undervalued. you think of euro-dollar at the moment, what we are dealing with is, for the first time, the euro-dollar is where it is without the support of the three important pillars, the two year rate spread, the spread in

and the ratios, between the eurozone stocks in the u.s. stocks that peaked two weeks ago. the whole move until now is on the base of technicals, momentum indicators. you were the centerpiece of a story on the bloomberg yesterday. emerging market currencies may be about to end. .hat is the view policy could heighten risk aversion. valentin: that is the case. a big part of the carry trade or demand so far this year was on the view that the fed will remain dovish. at the same time, investors are

viewing the ecb will be approaching a taper cautiously. it is about valuation and the extent to which the market has run ahead of themselves. on that you markets, what is interesting is for the first time g10 invite volatility. -- implies volatility. it is somewhat unusual. usually you see it the other way around. that is an early warning indicator, e.m. carry trades may come under some pressure, especially if central banks gathering in a couple of weeks indicate that the fed is on , the ecb taper is coming. not entirely in the price. mark: there is plenty coming up. mark carney warns the you can economy -- warns the u.k. economy.

rbs is back in the black. this is bloomberg. ♪

♪ mark: let's get the bloomberg business flash. ianz the record inflows. -- some record inflows. the fourth consecutive flow it inflows. has -- haveazda agreed to invest into a u.s.

plant. in oil trader is closing down his office. the capitulation comes after oil prices. his selection find lost almost 30% in june. that is the bloomberg business flash. brexit is carney says casting the biggest shadow over the u.k. at comic -- economic output as uncertainty looms. he says there is only so much the policy can do for the central bank. the u.k. economy is beginning the process of adjusting to a new and insurgent economic relationship with the european union. return policy cannot prevent the

weaker real incomes. how the incomee is distributed between job losses and price rises, and can support u.k. households and businesses as they adjust. mark: still with us, valentin marinov. you were there. we can hear your view, but the view of the market was clear. sterling, down. stocks come up. bond yields, lower. you were there. what was your take away? i don't think the intention was to send a dovish signal. growththink of the projection, the inflation projection, not much has changed since may. if you look at -- if you listen to what he was saying, it is the case that the assessment has changed a little bit, but there is no significant need for adjusting the policy outlook.

yesterdaywere saying respectively, they think the markets are too conservative, assuming there will only be two hikes in the next three years. the message is, maybe an overreaction. if we see long-term rate expectations civilizing, if we see investors frontloading from those hikes, the pound actually gained some ground. mark: how much of the message yesterday was to ensure sterling doesn't fall father? -- fall further? valentin: if you read the inflation report, the pound is front and center, a big risk. stockxt risk would be inflation. a weaker pound could be instrumental. mark: is there a level or is it the pace? this is the bloomberg business

pound index. it has gone sideways since the end of last year. valentin: that is the conclusion the boe has made yesterday and is between a gated to the markets. i believe they stand ready to make sure it stays this way, that any unwarranted selloffs are prevented, and they have a rate hike at their disposal. it overe been exposed the recent months -- explicit over the recent months. if we end up having selloff in the currency and renewed cost inflation, the bank of england would be willing to act in response by hiking rates. crsk: must look at our w option. if you want to put money into

the pound, from this point, given what you can see, what might be your best bet? i will use valuation. the pound is still looking fairly cheap against the dollar. i mentioned a few weeks back that long-term field value -- like -- sterling at the moment looks overvalued. fair value is closer to 87. facing the mighty zero in the process. i am not that break. -- i am not that brave. i believe it could come under pressure. going into the symposium and the

eventful month of september with the ecb meeting, the fed meeting. we also have the debt ceiling in the u.s. assumes aforecast smooth brexit. that is looking shaky. valentin: that is my ascension as well. that is the key outcome from the inconclusive june election, the case being that ultimately that is the best outcome with all the parties going to build a consensus around, a fairly rocky road towards that consensus, but that is still a long-term assumption. changes, we have done that exercise, and the hard disorderly, 125, youdrops to 120, are closer to parity. in cable, a lot is in the price.

that is on the extreme assumption about the extent of that brexit economy could produce. from that point of view, in the case of cable, there is not much value on the downside. mark: august stays with us. -- our guest stays with us. you angoing to bring interview next. this is bloomberg. ♪ ♪

mark: welcome to "bloomberg surveillance." rbs has posted a profit. boosted bywas accounting gains. misconduct dogged by charges. said the issue with the boj would be resolved. >> these were a good set of results. we are making progress. income up, cost down. we know we have the department of justice to settle. we aspire to get that settled this year, provided that it will

push us into a bottom-line loss. the chief executive seems to be making headway three years into the turnaround. >> i think that is fair. you look at the rundown of risk, assets. they are getting some of the way through. a lot of the things, very good reasons why investors should consider buying rbs shares. thinking?t wishful jonathan: we have just been looking at that. is, the bojtion settlement. is it $5 million or $10 million? it is a big range.

we don't know yet. it is not so profitable yet that you can put a ratio in. mark: what is the takeaway? hsbc is buying back shares. barclays seems to be moving ahead. lloyds has contracted by ppi. what is the take away from the u.k.? it is still tough in the u.k. rbs is relatively in a better position. look at credit cards. rbs is one of the few banks. all the things we're worried about and the u.k., the consumer -- getting worse, difficult to see that getting any better. mark carney's comments confirmed that. mark: which bank overall in

europe stands out? don't forget agricole. there are beginning to sell insurance. people will still be -- up next, the brexit warning. this is bloomberg. ♪ we check our phones 85 times a day.

so it only made sense to create a network that keeps up. introducing xfinity mobile. it combines america's largest, most reliable 4g lte with the most wifi hotspots nationwide. saving you money wherever you check your phone. yeah, even there.

see how much you can save when you choose by the gig or unlimited. call, or go to xfinitymobile.com. xfinity mobile. it's a new kind of network designed to save you money. mark: welcome to our weekly brexit show. i'm mark barton. let's get a roundup of the week's brexit news. nejra: the bank of england cut its forecast for economic growth and wages at it kept its

benchmark rate at a record low. britain's economy has moved into a phase of study but sluggish growth. it was announced that eight cities from frankfurt to dublin have applied to host the european union's banking authority. 19 are looking to be the home of the drugs regulator. the news kicked off a campaign to win agencies being forced out of london by brexit. thanks mate as much as $50 million in capital in the aftermath of a hard brexit. according to oliver wyman, some smaller firms may abandon their operations on the continent altogether. deutsche bank is envisioning shifting all months -- almost half to the continent in the coming years. according to people briefed on the matter, most of the positions will move to frankfurt and berlin. global news 24 hours a day powered by more than 2700 journalists and analysts in more

than 120 countries. i'm nejra cehic. this is bloomberg. factor: the most important is the outcome of brexit negotiations. that is according to mark carney. the bank left rates unchanged yesterday. they may rise faster than markets expect. in an exclusive interview, aberdeen asset management chief executive martin gilbert told us rates won't move until after the u.k. leaves the e.u. >> interest rates are not going to go up until we see the conclusion of the brexit negotiations. everything is too uncertain. he's just unwilling with the other five to take the risk of starting to cut interest rates up now. why put them up when there's so much uncertainty? mark: joining us now, themos fiotakis. let's look at wirp.

