Category Archive: 4.) Marc to Market

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Trade War Escalates, Bank of Canada to Cut Rates, US Reports February CPI and Sells $39 bln 10-Year Notes

2025-03-12

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2025-03-12

Overview: The next phase of the evolving trade war that is both a cause and effect of strain in the traditional US alliance, in North America, Europe, and Asia Pacific has begun. The US has imposed 25% tariffs on imported steel and aluminum. Despite lobbying form various countries, no exemptions were announced. The EU quickly announced retaliation, but the measures do not go into effect for a month, which allows time for negotiations. The dollar is...

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German Political Consensus is Emerging, Helping to Extend the Euro’s Gains, While Japanese Data Disappointed

2025-03-11

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2025-03-11

Overview: After stabilizing yesterday, and into today, news of political developments in Germany suggest movement toward an agreement on defense spending and sent the dollar lower. The euro unwound its losses since the election. The US interest rate premium over the eurozone continues to trend lower. Japan disappointed with weak real household spending and Q4 GDP was revised lower. While most G10 currencies are firmer against the dollar, the yen...

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Fragile Consolidation for Greenback to Start the New Week

2025-03-10

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2025-03-10

Overview:  The on-again off-again US tariffs have raised the level of uncertainty and lack of visibility that itself has become a market factor. The dollar has begun the new week, which could see US steel and aluminum tariffs announced Wednesday, softer, but mostly consolidating within the pre-weekend range. Most of the G10 currencies are firmer, though we note the potential downside reversal in sterling. Norway's higher than expected CPI has...

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Week Ahead: US Growth Worries and Europe’s Fiscal Initiative Weaken American Exceptionalism’s Bull Case

2025-03-08

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2025-03-08

The combination of continued growth concerns in the US and the fiscal/defense initiatives in Europe saw the dollar fall every day last week. The Atlanta Fed's GDP tracker says the US economy is contracting at an annualized rate of 2.4%, which seems exaggerated. After falling by about 50 bp in a seven-week slump, the US 10-year yield rose by about 15 basis points last week. Eurozone 10-year benchmark yields rose around 35 bp. The US premium on...

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Pressure on the Greenback Remains Ahead of the Jobs Report and Powell, while European bonds Stabilize

2025-03-07

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2025-03-07

Overview: The greenback's drop has been extended today against most of the G10 currencies, but not the growth-sensitive dollar bloc, which is underperforming today. Still, ahead of the US jobs report and Fed Chair Powell's speech on the economic outlook, all the G10 currencies have appreciated by at least 1% this week. The Swedish krona's 6.7% rise tops the board, but the euro's 4.7% rally is its best weekly performance since 2009. The Turkish lira...

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European Bond Rout Continues Ahead of ECB Meeting

2025-03-06

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2025-03-06

Overview:  The run on the dollar has been extended today but it has stalled in the European morning. As North American traders return to their posts, the Australian and Canadian dollars, along with sterling are lower on the day. Higher than expected Swedish inflation has helped put the krona on the top of the G10 with more than a 1% gain. It is at its best level against the euro in a couple of years. Most emerging market currencies are lower, led...

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Dollar Slumps while European Rates Surge

2025-03-05

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2025-03-05

Overview:  Talk emerged yesterday that the dramatic losses US equities amid recession fears in light of the rash of tariff announcements and threats would draw the new administration's attention. Commerce Secretary Lutnick suggested yesterday that President Trump may consider a compromise on Mexico and Canadian tariffs announced yesterday. There was no sign of that in the president's address to the joint session of Congress yesterday. US index...

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Dollar Mostly Softer as Tariffs Implemented

2025-03-04

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2025-03-04

Overview:  The postponed US tariffs on Canada and Mexico have gone forward and China faces its second 10% tariff increase in two months. The dollar is mixed. The Swiss franc and Japanese yen are the strongest of the G10 currencies, up around 0.45%-0.60% in late European morning turnover, but the Canadian dollar is no slouch and is up about 0.35%. Canada (and China) have announced what are seen as mild initial retaliatory measures, while Mexico is...

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Asia and Europe Seem Less Keen about the Dollar than North America

2025-03-03

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2025-03-03

Overview: The dollar rallied in the second half of last week even as interest rates fell amid a new growth scare. The 25% tariffs on Canada (10% on energy) and Mexico that were postponed a month ago, could be implemented as early as tomorrow.  The only tariffs that have been imposed so far were 10% on Chinese imports, and another 10% threatened tomorrow, and apparently in April, too.  The economic disruption that the tariffs and tariff threats seem...

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March 2025 Monthly

2025-03-01

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2025-03-01

In recent weeks, while Russia's war on Ukraine continues and Beijing continues to harass its neighbors, the U.S. tariff threats and doubts that its defense commitments will be sustained, have emerged as the most significant challenge for businesses, investors, and policymakers. These tariffs are aimed at protecting domestic industries, forcing a re-shoring of production, and raising revenue. If, and when implemented, the tariffs can be expected to...

