Category Archive: 4.) Marc to Market

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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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Great Graphic: Aussie Tests Three-Year Downtrend

2016-08-17

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2016-08-17

The Australian dollar's technical condition has soured. Market sentiment may be changing as the MSCI World Index of developed equities posted a key reversal yesterday. It is not clear yet whether the Aussie is correcting lower or whether there has been a trend change.

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Yuan and Why

2016-08-17

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2016-08-17

It is as if Hamlet, the confused prince of Denmark, has taken up residence in Beijing. The famed-prince wrestled with "seeming" and "being". So are Chinese officials. They seem to be relaxing their control over financial markets but are they really? Are they tolerating market forces because they approve what they are doing, such as driving interest rates down or weakening the yuan? If so what happens when the markets do something which they...

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FX Daily, August 16: Dollar Slumps, but Driver may Not be so Obvious

2016-08-17

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2016-08-17

The US dollar is being sold across the board today. The US Dollar Index is off 0.65% late in the European morning, which, if sustained, would make it the largest drop in two weeks. The proximate cause being cited by participants and the media is weak US data that is prompting a Fed re-think.

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Great Graphic: Dollar-Yen–Possible Head and Shoulders Continuation Pattern

2016-08-16

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2016-08-16

This technical pattern is most often a reversal pattern, but not always. It may be a continuation pattern in the dollar against the yen. It highlights the importance of the JPY100 level and warns of risk toward JPY92.50. It aligns well with the sequence of macro events.

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FX Daily, August 15: Dollar Eases to Start the New Week

2016-08-15

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2016-08-15

The US dollar closed the pre-weekend session well off its lows that were seen in response to the disappointing retail sales report. It has been unable to sustain the upside momentum, and as North American dealers prepare to return to their posts, it is trading lower against most of the major currencies. The notable exceptions are the Scandi-bloc, which are consolidating last week's gains, and sterling, which remains pinned near $1.29.

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Bretton Woods: RIP

2016-08-15

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2016-08-15

Some romanticists want to have another Bretton Woods fixed exchange rate regime. Bretton Woods had difficulty from nearly the day it went operational. It is misguided to think a new rigid regime is needed or is appropriate.

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FX Weekly Preview: Thoughts on the Significance of Ten Developments

2016-08-14

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2016-08-14

The GDP deflator may be just as important as overall growth for BOJ considerations and the possibility of fresh action next month. Falling UK rates and a weaker pound are desirable from a policy point of view. Dudley's press conference may be more important than FOMC minutes. Two German state elections that will be held next month comes as Merkel's popularity has waned.

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Weekly Speculative Positions: Switch to Small Net Long CHF

2016-08-14

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2016-08-14

Speculators shifted to a 0.1 long Swiss Franc position in the week of August 9. Speculators reduced their exposure on Euro, CHF and Peso, increased it for NZD, CAD and GBP.

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FX Daily, August 12: Summer Markets Grind into the Weekend

2016-08-12

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2016-08-12

There is a general consolidative tone in the capital markets as the week draws to a close. The US retail sales report may offer a brief distraction, but it is unlikely to significantly shift expectations about the trajectory of Fed policy. Indeed, it might not really change investors' information set.

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FX Daily, August 11: Sterling Struggles to Find a Bid, While RBNZ Can’t Knock Kiwi Down

2016-08-11

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2016-08-11

Once again, EUR/CHF reverses in the middle of the week. A part from technical reasons, the weak French CPI (+0.4% YoY) and Italian CPI (-0.2% YoY) exercised downwards pressure on the euro. The US dollar has found steadier footing today after trading heavily yesterday. There are two main themes. The first is sterling’s heavy tone.

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Two Things I Learned Looking for Something Else

2016-08-11

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2016-08-11

LIBOR continues to rise. The relative calm of the markets will likely end next month. The last four months of the year are jammed with key events that have potential to disrupt the markets.

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Cool Video: CNBC Asia–Mostly about the Redback and Greenback

2016-08-11

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2016-08-11

I was invited to appear on CNBC Asia Rundown show with Pauline Chiou. We discuss the Chinese yuan on the anniversary of last summer's unexpected devaluation. I suggest that most of the things that get observers excited, like the internationalization of the yuan, or the Hong Kong-Shanghai link or, perhaps by the end of the year,a Hong Kong-Shenzhen link are really Chinese machinations that are the result of its contradictions.

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