to september next year, 39% probability. 25 basis points. would you agree with martin gilbert? you've got to wait until the end of the brexit negotiations? or are you in the carney camp? the market needs to be more hawkish? themos: first, our view is the data is slowing down already. even if you are agnostic about the outcome of negotiations. there are a number of reasons why inflation and growth will probably be slower towards the end of the year. the economic reality is probably not going to create a lot of space for hikes to begin with. why is the market not pricing what the governor says? the market tends to price probabilities. there is a probability the

governor is right. there's also a probability that things become more severe. the data will determine this. so far, what you have is a stressed consumer, you have investment intentions reasonably low, and you have the currency being the main driver of inflation. probably slower data will not allow much space. mark: where does inflation peak? still remaining above 2% over , above its, 2.2% target. what is your path of inflation in coming years? peaks: it probably sometime in the next few months. but if you look at the drivers of inflation, you have a very big chunk of it being the currency. if you look at the year-over-year basis, it

flattens out toward the end of the year. at the same time, you have lower oil prices, which will reduce the headline effects. you will probably stay a little bit above the target of the bank of england, but not to an extent that if you couple that with the growth data, it will create a comfortable argument for hikes. mark: the big argument this week politically, within the cabinet while theresa may is a way, we had a seemingly big divide over the transition agreement, will there be one, how long -- what is your view? what is your assessment on what happens after march 2019, and what does it look like? how long does it last? themos: the negotiation was always meant to be hard. there are many items on the table which will take a lot of time. whether they transition or not

depends purely on what the different sides are willing to give. what is more important in terms of the economy is some of the items you've mentioned, jobs moving, etc. we have stress tested the balances of the u.k. economy, particularly the external balance, where part of the financial services move out, and this creates a deficit, which makes the currency and economy vulnerable. the other part of this situation is, the u.k. has been fortunate enough the last few quarters to receive income from a growing local economy. if for whatever reason brexit negotiations deteriorate, in an environment where the world grows slower, it might have a double impact. mark: it is possible the boe might have to cut its forecast again and again.

under those scenarios, how low does sterling go? we were just talking to valentin, who says even under the worst case scenarios, he's not talking about anything crazy like parity -- in your worst case scenarios, what happens to the pound? we would disagree wih that. we think the pound is quite vulnerable. also, the pound is a stress relief mechanism. we have seen that weak pound parts of the economy do better. worst scenario is a very difficult word. scenarios,erse euro-sterling at parity or above is not unthinkable. mark: how would you play sterling right now? themos: sterling has been one of our key recommendations for

people to be long euro against. this is one of the laggards. it is one of the better risk reward. globalects them out of risks as well. mark: themos fiotakis joining us y on "bloomberg surveillance ." up next, economic disaster. that is what one research group says will happen if the u.k. leaves the e.u. without a trade deal. we will speak to the director of u.k. in a changing europe. that is next. this is bloomberg. ♪

mark: welcome back to our weekly brexit show. i'm mark barton. let's check on the markets. here's nejra cehic. nejra: euro-dollar headed for a

high. 2. are about 1.188 are we going to hit 1.19? some questions starting to come in. six-monthuro-dollar risk reversals. what you can see is that recently, we've just gone into that bullish territory when it comes to the options markets on euro-dollar, at least with six-month risk reversals. that is the highest since 2009. we've come off a little to keep an eye on the options markets, to perhaps see the direction. in terms of how it is affecting equity markets, it has been having some impact on the dax. back in june, the dax outperformed the stoxx 600 by the most on record. since then, it has come right

down. part of this is down to a stronger euro. of dax is largely made up exporters and industrial companies. we got that pmi data yesterday showing germany lagging. overall, european stocks pretty much unchanged. perhaps ever so slightly weaker. the equity space is not really most movement is today. fx is where it's at. dollar-yen, following news out of washington, 110.13. dollar heading for a fourth weekly loss against the yen. this trait is going to be in focus. the dollar may test support if payrolls disappoint. that is according to this trend chart. a lot of say the dollar is getting oversold. looking at wti crude, we are

holding below $50 a barrel and heading for a weekly loss after last week. mark: thanks a lot. crashing out of the e.u. without a deal would spur an economic disaster. that is the warning from the research group, u.k. in a changing europe. our guest, director of the u.k. in a changing europe, anand menon. welcome to the show. what are the implications? anand: the cliff edge we are talking about is in just no trade deal, but no article 50 or divorce deal. what we're arguing is, while the government has said no deal is better than a bad deal, we disagree. it will tie us up in such a political and legal mess, it is something we need to avoid. mark: paint a picture of the economic mess. anand: the economic mess would be partly the effect you would see.

that might cut trade by 40%. it could have an enormous impact on our gdp. also, the legal framework would become glycated. if you have a contract with a german company, you would no longer be certain under whose law that would be enforceable. you would have legal problems. mark: dare i ask what the political mess would be? anand: it is almost certain that our relations with our european partners will be very bad tempered. that would stop us cooperating on a host of issues. mark: what is the probability, then, of that worst-case scenario happening right now? anand: let me preface whatever i say by saying, predicting things in british politics at the moment is a mug's game. i would say it is about 20%.

the politics is vitriolic. if we try and strike a deal on the brexit bill, and the tabloid press and backbenchers get exercised about it, it becomes hard to push that through. some of the issues are hard to resolve. the issue about guaranteeing the rights of e.u. citizens is difficult. mark: you don't think we are making progress on that? anand: it is too early to say. everyone knows it is the biggest story in town. you need to be talking about it. but the negotiations have only just started. mark: the big issue when it comes to citizens living here is the oversight of the european court of justice. how do you see that being resolved? anand: both sides have a point. the british government says, we just voted to be free of your court. why should we let it have jurisdiction over people living here? the e.u. say, the reason we want jurisdiction is because we don't

trust you are your parliament not to remove those rights in five years time. we want to guarantee them. finding a middle ground -- mark: is the middle ground the norway option, the court that -- that seems to be looked at right now by the government. anand: that could work for trade. it wouldn't necessarily work for citizens. when it comes to citizens, the judicial authority would be interpreting e.u. law. the court isn't allowed to interpret e.u. law. that is where it gets tricky. mark: the e.u. citizens' rights, hurdle one. hurdle two, brexit bill. anand: it sounds like the floor for what they you want is about 60 billion. the ceiling we want is 40 billion. mark: is that palatable for both sides, given that some members

of the government suggest we are not going to pay a penny? anand: the european union want the money because they face a fiscal problem when we leave. we want to pay as little as possible. if we dress it up not as a bill for leaving, but as a price we pay for continued access to certain market rights, that sounds different. a lot of it will be -- mark: how you frame it. third big one, irish border. anand: that is interesting. the government is still committed to leaving the customs union. it is hard to see how we could not have some kind of border between the north and the south of ireland. the irish government is engaged in this as well. schemes,ome up with putting the border around the island. the problem is it is political. the unionists in the north do not want a border separating them from the rest of the united

kingdom. mark: how soon can negotiations move beyond those big three issues to actually talking about a trade deal? some talk it could happen in october. looking more likely end of the year. how soon could we get onto the path of discussions the u.k. wants to get to swiftly? anand: the plan is there's going to be a summit in october, at which michel barner will report to the heads of state on whether sufficient progress has been made. the european council will vote on whether they think it is sufficient. if it isn't, they will say, keep negotiating. mark: how soon do you think it will happen? anand: my guess is there will be some fireworks in october. it suits both sides. i think there might be a walk out of some kind in october. make it up in november, then move forward. mark: and then if we start on

talks on a trade deal at the end of 2017, we then have to complete talks by the end of 2018 to get it through the various parliaments and bodies. doable by march 2019? mark: no. anand: what is doable by march 2019? mark: i think we could have an article 50 deal in place and maybe a broad framework for negotiations on the trade deal. mark: stay there. thanks a lot. anand menon stays with us. rbs speaks to bloomberg about its better than expected profits. this is bloomberg. ♪

reporting second-quarter profit and revenue is ahead of estimates. manus cranny spoke to the cfo and begun by asking him about the latest earnings. >> these were a very good set of results. we are encouraged by the progress we are making. it is our best six-month

results since 2014. operating profits up a lot. we know we've still got the department of justice to settle. that, that could push us into our bottom line loss. manus: how really possibility is it that you get the deal done this year? that is the black cloud hanging over the numbers, isn't it? >> we would love to get it resolved. we've got no further update today. manus: pbi, looks to me no more substantial provisioning. are we done with ppi? >> i've made that statement a number of times. we talk about 600 million pounds of provisions. we knew at the time we were doing that, we were trying to be cautious. we continue to be cautiously positioned. i'm not going to say we are done.

