Business Travel

2023-08-05

The US
and China report July CPI figures in the coming days and they are likely moving
in opposite directions. Headline US CPI is likely to rise for the first time
since peaking in June 2022. China’s CPI has been slowing and is likely to go negative
on a year-over-year basis. It finished last year at 1.8% and in June was
unchanged year-over-year. The divergence of policy is what is driving force of
the exchange rate, and the    question is not really so much why
the yuan is weak, but why it is not even weaker, and the answer seems to be
because of Beijing’s use of soft power. It has moderated the pace through the
setting of the daily reference rate, and it has gotten banks to reduce the
interest rate on dollar deposits for example. Press reports also note that State
Administration of

2023-08-01

Overview: The dollar has
come back bid. It is rising against all the major currencies today. The Reserve
Bank of Australia left rates steady and the poor Chinese Caixin PMI is weighing
on the Australian dollar, which is off about 1.25% today. Sterling is the best
G10 performer, off about 0.1%. Perhaps, the BOE’s meeting on Thursday is
helping to deflect some of the selling pressure. Emerging market currencies are
also nearly all lower, led by the South African rand and South Korean won. The
greenback’s gains are weighing the gold, which is consolidating in yesterday’s
range but looks heavy. After yesterday’s surge to $82, September WTI is a
little lower and is trading around $81.30 in the European morning. It
seems like a risk-off day, though Asia Pacific equities were mixed. Japan,

2023-07-29

Prices
pressures are abating, albeit gradually, while economic momentum is faltering.
The data in the coming weeks will help shape expectations for rate decisions
for September. As the market pushed back against the Federal Reserve’s forward
guidance that anticipated two hikes in the second half, the US dollar fell
against the G10 currencies, but found support beginning around the middle of
the July as the market was reluctant to return to pricing in a cut this year
and doubts rose about the extent that the European Central Bank and the Bank of
England would raise rates.The dollar’s recovery is
likely to extend into August, perhaps, encouraged by the risk of the first
increase in the US year-over-year headline CPI since June 2022, when it peaked
slightly over 9%. The US economy is looking

2023-06-20

Overview: The market continues to resist the Fed’s
signal that another 50 bp of hikes may be necessary to ensure inflation is
headed toward its target. Previously, the market had rate cuts priced in, and
it took some time for the Fed’s push back to be accepted. The market converged
with the Fed, and this helped the dollar recover. We suspect a similar pattern
to play out again. The market does not have even one of the two Fed hikes
discounted. As it moves in this direction, we look for the dollar to get better
traction. Today’s it is mixed but mostly stronger. It is reversing lower
against the yen after reaching new highs for the year. Like yesterday, the
dollar-bloc currencies and Scandis are the heaviest. Emerging market currencies
are mostly lower. The Mexican peso, which reached new

2023-06-05

Overview:  The US dollar has extended its post-employment
gains today, helped by firmer rates and several countries seeing downward
revisions from the preliminary May PMI. The greenback is trading with a firmer
bias against all the G10 currencies and most of the emerging market currencies,
including Turkey, India, and China. July WTI gapped higher after the Saudi
Arabia announced a voluntary and unilateral cut of one million barrels a day in
output starting next month. July WTI opened at $75 after settling near $71.75
before the weekend. However, that was more or less than the high, and it is
near $73 now.The US 10-year yield gapped higher today too and is near 3.73%, a four-day
high. European 10-year benchmark yields are 5-7 bp higher. After strong
pre-weekend equity gains in the US,

2023-04-27

Overview: Some regional bank earnings were weighing
on investor sentiment but reports that the FDIC is running out of patience with
First Republic Bank to strike a private deal and could decide to downgrade its
assessment. This could lead to limits on its ability to use the Fed’s emergency
facilities. Other reports said that the bank’s advisers are securing
commitments to buy a new stock as part of a broader restructuring. Still, while
the KBW bank index of large banks fell for the fifth consecutive session, the
index of regional banks snapped a four-day slide with a 1.25% gain. That was yesterday, and
today risk appetites have been rekindled, it appears. Most of the large Asia
Pacific bourses (but Australia) advanced, including China’s CSI 300, which
snapped a six-day slide. Europe’s

2023-04-24

Overview:  The dollar is mostly lower, led by the Swiss
franc and euro. However, despite softer US rates and a victory for the LDP in
local Japanese elections, the yen is trading with a softer bias. Japanese
stocks recovered from the pre-weekend profit-taking seen after the Nikkei make
new highs for the year. Most other large bourses in the region except Taiwan
and India also moved lower. Note that China’s CSI 300 fell for the fourth
consecutive session and the first back-to-back loss of more than 1% of the year.
Europe’s Stoxx 600 is flat. It rose last week for fifth consecutive weekly
advance. US futures are trading with a lower bias. European benchmark yields are slightly softer, while the US 10-year Treasury
yield is off a little more than 3 bp to slip below 3.54%. European two-year

2023-04-15

Investors and businesses are
wrestling with conflicting impulses. On the one hand, economic growth seems
sufficiently strong to allow the Federal Reserve, European Central Bank, and
the Bank of England to continue to counter elevated price pressures. They are
set to hike rates next month. On the other hand, last month’s banking stress is
seen translating to a lower and sooner peak in policy rates.

Before the bank stress emerged, the
market had priced in a peak Fed funds rate of nearly 5.75%. Now, the May hike to 5.25% is expected to be the top. We suspect the market is under-appreciating the risk of a hike after May. Moreover, Fed funds futures strip is pricing in
a cut by the end of Q3 and sees the year-end rate near 4.50%. Similarly,
the swaps market had the ECB’s target rate rising