Category Archive: 4.) Marc to Market

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September 2023 Monthly

2023-09-02

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2023-09-02

There is a sense of new divergence. Most economists, including the staff at the Federal Reserve, no longer think the US is recession-bound. Unprecedented in modern times, inflation has fallen sharply, and unemployment has not risen, and the economy appears to be enjoying its third consecutive quarter, and the fourth in the past five, above what the Federal Reserve regards as the non-inflationary pace (1.8%). At the same time, and despite being...

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China’s Measures Begin to Find Traction, US Employment Report on Tap

2023-09-01

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2023-09-01

Overview: Beijing's seemingly steady stream of measures to support the economy and steady the yuan are beginning to produce the desired effect. The yuan is snapping a four-week decline and the CSI 300 halted a three-week drop. Some economists estimate that the bevy of measures may be worth as much as 1% for GDP. The dollar is narrowly mixed ahead of the US employment data, which is expected to see the pace of job growth slow to around 170k. Of...

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Position Squaring Ahead of US Data Helps the Dollar Recoup Some Recent Losses

2023-08-31

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2023-08-31

Overview: Position-squaring ahead of today's US personal consumption data and perhaps tomorrow's jobs report is giving the dollar a firmer profile against most G10 and emerging market currencies. The Scandis have been the hit hardest and are off 0.75%-0.85%. The euro and sterling about 0.35%-0.45% lower. The yen is the only G10 currency that is slightly firmer. The dollar-bloc is nursing small losses (0.10%-0.15%). Despite the firmer than expected...

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Market Awaits US Data and Leadership

2023-08-30

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2023-08-30

Overview:  The dollar staged a major technical reversal yesterday, in a dramatic reaction to a considerably weaker JOLTs report than expected, spurring a large drop in US interest rates. And this is despite press reports that the participation rate in the survey is half of what was three years ago. We suspect the price action said as much about market positioning as it did about the data. The path to the US jobs data on Friday goes through...

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Still No Follow-Through Dollar Buying After Last Week’s Surge

2023-08-29

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2023-08-29

Overview: The dollar was threatening to break higher at the end of last week, and the euro and sterling closed below key supports. However, so far this week, the greenback is consolidating and has not seen follow-through buying. The key data this week, US consumption and jobs, and the eurozone's CPI still lay ahead. The Antipodeans and Norwegian krone enjoy a firmer today. A 0.8% contraction in Sweden's Q2 GDP was not as deep as had been feared,...

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Dollar Consolidates as Market Considers Breakout and Rebuffs Beijing’s Latest Efforts

2023-08-28

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2023-08-28

Overview: Many market participants sense an inflection point is near. The dollar settled last week beyond key levels against several major currencies, bolstered by higher short-term US rates. The market is aware that the Bank of Japan could intervene in the foreign exchange market with the trading near its best levels of the year, and the 10-year JGB yield grinding higher. Beijing cut the tax on equity transactions, will restrict IPOs, and urged...

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Week Ahead: Slowing US Jobs and Softening EMU Inflation

2023-08-26

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2023-08-26

The Jackson Hole symposium marks the end of summer just as much as the autumn equinox next month. It has been a tough few months for bond markets as yields have soared. For the US economy, which has proven more resilient than many, including Fed officials thought, and a sharp increase in anticipated supply of Treasuries, the rise in yields may be understandable. The rise in Japanese government bond yields may also make sense given the rise in...

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Dollar Bid and Rates Firm Ahead of Powell

2023-08-25

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2023-08-25

Overview: The euro and sterling took out important chart levels near $1.08 and $1.26, respectively. They have steadied in the European morning but remain fragile ahead of Fed Chair Powell's speech at Jackson Hole. A couple of ECB officials sounded a bit hawkish and a less hawkish comment by ECB President Lagarde could renew the pressure on the euro. The market appears to be going into Powell's speech with a hawkish bias and the odds of a hike next...

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BRICS to Expand a Little, USD Steadies after Yesterday’s Retreat, Attention Turns to Jackson Hole

2023-08-24

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2023-08-24

Overview: Strong Nvidia's earnings after the US markets closed yesterday helped lift Asia Pacific markets today. All the large bourses were higher but India. Hong Kong, South Korea, and Taiwan indices rose more than 1%. Europe's Stoxx 600 is higher for the fourth consecutive session and US index futures are higher, led by the NASDAQ. European benchmark bond yields have extended yesterday's PMI-induced decline and are mostly 1-2 bp lower. The...

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Euro and Sterling Slump on Poor PMI

2023-08-23

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2023-08-23

Overview: Poor European flash PMI pushed on open door, giving the market a new reason to do what it was doing and that buying the dollar. The euro has approached important support around $1.08 and sterling is approaching the lower end of its two-cent trading range (~$1.26-$1.28). The greenback is consolidating against the yen and holding above JPY145. The Chinese yuan is little changed while the Mexican peso is extending yesterday's gains. Despite...