manus: the one-story with every banker is brexit and preparedness for brexit. a prudent cfo is always prepared. an update on your plan? >> you will see in today's announcement that we are in advanced discussions with the dutch national bank about setting up a small european headquarters in amsterdam. very logical market for us. it has the right licenses for us. it is just sensible contingency planning at this point. manus: how many people -- >> we have a relatively small markets operation. we are in discussions with the dutch regulator at the moment. manus: it is always going to be difficult. there's this migration to frankfurt. i wonder your opinion in terms of being outside that scalable

ecosystem. any concerns? >> not at all. the dutch national bank is familiar with regulating investment banks. we've had a long history there. we are very comfortable setting up a business in amsterdam. manus: let's talk about the story of growth. where does the growth story come when i talk about rbs in 2018? >> if you look at today's numbers, continued very good growth in mortgages, growing about three times faster than market growth rates. i think we are going to continue to prioritize. we are again seeing good growth in business banking. at the top end, we continue to the more hawkish.

menon here. very quick questions. transition agreement, what is it looking like? anand: it looks like the government is recognizing the need for one. mark: two years, three years, one year? anand: it has to be done by the election of 2022. three years maximum. mark: may, how long does she last? anand: very hard to say. probably depends on whether she has the stomach to keep going. mark: october tory party conference, big speech if she's still around, what is the message? anand: trust me. we are studying the ship. we made a mistake with the general election. mark: have we seen peak corbyn or not? anand: it is very hard to know. he defied expectation in the general election. people are saying it is a different game now.

many people voted labor because they were unsure about corbyn. if there was an election tomorrow, not a guarantee that labour would win. anand: i don't think so. both parties are very divided over brexit and a host of issues. mark: brilliant, we covered everything. anand menon. "bloomberg surveillance" continues in the next hour. guy johnson in london. tom keene joins us out of new york. this is bloomberg. ♪

♪ tom: this morning, it is a fully employed america.

it is an america where 20,000 plus show up at a jobs fair for amazon. in washington, there is a grand jury. robert mueller will subpoena. use grind lower. -- yields grind lower. good morning. this is "bloomberg surveillance ." guy johnson in for francine lacqua. infested dump. i think president trump would take umbrage with that. invested dent in new hampshire. he says he never said that. i don't know if you have been at -- white house,

guy: they are about to kick everybody out of the white house. they have the plumbers coming in, because they are going to be renovating the air conditioning units. they're going to be renovating the heating system. i take you back to watergate. they were trying to fix the leak. i wonder if they will be successful this time. folks areresident's migrating to new jersey for the next two weeks. with the first word news, here is taylor riggs. taylor: special counsel robert mueller is using a grand jury to collective remission in the rush investigation. that is according to people familiar with the matter. he is looking into russia's meddling in the presidential election and possible collusion by trump campaign associates. is trump administration unified in asking congress for an increase.

the small notsays ask for spending cuts. congress needs to raise the debt ceiling by the end of next month. in australia, police say they stopped when of the most sophisticated terrorist plots the country has faced. two men are accused of trying to smuggle a human -- a homemade bomb on a point. the suspects took a bomb apart and try to turn it into a device to disperse chemicals. in dubai, a fire in a residential building has been put out. 50 stories.many as there were no injuries. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. how about data on a jobs day. it.ds grind we had curves flattening.

the differences are getting your 119. -- near 119. begin with a 11012. stronger yen over the last week. i will let you talk about eurosterling. it gets my attention. earlier, and guest he was saying he thinks we're going to parity and beyond. the ftse is unchanged. we are waiting for the payroll number. if i had no that tom wasn't going to do euro swissie this morning, i would have on that into the mix. it has been weak for the swiss. the german 10-year, unchanged. tom: molly begin the jobs day coverage with a chart i have never done.

-- let me begin the jobs they coverage with a chart i have never done. this is the inflation-adjusted blue-collar wage in the united states of america, set in 2017. this is $22 an hour right now. here is the glory time of the 1970's. a wage of one dollar more than today's. this is the peak of the inflation agony of 1980, and that -- and what this says is that inflation really matters. , and thisgh inflation is low inflation, which is allowed for this real wage 20 yearsming out of ago. that is a great story about the blue-collar wage in america adjusted for inflation. people are not feeling it, which is critical. let's talk about what is happening with the dollar. this is a great chart.

if the dollar oversold going into this payroll number? you have a leading average. rsi,here, we have the which is showing you we are in a very oversold position. i'm going to put a caveat in there. we are in trending markets right now. in trending rockets, you don't get to play the rsi card. if you do, it doesn't work. interesting stuff happening around the dollar at the moment, but the market is on a roll. tom: we see it most expressed in strong euro this week. it has been an eventful time in washington. there is any number of ways to go. when we be president went is to his supporters in west virginia. here is the president. there wereple know

no russians in our campaign. there never were. we didn't win because of russia. we won because of you. tom: the dynamics of this into the weekend are extraordinary. there are 14 or 15 pets to take. about the dumpes known as the white house and this other stuff. it is getting serious. are james and a guest from ubs. it is a great honor to have you with us, jim. a grand jury as another ball of walks. to our audience what a grand jury is. it is unique to the united states. nobody really does this like robert mueller is going to do this, do they? james: that's right. it is a delight to be here. grand juries, there is an old

cliche that if it prosecutors once, a grand jury will invite a ham sandwich. it is a trial with no food defense. present all of his evidence to the grand jury. the grand jury's question the prosecutor. it is for that reason the prosecutor can drive the process anyway he or she wants, and by and the result of a grand jury is typically an indictment. that is a charge, which then leads to a trial. tom: one of the great separations of this is the idea of a grand jury as accusatory or as almost an inquisition. there are different ways this is done in other countries. let's say he is in front of mr.

trump, junior, who i believe has been subpoenaed. mr. trump, junior, for example .s one who will have no defense we'll be make accusations or are they fishing for data? james: it is a fact gathering episode. they will be asking him questions, i imagine, about the circumstances surrounding that celebrated meeting with the russians that he said was presumably to discuss adoption, but which we now know also involves an offer of dirt on hillary clinton. the market reacted to this. explain why the market reacted to something that probably was inevitable. james: why does the market reacted ever? guy: give me the sentiment. what does this say about the

velocity. james: it is more about the direction, that this is happening, that this is now no longer a twitter fight, but it was a moment of crystallization that this is heading into the judicial system with the risks much higher for purple people. guy: -- for powerful people. guy: you saw the headline across. the market did react. as he said, we are moving into a different world. does this change things? does this tell you anything about the sense of direction of our u.s. politics and the inquiries surrounding it at the moment are going? >> it tells you something about the markets. with used the year trying to design areas about how the u.s. economy would change to the better, forcing higher

yields, a server dollar, etc. in it some of those scenarios or politics direction are arising in real-time. you some of -- you see some of those expectations coming off. we are going to bring up the dollar chart here. this is the same chart brought up earlier. it is the persistency of trend on the bloomberg dollar index. it is very good mathematics, and that we get more persistent recently. can you link the world of politics over dollar dynamics? can you see the upset in it fallsn may be as into fiscal policy falls into dollar trend? themos: to some extent.