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Now What?

2025-02-28

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2025-02-28

Sorry for the disruption of the regular commentary.  Still, the monthly will be posted tomorrow.  There is a key divide in the market.  One camp sees the US tariff threats as bluster and a negotiating tactic.  The other camp, which I find myself in, thinks something more serious is happening.  The US voted against Europe and with Russian and Iran at the UN for the first time in 45 years on European issues.  Martin Wolf, the erstwhile economic...

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Fragile Stability Today after Yesterday’s Growth Scare Saw US Rates, Equities, and the Dollar Tumble

2025-02-26

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2025-02-26

(Business travel disrupts the commentary for the next two days.  New monthly drops March 1.)  Overview: A growth scare, perhaps spurred by the Philadelphia Fed's non-manufacturing activity survey and the sharp drop in Conference Board's consumer confidence measure, sparked a sharp drop in US yields, a sell-off in US equities and a weaker US dollar. There is a fragile stability today. The greenback is firmer but mostly within yesterday's ranges...

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US 10-year Yield Falls to New Low for the Year, while Dollar has Muted Reaction to Trump’s Affirmation of Tariffs on Canada and Mexico

2025-02-25

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2025-02-25

Overview: The US 10-year yield has fallen to a new two-month low near 4.33% today, ahead of the $70 bln sale of five-year notes, following strong demand at the two-year floating note sale yesterday. The 200-day moving average is near 4.25%. The 10-year yield peaked in mid-January near 4.80%. The dollar initially rallied on President Trump's acknowledgement that tariffs on Mexico and Canada were still on track, though another official was quoted on...

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Greenback Trims Initial Losses: Reversal in the Making?

2025-02-24

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2025-02-24

Overview: With Japanese markets closed for a national holiday, the dollar was offered in early turnover today, and its recent losses were initially extended against several currency pairs. However, it recovered and early losses were pared or reversed. Among the G10 currencies, the dollar is higher against the Swiss franc and Japanese yen. The German election results were very much in line with the polls and a CDU/CSU-SPD coalition seems likely, and...

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Week Ahead: Tariffs Loom and the State of the Trump Trade

2025-02-22

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2025-02-22

Many observers seem confused. They express disappointment that the so-called "Trump trade", a rally in the dollar has not materialized. Yet, in some ways, isn't that what happened from late last September, ironically around the Federal Reserve's 50 bp rate cut, around the time investors began taking US election polls more seriously? In Q4 24, the Federal Reserve's real broad trade weighted dollar index rose by 4.9%, the best quarterly...

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EMU PMI Disappoints, US Snubs G20, and BOJ Threatens to Buy JGBs

2025-02-21

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2025-02-21

Overview:  The US dollar enjoys a firmer tone today after falling to new two-month lows against several of the G10 currencies. The market lacks near-term conviction as the US tariff threat looms after next week. US Secretary of State Rubio and Treasury Secretary Bessent have not attended the G20 meetings in South Africa due to tension in the bilateral relationship but adds to sense of US unilateralism, which is often mischaracterized as...

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Yen Jumps amid Signs Tokyo Does Not Object to Normalizing Monetary Policy

2025-02-20

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2025-02-20

Overview:  The dollar's gains scored in North America yesterday have been reversed today.  It is softer against all the G10 currencies, led by the Japanese yen.  The greenback was pushed below JPY150 for the first in a little over two months, ostensibly on the back of greater confidence that the BOJ will continue to hike rates, but if anything the swap market is slightly softer than yesterday. Still, the dollar does not look to have bottomed...

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Euro’s Pullback Extends, While the Kiwi Shrugs Off Third Half-Point Cut by the RBNZ

2025-02-19

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2025-02-19

Overview: The US warned that the next phase of the tariff war could be announced in early April and three industries, auto, pharma, and chips. President Trump's comments suggested sometime between the announcement and the implementation. He did not specify if USMCA trade would be exempt for the auto tariffs. Some auto parts reportedly cross the border four-five times. The dollar is mixed against the G10 currencies. The Reserve Bank of New Zealand...

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Greenback Comes Back Firmer

2025-02-18

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2025-02-18

Overview:  The US dollar enjoys a firmer tone against most of the G10 currencies in relatively quiet turnover. Ironically, the Australian dollar is the best performer and it is virtually flat, despite the beginning of the central bank's easing cycle earlier today. Governor Bullock pulled over a hawkish cut in the sense and futures market pushed out the next cut until August. The UK report stronger wage growth and the first increase in employment in...

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Short Note on Presidents’ Day

2025-02-17

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2025-02-17

There are two notable developments today. First, Japan's Q4 GDP was stronger than expected and Q3 growth was revised higher. The net impact is a stronger yen, rise in Japanese rates, and slightly greater confidence that the BOJ will hike rates again, perhaps as early as June. Second, between US and Russian talks to end the war in Ukraine and US Vice President Vance's speech at the Munich conference before the weekend, the Western Alliance has been...

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