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Dollar Eases, Stocks and Bonds Advance

2023-08-22

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2023-08-22

Overview: For the first time in more than a week, North American dealers will take to their posts with the dollar softer against all the G10 and most of the emerging market currencies. Despite stepped up efforts by Chinese officials and a firmer yen, the yuan remains on the defensive and is one of the handful of emerging market currencies softer on the day. Stocks and bonds are mostly higher too. The yuan might not be benefitting from a softer...

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China Surprises While the Dollar Begins Week Softer

2023-08-21

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2023-08-21

Overview:  The new week, which features the BRICS meeting and the Jackson Hold symposium is off to a quiet start. The failure of Chinese banks to pass through last week's 15 bp cut fully into the lending prime rates was a major disappointment and it is not yet clear the logic. While the yuan and yen are softer, as are more local Asian currencies, while most of the G10 currencies are posting small gains against the greenback. Gold is trading little...

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Week Ahead: Yen’s Recovery Ahead of the Weekend may Give the Yuan a Reprieve or Be Ready for BRICS to Disappoint High Hopes for a Dollar Alternative

2023-08-19

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2023-08-19

There seem to be three large forces shaping the investment climate. First is the resilience of the US economy, with four consecutive quarters of above trend growth.  It appears that the US economy may be expanding faster than the 2.4% annualized pace seen in Q2.  Many of the largest naysayers have capitulated. Second, the monetary tightening cycle is widely seen as almost over, and many are beginning to fine tune forecasts for the first cut by the...

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Dollar Bulls Still in Control

2023-08-18

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2023-08-18

Overview: What may have been hoped to be a quiet August has turned into a feeding frenzy for dollar bulls as the contrasting economic performance has spurred persistent buying of the greenback. Even shallow dips have been bought. Today, it is mostly trading inside yesterday's ranges against the G10 currencies. The PBOC set the dollar's reference rate at what appears to be a record gap below the Bloomberg average survey, and the dollar was scooped...

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Aussie Recovers from Poor Jobs Data, but Nokkie is Weaker Despite Rate Hike

2023-08-17

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2023-08-17

Overview: Encouraged by the continued stream of US data, which suggests that the world's largest economy is accelerating, the US 10-year yield is approaching last year's 4.33% high, and the dollar's run has lifted it to new highs for the year against the Japanese yen, Chinese yuan, and the Australian and New Zealand dollars. Even a rate hike by Norway did not stop the dollar from rising against the krone. The greenback is firmer against most of the...

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Dollar’s Rally Pauses Near Key Levels

2023-08-16

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2023-08-16

Overview: The US dollar is trading with a slightly heavier tone in the European morning. It has stalled in front of JPY145.90, where the BOJ intervened last September and ahead of CNY7.30, which some observers think Chinese officials are defending. We are less convinced that either central bank has drawn a line at a particular level and suspect it is too early to be confident that the greenback has peaked against either. On the back of yesterday's...

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Surprise-Packed Tuesday: China Cut Rates, Japan’s Q2 GDP Rises Twice as Fast as Expected, and UK Wages Accelerate

2023-08-15

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2023-08-15

Overview: Today's highlights include a surprise rate cut from China after another series of disappointing data and much stronger than expected Japanese Q2 GDP (6% annualized pace). The UK reported an unexpected sharp jump in average weekly earnings, which were sufficient to get renew speculation of a 50 bp hike by the Bank of England next month. The US dollar is mixed. The Swedish krona and dollar-bloc currencies are struggling, while the Swiss...

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Greenback Remains Firm, with Yen and Aussie Falling to New 2023 Lows

2023-08-14

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2023-08-14

Overview: The dollar and US rates remain firm. The greenback rose to new highs for the year against the Japanese yen and Australian dollar before steadying. Outside of the Swedish krona, which is off nearly 0.5%, the G10 currencies are nursing small losses late in the European morning, mostly less than 0.1%. Most emerging market currencies are also lower. The Chinese yuan gapped lower for the second consecutive session and is also approaching this...

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Week Ahead: Anniversary of the End of Bretton Woods Sees Resilient Dollar and Firmer US Rates: Can it Persist?

2023-08-12

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2023-08-12

Tuesday marks the 52nd anniversary of the end of Bretton Woods currency arrangement, which pegged the dollar to gold and other currencies to the dollar. Some economists have tried framing their views in terms of Bretton Woods II and there have even been proponents of Bretton Woods III, but these are informal arrangements at best, no reciprocity, or mutual obligations. The point of the matter is that the end of Bretton Woods ushered in the modern...

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Dollar Proves Resilient and Even Strong UK GDP Figures Hardly Dents It

2023-08-11

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2023-08-11

Overview: The dollar's resilience after initially selling off in response to the as-expected CPI was impressive. A quieter tone is dominating today and most of the G10 currencies are +/- 0.15%. While the dollar is consolidating, the underlying tone is still firm. For the week, it has risen against all the major currencies and the Dollar Index is up nearly 0.6% this week, its fourth consecutive weekly gain. The greenback is rising today against most...

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