one has be be re-rating of expectations in the u.s. you can see that in yields, so on and so forth. the politics is one part of the story. no inflation in the flood is another part of the story. if you look at the price indices that have underperformed for a while, so high expectations against slow realization is also the european side. some of that acceleration, along the trend you point out, has been because of people actively trading or thinking about the convergence trade after many years of the divergence trade. tom: what do you see in your reading on what the response will be to vladimir putin? have seen reading you in london, how would you suggest a tactical response to vladimir putin? james: the tactical response probably involves the is going

to let the americans continue to .hase their own tail if you read intelligence analysis about what his goal was, ultimately, it was to sow chaos, and that is what he has done, undermined the credibility of the american government. he will continue to make tactical moves, but at this point he is probably does going to let the americans continue to dig. tom: thank you for the briefing this morning. we will continue with themos fiotakis from ubs. there will be a number of conversations. garymore important than cohn. this is bloomberg. ♪ ♪

let's get the bloomberg business flash. joined honda in raising its profit forecast because of the weaker yen. it boosted its prediction for the year and beat march by 16%. quarterly profit beat estimates. -- tony otis quarterly profit beat estimates. toyota's quarterly profits beat estimates. that is your bloomberg business flash. guy: it is u.s. jobs data. payrolls are expected.

-- are expected to have risen to 180,000 in july. the average earnings also seem slowing slightly, to .4% year on year. -- 2.4% year on year. the symposium is happening later this month. we are joined by themos fiotakis . could today's number change the direction of the number -- the dollar? themos: i think it is unlikely. long pass are the days the market was scrutinizing data defined when the fed is going to drive the dollar stronger. now the dollar is playing a so in bit of defense, that sense, do good a softer number with softer wages.

this is all speculating in the short-term, but it don't think the market reaction is doing so much recently introduction to the fed hiking. -- in conjunction to the fed hiking. guy: which number could cost of the price? -- caused the surprise? beens: the market has moving more recently a negative surprises. we have had a couple of those two slightly higher levels. of trend we are seeing in markets at the moment. trends that are expressed in foreign exchange, it is a low -- is it a low trading environment or our bets being placed with the currency majors? is there a big bet being made on strong bureau, as example? market has been

surprised with some of the moves. that doesn't exclude us. euro to expected the flirt with 119 in a few months. we were placing it closer to 112, 113. that was a reasonable expectation by a number of investors. we were expecting some consolidation, and after that, as you see from the difficult futures position, people have been forced into a market trend. tom: let's look at eurosterling. ubs call on eurosterling? themos: from our side, we are expecting it to trend up. it has been one of our top traits. -- top traits. -- top trades. are approaching the low 90's.

sterling is a question of risk reward. the weak economy makes retard to see a stronger -- makes it hard to see a stronger sterling. contrast, in the battle of brexit risks, there is a number -- another factor. growthave global disappointed, sterling can have a beer downside risk. -- a bigger downside risk. tom: before we go to break, i want to show this right now in eurosterling. mentioned this earlier. here is brexit right here. this is not what we normally show in america. this is eurosterling. ". -- up we go. sterling per euro. much more coming up. we will speak with william gross.

we will do that after the jobs report at 8:30. this is bloomberg. ♪ ♪

you, youestion for believe the governor of the bank of england when he says the u.k. yield curve is wrong? the bank of england downgraded a bunch of its forecasts, but we should be pricing in more rate hikes. now, i guess.

-- a guest. similar, then interviews today. saying we are downgraded expectations. why my sitting on a trade that -- trades debt? the thing about the forecast is conditional guidance. it comes in line with their expectations, which is about .4% growth per quarter. it is based on a smooth brexit, and that is a big judgment. there are clear that are huge risks around that. they would expect rates to go up faster. you are probably looking at three hikes. it is very modest tightening. at the same time, you are right. the big judgment in the forecast

is the smooth brexit assumption. do you believe the governor of the bank of england? themos: they-- are extremely talented. there are different issues at play. you need to be savvy about the market. it is playing probability. risks, they are spurted for the downside globally. the market will never price the full probability of a good outcome. that is what the market tells us. on the bank of england side, what they are saying is that if the economy continues as it is now, maybe we are a little bit too easy in terms of market economy. they are saying, given brexit, there are certain outcomes that may justify hikes. are you talking to anybody at the moment that says, if we

get a harder brexit, we think the bank is going to hike into that? inflation will go to the roof. time, brexite same is an uncertain situation. there are outcomes that could lead to that. tom: thank you so much. dan, thank you for your work your. -- work here. this is the best business week issue i have seen. this is the cover story. it is about kids that go more money than you and me combined. inside, gary cohn. read it. ♪ is this a phone?

or a little internet machine? [ phone ringing ] hi mom. it makes you wonder... shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. [ laughing ] so all you pay for is data.

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washington. we will get to that in a moment. right now, your first word news. here's taylor riggs. taylor: there is a new turn in the investigation into russian meddling in the presidential election. robert mueller is now using a grand jury in washington to collect information. the program includes whether a trump and paint associate colluded with the russians. jeff sessions will unveil the government's crackdown on intelligence leaks today. announce what law enforcement will do and to find those are possible -- and to find those responsible. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: i have been looking at the new "business week."

inside is why the washington junkies are going to read this. from joshuaupdate green with his number one bestseller on mr. bannon. possibly we will regret article -- read that article. he joins us from washington right now. the events are extraordinary to say the least. will mr. trump be distracted by the grand jury in washington? .> it seems so in his rally last night, he again went to the will of decrying the investigation as a nonevent, but this grand jury may not be as big a deal as many think. he is just moving some of the witnesses from alexandra and virginia, which is more

difficult to get to than washington. that seems rather logical, but it is a reminder to the white house that things are heating up. tom: you heard me in the food court of our washington office is complaining that it is a dump. i will be honest. i have said that. pr stumblingo be a dropped week of comments not only by the president, but a clumsiness out of the white house. is mr. kelly getting any traction? is the general a change agent? i detected a lowering of the rhetoric out of the white house, a lowering of the restraint. the reports are that general kelly has taken full control antibody is reporting to him. there are reports that donald trump is trying to impress his new chief of staff by being disciplined. i think there is a definite tamping down, but that may be -- guy: does that mean this weekend

will be different? you would normally expect a diversionary tactic to emerge from the white house. does that mean we get a different chain of command of this weekend in terms of how it is going to work with that communication? marty: i can tag your are white house team is hoping that. we have been lulled into complacency various times only to be surprised by a late-night tweet that just ratchets up the rhetoric. this vacation will be an interesting test of whether or not general kelly can keep controls over the messaging. question, he went to west virginia. you have the democratic governor coming in republican governor. is that a change of tactics? is that something new?

he is trying to make sure he is adding good visual surrounding him. -- he is getting good visual surrounding him. i don't think this is anything new. he always reverts back to his base. that is something he has sent throughout his presidency. he feels very comfortable, comforted. he takes confidence from the crowds. it makes him feel my he is totally in control when he goes there. go with the theater of that. let's talk about the reality. listed a couple of attributes of his time as chief of staff for president clinton. chief, ans trust, one clear chain of command. he says success or failure is not dependent on the chief of also hinges on the willingness in support of the president. president clinton was willing to make the changes necessary to establish effective white house operations.

it is fabulously interesting. was the one who greeted mr. panetta when he came to the pentagon years ago. it is really extraordinaire. marty: the interconnectedness of washington is something that, if you were down here, you see everyday. tom: exactly. marty: it is not something donald trump brought to this presidency. there is no connective tissue to the establishment. kelly and panetta are part of it. i think the biggest thing is loyalty and trust. this white house has shown no ability to keep people in line, and therefore it is a matter of trust. tom: marty, because of this weekend and the tweet infested then that is washington. -- den that is washington.

