Category Archive: 4.) Marc to Market
FX Weekly Preview: BOJ and FOMC Meetings Featured in the Last Week of July
A recent Reuters poll found about half of the 100 economists surveyed expect a hike in Q4, which really means December since the November meeting is too close to the national election. The other half is split between a Q3 rate hike (September) and some time in 2017. That said, two primary dealers anticipate no hike until the end of 2017.
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Weekly Speculation Positions: Bullish on Dollar and Dollar-Bloc
Speculators made several significant position adjustments in the CFTC reporting period ending 19 July. They are more Bullish on Dollar and on the Dollar-Bloc currencies.
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FX Daily, July 22: Flash PMIs Show Brexit Impact Localized
As the week draws to a close, there are three main developments in the capital markets. First, the profit-taking seen in US equities yesterday has continued in Asia and Europe today. The MSCI Asia Pacific Index and the Dow Jones Stoxx 600 in Europe are both off around 0.5%.
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FX Daily, July 21: Monetary Policy Expectations are Driving Foreign Exchange
Monetary policy is said to have lost its impact on the foreign exchange market, as investors scratch their heads at the resilience of currencies with negative interest rates. Yet the price action in the action cannot be understood without recognizing the ongoing importance of monetary policy expectations.
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Effective Fed Funds and Money Markets
Fed funds have been trading firmly. There are several reasons and one of them is the shift that is taking place in the US money markets. Still the risk of a Fed hike has increased, just as speculation increases of easing in other major centers.
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Draghi Does not Surprise and Euro Edges Away from $1.10
Draghi does not show the kind of urgency many bank economists do over the shortage of bonds to buy. Draghi kept options open and suggested a review in September when new staff forecasts are available and more data will be seen. The euro firmed, mostly it seemed on sell the rumor buy the fact, and/or possibly some disappointment that no fresh action was taken.
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FX Daily, July 20: Sterling’s Jump Slows Dollar’s Ascent
It is a bizarre turn of events. Just like the Game of Throne's Westeros is a map of the UK put on top of an inverted Ireland, so too do UK events seem to be a strange permutation of the pre-referendum views. Although sterling and interest rates have not fully recovered from the Brexit decision, equity markets have, and fear of contagion has died down.
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Great Graphic: Aussie Approaches Two-Month Uptrend
Australian dollar is the second heaviest currency this week after a key downside reversal at the end of last week. It is approaching an uptrend line near $0.7450. Many perceive an increased likelihood that the RBA eases and many are reassessing chance of a Fed hike later this year.
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FX Daily, July 19: Dollar-Bloc Tumbles, but Euro and Yen Little Changed
The US dollar is sporting a firmer profile today, but it is not the driver. Heightened speculation that Australia and New Zealand may cut interest rates next month is pushing those respective currencies more than 1% lower today.
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Dollar Bull Case Intact: It is All About the Perspective
Our bullish dollar outlook was based on divergence and we judge it to still be intact.The Dollar Index has been trading broadly sideways since March 2015, but never did more than a minimum retacement of its arlier rally. The Dollar index is at it highest level since March today.
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European Court of Justice Ruling Weighs on Italian Banks
ECJ uphold principle of bailing in junior creditors before the use of public funds. Italian banks shares snap a three-day advance. The EBA/ECB stress test results at the end of next week are the next big event.
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FX Daily, July 18: Coup in Turkey Repulsed, Risk-Appetites Return
The US dollar and the yen are trading heavy, while risk assets, including emerging markets, and the Turkish lira, have jumped. Sterling is the strongest of the majors. It is up about 0.5% (~$1.6365), helped by the opportunity of GBP23.4 bln foreign direct investment and comments from a hawkish member of the MPC suggesting not everyone is onboard necessarily for a rate cut next month.
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Squaring the Circle: Can Article 7 be Used to Force Article 50?
Article 7 would suspend the UK's EU voting rights on grounds it is not negotiating in good faith by delaying the triggering of Article 50. The U.S. debated what "is" means, now investors are trying to figure out what May means. Although sterling has stabilized, interest rate differentials have not.
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FX Weekly Preview: EMU Returns to Center Stage in the Week Ahead
Key event in Europe is not on many calendars--it is a ruling by the European Court of Justice. UK government and Tory Party stabilizing, leaving the Labour Party in disarray. US economy appears to have accelerated into the end of Q2. BOJ's meeting at the end of the month.
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Speculative Sentiment Shifts
The combination of a robust US jobs report, speculation of bolder action by Japan, the possibility that the ECB drops the capital key to overcome the ostensible shortage of some core bonds (e.g. German bunds), and the anticipation of easier BOE policy appears to have generated a change in sentiment among speculators in the currency futures market.
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Great Graphic: Equities Since Brexit
Since the UK voted to leave the EU, emerging market equities have outperformed equities from the developed markets. This Great Graphic, composed on Bloomberg, shows the MSCI Emerging Market equities (yellow line) and the MSCI World Index of developed equities (white line).
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FX Daily, July 15: Sterling and Yen Remain Key Drivers in FX
The US dollar is broadly mixed against the major currencies. The Swiss franc's 0.25% gain puts it at the top of the board, after sterling's earlier gains were largely unwound in late-morning turnover. The yen is the weakest major; extending its loss by 0.6%, to bring the weekly decline to more than 5%. The pre-referendum result high for the dollar was near JPY106.85. Today's high has been about JPY106.30. In emerging markets, we note that the...
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FX Daily, July 14: Will BOE Ease on May Day?
After a nearly three weeks of turmoil following the UK referendum, there is now a sense of order returning to UK politics. Two elements of the new government are particularly relevant. First, May demonstrates strategic prowess by putting those like Johnson and Davis, who campaigned for Brexit, to lead the negotiations with the EU, while putting Tories who favored remaining in the EU in the internal ministries.
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Great Graphic: If You Think Sterling has Bottomed, Where may it Go?
Many think sterling has bottomed. A number of technical factors point to potential toward $1.42. Fundamental considerations do not appear as supportive as technicals.
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BOE Surprises by Doing Nothing, but Tips August Action
BOE neither cut rates not announced a new asset purchase plan. Sterling rallied hard. However, the BOE indicated an August ease and I look for sterling to pare knee-jerk gains.
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