Category Archive: 4.) Marc to Market

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Spain’s Political Deadlock Likely Leads to Third Election

2016-08-31

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2016-08-31

Rajoy is hoping to form a minority government this week. It seems unlikely to succeed, which could lead to an election on Christmas. Regional elections and corruption trials may change Spain's political dynamics.

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FX Daily, August 30: Greenback Remains Firm, Awaiting Fresh Cues

2016-08-30

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2016-08-30

The US dollar is trading firmly, largely within yesterday's ranges. The odds implied by the September Fed fund futures eased to 36% from 42% before the weekend, but ahead of Fischer's Bloomberg TV appearance, and tomorrow's ADP employment estimate, the market seems cautious about fading the dollar's strength.

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Natural Rates and Terminal Fed Funds

2016-08-30

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2016-08-30

The neutral or natural interest rate is linked to potential growth. Potential growth has fallen so has the neutral rate. The implication is that the FOMC has made the bulk of the adjustment on its long-term Fed funds forecast.

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FX Daily, August 29: Dollar Gains Extended, but Momentum Fades

2016-08-29

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2016-08-29

The US dollar staged a strong pre-weekend rally on hints that the Fed will raise rates before the end of the year. There was initially follow through dollar buying in Asia before a more stable tone emerged in Europe, where London markets are closed for a bank holiday. The easing of the dollar’s upside momentum may set the stage for a bout of profit-taking later today and tomorrow.

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Great Graphic: Low Wages in US Rising

2016-08-29

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2016-08-29

The bottom of the US wage scale is rising. The added wage costs are being blunted by less staff turnover, hiring and training costs. It is consistent with our expectation of higher price pressures.

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FX Weekly Preview: Yellen Pushes Divergence Front and Center

2016-08-28

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2016-08-28

The summer dynamics of the capital markets has changed by the enhanced prospects of a Fed hike. Equity markets and other risk assets look particularly vulnerable. Sterling may do better against the euro than the dollar.

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Weeky Speculative Positions: Euro Shorts Trimmed, More Sterling Shorts, Long CHF again

2016-08-27

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2016-08-27

Three weeks ago speculators went net short in CHF, when the U.S. jobs report was published. Now the net position shifted to long again. Last week GBP shorts increased but Euro Shorts were reduced.

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FX Daily, August 26: And now for Yellen…

2016-08-26

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2016-08-26

Yellen's presentation at Jackson Hole today is the highlight of the week. It also marks the end of the summer for many North American and European investors. It may be a bit of a rolling start for US participants, until after Labor Day. However, with US employment data next Friday, many will return in spirit if not in body.

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FX Daily, August 25: Narrow Ranges Prevail as Breakouts Fail

2016-08-25

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2016-08-25

The US dollar remains mostly within the ranges seen yesterday against the major currencies.The market awaits fresh trading incentives and the end of the summer lull, which is expected next week. The Jackson Hole Fed gathering at which Yellen speaks tomorrow is seen as the highlight of this quiet week.

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FX Daily, August 24: Narrowly Mixed Greenback in Summer Churn

2016-08-24

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2016-08-24

The US dollar is going nowhere fast. It is narrowly mixed against the major currencies. The market awaits for fresh trading incentives, with much hope placed on Yellen's presentation at Jackson Hole at the end of the week. Is it too early to suggest that the build-up ahead of it is too much?

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Great Graphic: GDP Per Capita Selected Comparison

2016-08-24

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2016-08-24

US population growth has been greater than other major centers that helps explain why GDP has risen faster. GDP per capita has also growth faster than other high income regions. The US recovery is weak relative to post-War recoveries but it has been faster than anticipated after a financial crisis and shows little evidence of secular stagnation.

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FX Daily, August 23: Broadly Mixed Dollar in a Mostly Quiet Market

2016-08-23

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2016-08-23

The US dollar is mostly little changed against the major, as befits a summer session.There are two exceptions.The first is the New Zealand dollar. Comments by the central bank's governor played down the need for urgent monetary action and suggested that the bottom of cycle may be near 1.75% for the cash rate, which currently sits at 2.0%.This means that a cut next month is unlikely. November appears to be a more likely timeframe.

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FX Daily, August 22: Fischer Joins Dudley; Waiting for Yellen

2016-08-22

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2016-08-22

Last week, some market participants were giving more credence to what seemed like dovish FOMC minutes than to NY Fed President Dudley's remarks that accused investors of complacency over the outlook for rates. Yesterday, Vice-Chairman of the Federal Reserve Fischer seemed to echo Dudley's sentiment, and this has underpinned the dollar and is the major spur of today's price action.

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Dollar Weakness and Fed Expectations

2016-08-22

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2016-08-22

Dollar weakness does not line up with increased perceived risk of Fed hiking rates. Frequently the rate differentials lead spot movement. Some now turning divergence on its head, claiming too expensive to hedge dollar-investments so liquidation. TIC data, though, shows central banks not private investors, were the featured sellers in June, the most recent month that data exists.

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FX Weekly Preview: Yellen at Jackson Hole

2016-08-22

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2016-08-22

Lastly, a brief word about next week. I will not post my usual piece on macro considerations on Sunday. Here, though, is a brief thumbnail sketch of the top five things I will be watching: Yellen at Jackson Hole at the end of next week: To the extent that she shares her assessment of the economy, I would expect to largely echo the broad sentiment expressed by NY Fed President Dudley.

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Speculators Make Small Bets in FX, but Bears Run for Cover in Treasuries and Oil

2016-08-20

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2016-08-20

Summer doldrums continue to depress speculative activity in the currency futures market.  In the CFTC Commitment of Traders reporting week ending August 16 speculators made small adjustments to gross currency positions.  There was only one change more than 6k contracts. Continue reading »

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FX Daily, August 19: Dollar Recovers into the Weekend

2016-08-19

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2016-08-19

The US dollar is trading firmly ahead of the weekend as part of this week's losses are recouped. The euro is trading within yesterday's range, holding to a little more than a half-cent above $1.13. However, as we have noted, the Asia and European participants appear more dollar-friendly than Americans

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The Need for Higher Wages: Lots of Thunder, No Rain

2016-08-18

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2016-08-18

Major central banks and many economists are calling for higher wages. However, they are reluctant to offer proposals to strengthen those institutions who's goal is to boost labor's share of national income. The advocates are more interested in boosting prices than in lifting aggregate demand or addressing the disparity of income and wealth.

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FX Daily, August 17: Dollar Snaps Back

2016-08-17

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2016-08-17

The US dollar is enjoying a mid-week bounce against all the major currencies. It appears that participants in Asia and Europe are giving more credence to NY Fed Dudley's comments yesterday. Although many in the market have given up on a rate hike this year, Dudley reaffirmed his belief that the economy was accelerating in H2 and that the market was being too complacent.

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