economics, tony crescenzi knows it has been a grinding rate environment. he joins us now. i spoke with gary shilling yesterday. there is a grinding sense of lower yields. our markets going to confound the high yield curve? probably, but over the long run, it is possible use could get there. there isn't that worried. most forecast from gdp for the current quarter aren't four. it is unlikely that markets will think we are getting away from the terrible twos on growth. 10-year tends to go before the market thinks the federal funds rate will end up.

sustain below 2% is difficult. tom: i will good with that idea. -- i will go with that idea. frame, be all end all what you do with the number? tony: it is not. tom: we -- you have a direct conduit into janet yellen. tony: we do. the cost index is what they emphasize. it was released last week. it was disappointedly week. -- weal. l. k. buildingn't momentum on the wage front, so it wasn't they be all end all. we will have to wait and see.

the wage figure is the big question in the bond market today. perhaps it is a product of a bygone era. perhaps it was just a theory for the 1960's, 1970's, and 1980's. when you look back, you can find sentries were there was no phillips curve, and perhaps there is none. tom: let's bring in guy johnson. guy: let's bring in themos fiotakis. when do the bond bears give up? themos: i think the discussion we are having is different than the one we would have had six or seven months ago i think the discussion has changed.

most consistent linings is that phillips curves are rare, but they are flat. a curve with a flexible. the impact is not the first order effect. inflation, the biggest driver. we are gradually moving into an environment where inflation rates will come down. notbear case for bonds is there. we have never supported that. go below current levels, don't forget on average we have been around here. you need to have either growth disappointed or no fiscal boost. financial conditions of the united states remain incredibly loose. you can see that on the bloomberg. ratesuldn't the fed raise when financial conditions are as loose as they are now? tony: it is questioning whether

or not a phillips curve does this. it doesn't mean they want hike. if it is flat, there seems to be no relation between unemployment and inflation, and so because it is flat, that means at some point there is some uptick in wages and inflation, they can't know when that is. it has to keep moving. do ifould the fed financial conditions continue to ease, but inflation were to continue to ease in the jobless rate falls? we think the fed probably still would move. so long as the data is pretty good. suddenly, there is a rates pickup and it is too late for that. phillips curve believers were so dam good.

tony crescenzi with us of pimco. themos fiotakis of ubs as well. come cap, this is an important conversation. to william gavin. processperience on the of law in washington. stay with us. ♪ ♪

10:43 in london. 5:43 in new york.

this is something you talked about recently. their growing and menacing threat of passive investing. pulsing wrote, passive investing is in danger of devouring capitalism. earlier we spoke to the cfo of allianz. >> i would not make a forecast for the next five years. performers that inflows , and that fight has to be done and one every week. you can't argue with the numbers. they have been kneeling it of

late. it ofeling it -- nailing late. within these delicacies is the reality you have got to perform. you guys have been on the up and up with all the turmoil. tell me about how you make money and bonds -- in bonds with yields the flow. -- this low. when we think of the argument between passive and active, we have to remember bonds are different. tom: they are different in equities, well said. tony: there is a lot of turnover in the bond market. you're about a lot of companies issuing bonds. it is 40% turnover. of all the bonds outstanding in the corporate bond market, 40%

change. only 4% in the equity market. trey percent in the bond market is a new wishes. -- 20% in the bond market is a new issue. there is a lot of decision-making about what to buy. pimco, have you been making full faith and credit with strategy on government paper or are you making it away from that? tony: away from that. indices are filled with u.s. treasuries. deficit, soudget the index has put more treasuries in it. that is not where the value is. pimco has brought nonagency market -- they are difficult to analyze.

complexity.ract how do we do it? i can't, personally. many analyze comes down to the zip code to determine how many will defaulted mortgages and what the recovery rates will be. it is complex. we want to extract the liquidity and complexity premium. tom: let's get the view on this in london. guy: is passive distorting the markets you look at? themos: i would be will to identify it either, but i think it is still a small part of the broader market. guy: is part of the trend taking place. what it has allowed is central-bank to be able to look at risk differently. you look at the boj, it has been

able to do that because these are baskets of risks rather than going out and buying individual securities. there have been changes as a result of this. central bank has been able to take advantage of that, the boj if the monster in the market. themos: that is right. there are many different drivers. one has been that this has becoming a harder market trade. the performance needs to be up to speed with the difficulty of the market. we can learn from analysis way that has been the case. a lot of the analysis we have the optimales that way of dealing with this market is to rebalance less often. chasing every single breakout is not a well-paying strategy. tom: it is an important strategy he brings up.

an important article. it is a war out there. surveillance was quote is -- "surveillance" is dedicated to this debate. one of the great ways of watching this program is tv . you have event coverage coming up. here,so have videos down the most recommended. this is bloomberg. ♪ ♪

sebastian: --taylor: this is bloomberg -- this is "bloomberg surveillance." a bank posted better than expected profit in the latest quarter. 17%.ue at rbs grew the bank has selected a spot for its post-brexit trading hub. >> we are in discussions with

the -- natural bank -- with the dutch national bank about setting up headquarters in amsterdam. it has licenses for us. taylor: rbs is preparing to move 150 jobs to amsterdam. the oil trader once known as god is closing down his main hedge fund. his master commodities find it lost almost 30% due to a wrong way bet on oil. he became famous during the financial crisis. that is your bloomberg business flash. tom: guy johnson, this is so predictable, it is six. the idea of big bets, they always come back to haunt you. , a wonderful story on this.

the idea of muted oil prices. it is hard to make money in any market when it is muted. muted will tell you every time. -- will kill you every time. you can blame u.s. shale for this. mismatches them kind of market you can make money in, you get a move up in oil, they have the technology, they can pump more. they are just dampening volatility. opec can do whatever it wants. it is about what do you do in muted markets, whether it is oil or bonds. is an important aspect to all of this. where is money to be made in it? themos: four number of months we

, as a resultuing of those muted risks, emerging , india, all of these locations where you have declining inflation, low risk on the dollar, bonds are going to do well there. the other implication of muted given the importance of oil and commodities for inflation rates globally, you may actually need to adjust your risk premium for inflation. if oil is you did, the upside is --, and the risk to me of and the risk premium may have to be less. quickly, the bond markets -- do you do less or do more? tony: you want to be less active.

to make bets on interest rates, because we are not expecting much. trade the range. tom: we are going to continue with tony crescenzi. themos fiotakis, we greatly pick you -- thank you. alan krueger will be with us. after the jobs report, william gross will join us. we will talk to him about his view of the bond market. stay with us. it is jobs day. this is bloomberg. ♪

. . . who knew that phones would start doing everything?

