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Cool Video: Clip from CNBC Squawk Box

Marc Chandler

Marc Chandler

Marc Chandler - Click to enlarge

The combination of divergence and the US policy mix is underpinning the dollar and I was invited to share my views on CNBC’s Squawk Box earlier today. It dovetailed nicely Matthew Diczok (from Merrill Lynch) views on Fed policy and US interest rates. In addition, I note the troubled spot Europe finds itself with German industrial output unexpectedly falling for a third month in August and Italy’s confrontation with the EU over budget issues. Japan is also far from being able to raise policy rates any time soon.

Oil, that John Kilduff speaks to on this clip, has also been rallying strongly. It is an important development, especially for emerging markets, which for the most part are net importers of oil. The rise in the price of oil is further exacerbated by the stronger dollar. This is a powerful headwind for emerging market economies.  It boosts measured inflation, acts as a headwind on growth, and aggravates external imbalances. 

I also suggest that the global markets appear somewhat less sensitive to Chinese markets recently. The cut in required reserves after a drop in new export orders in the PMI and rising trade tensions with the US has encouraged a more supportive stance by the PBOC. The line drawn at CNY7.0 may be challenged.   

Although the recent gains have stretched the dollar’s technical readings, the underlying trend of appreciation is still in place as are its drivers. Here is the clip (7.5 mins of fixed income, oil, and the dollar).

 

Full story here
Marc Chandler
He is Global Head of Currency Strategy of Brown Brothers Harriman (BBH). He has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. He regularly appears on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. BBH provides specialist services and innovative solutions to many Swiss asset managers that include a global custody network of close to 100 markets, accounting, administration, securities lending, foreign exchange, cash management and brokerage services. Feel free to contact the Zurich office of BBH
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