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see how much you can save when you choose by the gig or unlimited. call or go to xfinitymobile.com. xfinity mobile. it's a new kind of network, designed to save you money. ♪ tom: this morning, it is jobs data across two americas.

it is fully employed america. an america where 20,000 plus show up at a job fair to pack cardboard boxes for involuntary in on a sour, carl riccadonna, alan krueger, bill gross. will tryingy to lessen the tweet-infested ump" known as the white house. i will get in trouble for that one. good morning, everyone. this is "bloomberg surveillance ." we are live from our world headquarters in new york. thank kevin for his comments this morning. the president denies he called the white house a "dump." it has been a cacophony in washington over the last few

days. guy: is he describing the white house as a dump for the white house specifically? tom: i have been in the green room. it is like a religious experience as well. guy: they are having to kick everybody else to fix the place, so you might have a point. tom: buckingham palace, they have to fix the shower. right now, with our first word news, here is taylor riggs. we are seeking with d.c. news taylor:. special counsel -- here is taylor riggs. taylor: we are sticking with d.c. news. robert mueller is looking into russian meddling with the election and possible collusion with the trump campaign associates. the trump administration is unified in asking for a debt ceiling increase.

not asknistration will for spending cuts or provisions that might set off that extended fight. congress needs to raise the debt ceiling by the end of next month. down in australia, police say they wanted one of the most threatscated terrorism the country has faced. two men are accused of smuggling bomb on an airplane. they took it apart and tried to turn it into a device. and a fire on one of the world's tallest residential buildings has been put out. authorities say they are no injuries. it is the second major fire of the skyscrapers since global 2015. news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. tom: taylor, thank you. right now, a data check. equities, bonds, currencies, commodities before jobs data.

again, the stock market has been up through the week as well. and it cannot get to a nine handle. .09 all nicely $1 morning. guy? calmmarkets are pretty right now waiting for the jobs number to come through. 7477 is where we are trading. we expect to go to parity and beyond. down 5.7%. by .7%. is down tom: i got up at 1:00 a.m. to get this going for carl. 2007, 20 shows is in two dollars an hour and daily $

22 an hour is a pernicious effect of inflation. this is the low piece. down comes the real wage, and then up, up we go, better wage growth for blue-collar america. this because of the dearth of inflation. guy? guy: you tell you have a better version of this chart, but we can argue about that at a later date. when trending, should you care about the rsi?this is what we have in terms of the relative strength. we are down at the 2007 levels. this is the bloomberg dollar index. it looks like we're getting down to test that level, tom, which should be pretty important. tom: we have a great line up this morning of the jobs data the american labor economy. it will be labor share.

we will discuss that with professor krueger and others. with us this morning is tony crescenzi of pimco joining us again this hour. right now, carl riccadonna choices with bloomberg intelligence, how chief economist. what we look for at the 30 a.m.? -- at 8:30 a.m.? carl: i think potentially a new low on the unemployment rate, i think 4.2%. tom: 20,000 people are lining up to fill boxes at amazon. carl: because perhaps we are not at full employment. 5.5% all the way down to mid 4% territory. until we see more evidence of wage pressure, we have to continue to wonder if we have not arrived at that level. you are getting very close, but we might not be there yet. tom: response to the viewers and listeners. they say guys like you are nuts.

they don't see full employment. what is the divide between viewers and listeners lined up at a jobs for four amazon and women like chair yellen saying we are near full employment. nobody buys it. carl: your certainly there in some states. in maine, they have had to tap into the prison system to get temporary workers for the summer. but there is so much insecurity in the labor markets that workers do not feel they have the ability to negotiate for higher wages. when workers don't have part me power, that offers for additional -- is the jobless rate in that state? carl: i think 2% something. at this point, we're not seeing much curbed pressure. eventually, you will see that

perk up, but the phillips curve as much flatter. tony: is that the breaking point? at some point, it occurs. carl: you know you are at full employment when you have wage pressure sticking up. is germany in this is at full employment, and we are not seeing the wage pressure. tom: cannot go out for a cup of coffee and let you guys -- guy: that rearview mirror stuff is really interesting, tom. do you think gary cohn what have a different view of how that process works than, say, janet yellen does? you have a market perspective. he can read different things into different numbers. are we about to see a different shift? carl: labor inflation is a lagging indicator. when you talk about lagging indicators, you need to watch in

the rear view mirror, and in the case of inflation, it lags real economic activity by bus exporters. the numbers we are seeing now is really a function of what was happening in the economy a year-and-a-half ago growth was indeed very soft. it is something markets may at next year. whether or not we know the answer to what he will say, gary cohn is the next venture, orbital question whether or not -- the next venture -, the chair, thext fed markets will question here is the markets will move on the perceptions of what the next fed chair thanks. tom: to get back to carl's idea on rates, good or bad deflation, good or bad goplexity, carl riccadonna, to the blue circle, the principal circle as well come up

with there be a good or that low unemployment rate? carl: when labor economists were running the fed, which is the case still, there was a grand experiment up -- can we been the trend? programseen no reentry in maine, unemployment rates among certain demographics have been historically higher, also moving down. your potentially pulling folks off of the sidelines into the labor market. tom: why are we getting 20,000 people in fall over, massachusetts showing up to fill cardboard boxes for amazon? carl: because there's still tremendous demand for jobs. a lot of people are working part-time and whatnot. we are looking at the national unemployment rate. if you look at the youth unemployment rate, it is not below prior cycles. tony: many thanks indicate full

employment, though. carl: we're getting very close. the national unemployment rate, youth is not there yet. if we look further, but the employment population rate, it is still wimbley will -- still well below where it was. tom: i want to say good morning to john silvia at wells fargo right now. john silvia has a main job growth at 1.1%. that growth-infested new hampshire, according to dr. sylvia come is 1.7%. guy: ok, we can factor that back in. what does the yield curve tell me about where employment is going? carl: the yield curve is telling you we are still not getting a lot of inflation and there is not a lot of expectations for inflation picking up anytime soon. that tells you we are not in labor spiral type of

inflation environment like you saw in the 1970's him and we are not even close to getting to the anytime soon. you see that reflected in the relatively low longer-term yields. tom: you guys are still going at it. we'll get carl over to radio. we will have dialogue for him with our team. he will darken the board and argue with tony crescenzi of pimco. we have a lot more coming up on jobs day. alan krueger will join us. later on, a conversation with bill gross on linkage into bonds. it is just a coast-to-coast, worldwide. stay with us. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. for the first time in five months, the master find returned 1.5% in july, but is still down almost 4%b for the year. evan howard uses a microstrategy. toyota and mazda has a plan to create 4000 jobs. no word on where the plant will be located. president trump tweeted it is a great investment in american manufacturing. that is your bloomberg business flash. tom: taylor, thank you. for two afternoons in a row, and has been not chaos but certainly original news flow out of washington to joining us now, our white house reporter with an

weekendo get us to the and get us commodity, 17 days for a president vacation. what happens to the white house when any president goes away? does everybody go with him? >> the president is going to take a large number of staff members with him. the white house will be cleared out because there are some renovations that need to be done come so president trump is taking this opportunity oh two new jersey where he will be -- to go to new jersey where he will be at his golf club. several staffers will be doing -- of a workinge idea vacation, do you assume that mr. kelly goes with them, that mr. van and goes with him -- bannon goes with him like an entourage? it will definitely be

like an entourage. he has been on phone calls to the president, keeping a close watch on the president and making sure that he stays on track. guy: we can make all kinds of jokes about watergate in the problems back of the white house. they are fixing the plumbing is time, not the league's. you had access to the -- not the leaks. you had access to the white house. if the reporting around the administration different? that the material over the next few days. toluse: normally during the presidential vacations, news cycles will be slower. but with this white house, there so manyn so many leaks, unauthorized disclosures, you never know what to asexpect. we may hear morbidly special counsel, the pressure investigation, and of course the president has his twitter account, so the news cycle is likely to continue. guy: tell me about your weekend.

normally, you would expect some tweets to come out. but we have a new chief of staff. do you expect a quiet weekend this weekend?if you look toluse: at the twitter account of the president over the last week, there has been a little more structure, and has not spent as much time tweeting against his enemies, his own attorney general, as he has done in the past. see you get the sense that general ellie mae have some final -- general kelly may have some final say. tom: david from in "the atlantic" magazine has talked about the leaks that have been just outrageous. help our worldwide audience. who is doing the leaks? is something the president is trying to get to the bottom of, but it is people close to the president, people within the national security group brad ausmus essentially people from the so-called "deep state," people who maybe upset

about what the president is doing. but there are a number of people close to the president who either close to personal reasons or who are upset with what is going on in the white house are leaking information, including transcripts between trump and will leaders, something we have not seen -- world leaders, something we have not seen in the past. olorunippa, our white house correspondent. tony crescenzi, back to the bond market. i would suggest all of the turmoil means a delayed tax return, etc. is the delay policy falling back into bonds dynamics? tony: yes, actually. i wrote a blog in january, six wonths ago, when the towdo was 20,000 ashley conclusion was wasing -- when the dow

20,000, the conclusion was nothing. $6 trillion equities prices now. the bond market is saying, "so what?" we believe the growth will pick up a little bit. perhaps there will be a trump bump, but the long-term trajectory will not change. what is the tax cuts have been? maybe we spend it, but what do we do in 2018? we cannot go up another 3%. more than likely, there will not be any changes on growth. the guys are nervous about the bond markets. greenspan was talking about it. it is not a relationship between equities to bonds, it is bonds to equities where the story lies. tony: look at where the market is priced in terms of euro dollars, which is libor of course, which may not be around in 10 years -- but probably will be, although he has called for

it to end in 2021 -- 2.5% federal funds rate, the policy was half of what it was at the peak of the 2006 cycle and much 2000 -- i6% peak in am sorry, 6.5% in 1995. in legals and the trading range from it will change as soon as the bond markets' view on the federal funds rate has changed, that is not occurred. krzyzewski, thank you. -- tony crescenzi, thank you. with pimco. stay with us from london, from obs day, thish jus is bloomberg. ♪

guy: guy johnson in londonderry tom keene of course over in new york. tom, let's have what is happening with brexit. the bank of england talking about the impact on the british economy. it is having an impact on investment. we have talked about it as being project fear, "you should not be doing this." this time, i am not seeing that reaction. >> you see a lot of holidays.

a lot of people are headed to beaches. secondly, more importantly, different with the flow of where we are going on brexit, which is toward a transitional deal, thinking about the chancellor, talking about a transitional deal, and they kind of fit within the mainstream thinking. perhaps the brexiteers are not going to hit him this time. guy: are we starting to get any understanding of what theresa may will do with her speech? >> we are not sure if you have allowed the troops to stick out their positions. we have not heard much curtis johnson is in brexit movement. he has been the council on what the transition should look like. maybe we will see something for him.nd of the summer for

many are on holiday, and perhaps in september, try to bring these thoughts together. they always have a back to school beach. an early symptom were, she will -- in earlyg brexit september, she will start casting brexit into talks. guy: simon kennedy, our brexit editor, thank you. this is where we stand, the ftse 100 up .1%. the markets calm in advance of the payroll number. this is bloomberg. ♪ we check our phones 85 times a day.

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see how much you can save when you choose by the gig or unlimited. call, or go to xfinitymobile.com. xfinity mobile. it's a new kind of network designed to save you money. tom: good morning to everyone. this jobs data. guy johnson in london. tom keene in new york.

we touch on equities here in a moment. right now in new york city with our first word news, here is taylor riggs. taylor: starting with d.c. news, there has been a new turn into the investigation into russian meddling with the u.s. election, according to people familiar with the matter. special counsel robert mueller is using a grand jury to collect information to find out whether campaign associates treated with -- colluded with russians. leaks --ligence according to people familiar with the plans, what law enforcement will do to prevent leaks and find those responsible. jeff sessions said "some people may to go to jail." and he was called a hero for cracking down on cyberattacks in may. now he is under arrest. he previously used malware used to hack banking systems in canada and europe.

he was arrested in vegas after attending a conference. a hedge fund manager says investing is in danger of "devouring capitalism." paul singer. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. tom: taylor, thank you so much. it is always of interest to talk to the equity markets. this morning, we focus on bonds with tony crescenzi, carl riccadonna continues with us on this job stay. right now, you are an optimist. michael holds court. wonderful to have you on the program.

michael: we believe that the advance in the u.s. equity market has been pretty well supported by a barnburner earnings season. we like to track earnings that strips away last-minute earnings expectations manipulation, and by that measure, 60% of companies are feeding expectations from six months ago, and an astonishing 70% are beating sales. guyswhat i love about you you are three yards and a cloud of dust. mi doing a three yards and a cloud of dust strategy right now? go?h way do you want to michael:michael: we are not be kind of manager you described. we will not chase 150 times earnings and hope it will go to hundred times earnings.

we are based on a price matters discipline. right now, where we see the excitement on a price matters basis is in europe where you have 35% below long-term trend valuation. you have earnings at two times the rate of growth, two times that in europe, and you have great political power that can give us another leg up on growth. ago,michael, six months you might have said, "are you long european stocks," and people would have run away from it. now, everybody is long european stocks. done? best now michael: if you talked to usmichael: six months ago, nine months ago coming european stocks relative to the u.s., ironically, was the brexit vote, and we have been high on european and developed international writ large for a couple of years now and have just been waiting for momentum to come consistently into that market.

if you think about it, developed international versus the u.s., you have to go through it almost biblical seven lean years and seven fact one spirit we have gone through seven years of international being beaten by the u.s. we think we are in year one of a long period of outperformance. guy: michael, the rate of change of the eurodollar has been pretty spectacular. impacting?y about it michael: if you the trading pattern of the euro for the past couple of years, it was in a 105-115 zone. we broke out on the high side of 119.that is18.5, not worry is too much probably because of victory in the overall risk in the euro structure, we think the trading rate should be raised from what it was over the last year's committee on 10, 120, 125. not think that will derail the economic recovery that is going on in europe right now, particularly the real risks of macron.

can he get his reforms through? tom: we have seen that without road is an all. i know you're intimately involved. marvin goodfriend, a shortlist for any number of jobs on carnegie mellon, one of the heroes of richmond economics. do we need at the fed, not even for a chairman, economists like marvin goodfriend, or can we go with gary cohn? that is an excellentgo questionnaire and the fed is so intertwined in the economy through the quantitative easing process, and the difficulty extracting from the want to easing balance sheet that these that has accumulated -- you look in the last time we faced this back in the 1950's it was a difficult, painful process of unwinding a bloated balance sheet. the more technical expertise you have on the fed the better, and

the less political input the better. tom: that caps off a great article in "bloomberg businessweek" this week, a cover article, dakin williams with a great article on gary cohn at the fed. let's get an opinion from carl riccadonna. this is a raging debate, but gary cohn isn't kevin, is he? carl: they are very different individuals. it is going to be absolutely critical for the next set chair, orit janet yellen, cohn, otherwise, to command the respect of the other governors, especially on the committee. if we were descending into a world of chaos and governors dissenting, it is going to muzzle the confidence. tom: people supporting mr. cohn uy -- is a wonderful go

is gary cohn like a william martin, or is he a hard-nosed executive like lloyd blankfein? drop theo not want to connection with martin, but there is precedence for politicized fed, and i think may be a competent fed official, there will be the optics of this is trump's man at the fed will maintain a low interest rate environment to support the administration's policies, and that was the question marks around little independence. come backel, let me to you. i am being told of the payroll is probably not that important to the fed, maybe a little bit important, but it is one of the things the markets will rush off as well. michael: i am in agreement. calmthey are utterly

waiting for the numbers. if that is the case, why is nobody doing anything this morning? michael: the nonfarm payroll has been really volatile relative to expectations all year long, and the reason is clear -- you got a mismatch between these concepts that the applicants have the skill sets required by the jobs being offered, and that means a ,longer hiring process and it comes in surges. market has to back off, really trying to use a month-to-month change in the nonfarm payroll as a real signal. it is much more important as a financial market. 70% of companies are beating on the top line. that revenue number is hard to manipulate, and that gives you a really big signal, but only when 80% of industrial companies are beating. that means there are but that's happening, not just in the u.s. economy but the global economy, no matter what the month-to-month nonfarm payrolls look like. guy: can i draw a line between

which number of the topline sales growth? michael: that is a really great question. we believe that the topline wage number is really masking the underlying strength in the economy simply because of demographics. every time a baby boomer retires and is replaced by a millennial, it depresses overall wage gain because the baby boomer makes about two times what the millennial that replaces him does. however, the last 18 to 24 months, those millennial workers are getting 4% pay increases. they got no pay increases from 2008 to 2014. even though demographics are keeping the overall wage game unit by giving millennials the biggest demographic and u.s. ing ancreases, that a say i fantastic base for the rest of this year and into 2018. tom: michael jones, thank you so much. carl riccadonna bloomberg

intelligence will continue with us on jobs day. coming up, a really important conversation. this is what we like to do on "surveillance." we like to go deeper in the story. you do that on washington with the former fbi director. william gavin will join us. stay with us visit jobs day from london, and from new york. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." via taylor riggs. let's get to the bloomberg business flash.

the test their own bank posted better-than-expected profit in the latest quarter. revenue at rbs rose 17%. bloomberg spoke to the bank's cfo. wen: we are encouraged by the progress we are making, six months results. down.ave gone up, costs but we know we have adjustments to settle.we will aspire to get that settled this year. taylor: ewen stevenson was referring to the need to settle with the u.s. justice department over its mortgage bond investigation. jumpsrman factory orders in june. the increased by broad-based investment demand. promise toeping his

wall street. stemming losses and software updates are boosting demand for gopro's camera. that is your bloomberg business flash. taylor, thank you so much. it is a pleasure to bring you bill gavin, a former fbi assistant director, which barely describes 28 years a service to the nation with the bureau of the federal of investigation. bill gavin, wonderful to have you back with us this morning. what does this symbolized to you that mr. mueller is now onto a grand jury? bill: i think he is taking a step in the right direction. in any of line is these investigations, unless you can get it before a grand jury, subpoena people come up with them on her own, and swear to intelligence, the whole truth, and nothing but the truth, you not have the power to go anyplace. right now, it is a very big step forward for bob mueller's

investigation. this is what should have happened with hillary clinton's emails, but it did not happen. in that case, nobody had subpoena power, and we never arrive at a real conclusion. tom: jessie and the experience of people as they go into that room, the one be investigation -- you have seen the experience of people of the going the room, the would-be investigation, how does that change someone if they are sworn to a grand jury? bound toy are intelligence, the whole truth, and nothing but the truth, and prosecution should they perjure themselves while under oath on a grand jury. the other big benefit of a grand jury is that is secret proceedings. nothing is supposed to leak out. the rules applied, man you cannot take that information and give it to somebody else out of the ground during -- grand jury.

step in thislarge investigation, and bob mueller has definitely done the right thing. he has also done everything by keeping the lid on what he is in fact doing other than the fact that the grand jury convened. guy: mr. gavin, guy johnson in london. earlier, is this simply about logistics? is easier to go down the block and it is five miles down the road? is he trying to make sure that people are actually going to turn up? bill: no, this has to do with people telling the truth. you can ask somebody to have an interview with you, and they say what they want to say. the grand jury is there, once the consequences of is there, itrself takes on a whole new dynamic in somebody's personality and somebody's willingness to tell the truth. guy: i am just wondering why he needs a second grand jury.

there is one he inherited from the flynn investigation. what if you need to do from once? why does he need two different ones? bill: i don't know exactly what he did inherit with the grand jury, but it will be devoted solely to what he is doing and his concern at this particular point in time. jury,r. gavin, a grand whether it is in boston or your service and the other parts of america, if i believe about a maximum of 23 people in the room, but they are selected differently than a normal jury. who are those people on a grand jury? well, it is a jury of your peers, but the difference is with a grand jury, when you bring a witness in before a grand jury, to ask questions, they do not bring counsel. they cannot bring counsel in with the plan that makes a great

big difference. tom: this is the obvious statement that within this grand jury and the next president that we have, how would you suggest a president will respond to his family members being a mr. mueller's grand jury, if they are subpoenas. how will they respond they do not have counsel with the? bill: that'll remains to be seen, but 99% of the time, there is no counsel in that room. there may be some technical exception to that rule, but i have never seen it happen in all the times i've been involved with grand jurie for cases that go to a grand jury. gavin,aster gavin -- mr. thank you so much, 28 years at the federal bureau of investigation. you can do that off the bloomberg terminal with tv . we have a huge response to the technology, and there it is.

was justook at me, painful, i understand, or better yet, you can come over here and click on a feature and bring of the chart, and you can fill that riccadonnalike carl will steal that chart from me today down in the third floor. this is bloomberg jobs day. bill gross later and alan krueger as well. ♪

guy: this is "bloomberg surveillance." guy johnson in london. tom keene over in new york. "bloomberg daybreak: america's." to gary be talking cohn. i cannot wait. david: none of us can, actually. gary cohn was an economic council letter the white house. this apparent dilemma between the full employment but lack of wage pressure, what is going on, so we are talking to gary cohn, tom. tom: one of the issues, david

westin, the dialogue has shifted as well. you have got to ask him about mr. trump's perception on where the american economy is. david: you cannot get it without wage growth, so how focus is the president on getting the wages up? tom: i also want to know that mr. gross will join us at 8:30 a.m. we will do that worldwide on television and radio as well. how about a single best chart? i saw this recently. there is the chart. this is a gb chart. green, wenches, morning in america had another time. the president wants to be up at 3% gdp. th -- "e tween crowd incredible -- eve

tweet -- "west virginia was incredible a night. crowds and it does it is a more beyond, g-v every percent, wow!" guy: globalization get to 3% right now? the heat understanding how we get there is to look at what has been driving to economic growth in the cycle, and that has been consumer spending. the point david westin made is absolutely correct -- if we are going to get to 3% gdp growth, we need to see a pickup in consumer spending especially, that is going to be driven by wage and salary income, which has accelerated ever so slightly year-to-date. we have to see it taken up by another percentage point. when a salary, income gains closer to about 5.5%. that has been unattainable in the current cycle, however, that

was the survey link trend from 20072003 all the way up to in the economic cycle. on lowis whole dynamic economics, what are we going to learn about the phillips curve this morning? carl: we're going to learn that it is holding steady with what we have seen support in the cycle. so the phillips curve ain't broke, but it is badly bent, so we are getting the deflationary for your buck. that will happen later in the cycle. is not having yet. saul -- it is not happening yet. we saw a glimmer of that. chairwo technology and yellen, to the idea of cell phones, is my wireless phone the transitory inflation? carl: i think it may have

further room to the client, but the what is coming to take up idiosyncratic transitory components from the inflation numbers, we will have a is inflationary environment, which will get even worse is the dollar starts to depreciate as the balance wears off. carl riccadonna, thank you very guy johnson, thank you so much for sending in for francine this morning. alan krueger will join us from princeton. the idea of the ways. william gross will join us. david will have a discussion as well. there is the "surveillance" rainbow -- ♪ somewhere over the rainbow ♪ is this a phone?

or a little internet machine? [ phone ringing ] hi mom. it makes you wonder... shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. [ laughing ] so all you pay for is data.

see how much you can save. choose by the gig or unlimited. call or go to xfinitymobile.com introducing xfinity mobile. a new kind of network designed to save you money. ♪ jonathan: it is payrolls friday in the united states.

consensus is for inquiries and 180,000 jobs at a decrease in the unemployment rate to 4.3%. possible collusion with russia defense. robert mueller has a washington grand jury to collect information. and pimco cao dan iversen delivers. euroseived a 62 billion in the second quarter. "bloomberg daybreak good morning to. -- good morning to "bloomberg daybreak." i am jonathan ferro with david westin. alex real has taken the day off -- alix steel has taken the day off 30 euros goes nowhere at $1 .1871. but the dollar index is heading drop. emir basis point out of the -- a mere basis point. david: