Category Archive: 4.) Marc to Market

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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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The Greenback is Softer Ahead of CPI but Key Chart Points Remain Intact

2023-08-10

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2023-08-10

Overview: The deluge of Treasury supply is nearly over for this week. On tap today are 4- and 8-week T-bills and $23 bln 30-year bonds to finish the quarterly refunding. The sales will come after the July CPI print that is expected to see the first year-over-year increase since last June. The market is going into the report with about a 15% chance of a Fed hike next month discounted. Meanwhile, September crude oil extended its recover from $80 seen...

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After Strong Demand for US Three-Year Notes, Treasury will Sell $38 bln 10-year Notes

2023-08-09

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2023-08-09

Overview: The first leg of the US refunding was well received, with the three-year note being scooped up by investors, driving the yield below it was trading in the when-issued market. Today, the Treasury sells $38 bln 10-year notes, whose auctions have been less than stellar recently. The US 10-year yield reached 4.20% last week and is now straddling 4%. Italian bonds are also firm as the Italian government clarifies the new tax on banks' windfall...

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Risk Appetites Squashed by Weak Chinese Imports/Exports and Moody’s Downgrade of 10 US Banks

2023-08-08

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2023-08-08

Overview: The combination of falling Chinese imports and exports, Moody's downgrade of ten US small and medium-sized banks is serving to squash risk appetites. Equities are weak, but bond markets are strong despite the surprise tax on Italian banks announced yesterday and the kick-off of the US $103 bln refunding today. Outside of Japan and Australia, Asia Pacific equity markets were lower led by a 1.8% drop in the Hang Seng and a nearly 2.2% loss...

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Dollar Comes Back Bid

2023-08-07

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2023-08-07

Overview: The US dollar is recovering today after it was sold following the jobs report before the weekend. It is enjoying a firmer bias against nearly all the G10 currencies. The dollar-bloc is faring best, while the Scandis are off close to 0.5%. Most emerging market currencies are also softer, with only a few Asian currencies edging higher today, including the South Korean won, Indian rupee, and Taiwanese dollar. With a stronger dollar and...

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Week Ahead: Is the Dollar’s Run since Mid-July Over?

2023-08-05

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2023-08-05

The US and China report July CPI figures in the coming days and they are likely moving in opposite directions. Headline US CPI is likely to rise for the first time since peaking in June 2022. China's CPI has been slowing and is likely to go negative on a year-over-year basis. It finished last year at 1.8% and in June was unchanged year-over-year. The divergence of policy is what is driving force of the exchange rate, and the    question is not...

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US Jobs Report and OPEC Statement Featured Ahead of the Weekend

2023-08-04

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2023-08-04

Overview: The capital markets are calmer today but the US (and Canadian) jobs data stand in the way of the weekend. While equity markets are firmer, the rise in yields continues with new highs for the week being recorded today. European benchmark yields are 2-3 bp higher and the US 10-year Treasury yield is approaching 4.20%. Most of the large market in the Asia Pacific region advanced, but South Korea and Taiwan where the superconductor...

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Markets Remain Unsettled, Bonds and Stocks Retreat, Dollar Gains Ahead of BOE

2023-08-03

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2023-08-03

Overview: The global capital markets remain unsettled. The combination of the BOJ adjustment of its monetary policy, Fitch's downgrade of the US to AA+, ahead of a flood of supply, and new measures by China have injected volatility into the summer markets. The US dollar has extended it gains today against the G10 currencies and most emerging market currencies. The yen has recovered a bit after the BOJ stepped in and bought JGBs for the second time...

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Fitch Roils Markets

2023-08-02

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2023-08-02

Overview: Late yesterday, on the eve of the quarterly refunding announcement, Fitch cut the US rating to AA+ from AAA, citing project fiscal deterioration over the next few years and "the erosion of governance". S&P also has the US as an AA+ credit. Ironically, many observers who have been critical of the US monetary and fiscal policies, like former Treasury Secretary Summers and El-Erian, were also critical of Fitch's decision. The...

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RBA Holds Fire, Greenback Rebounds

2023-08-01

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2023-08-01

Overview: The dollar has come back bid. It is rising against all the major currencies today. The Reserve Bank of Australia left rates steady and the poor Chinese Caixin PMI is weighing on the Australian dollar, which is off about 1.25% today. Sterling is the best G10 performer, off about 0.1%. Perhaps, the BOE's meeting on Thursday is helping to deflect some of the selling pressure. Emerging market currencies are also nearly all lower, led by the...

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BOJ Moves to Slow JGB Sell-Off, while Month-End is Making for Subdued Price Action in FX outside the Yen

2023-07-31

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2023-07-31

Overview:  The Bank of Japan took the market by surprise with its adjustment of the cap on the 10-year yield before the weekend, and then stepped in to buy the government bond as yields rose in reaction today. The move helped lift the dollar to JPY142.50. from where it had settled on Friday (~JPY141.15). The dollar is mostly softer, however, with only the yen and Swiss franc weaker. The Australian dollar is leading the other currencies higher ahead...

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August 2023 Monthly

2023-07-29

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2023-07-29

Prices pressures are abating, albeit gradually, while economic momentum is faltering. The data in the coming weeks will help shape expectations for rate decisions for September. As the market pushed back against the Federal Reserve's forward guidance that anticipated two hikes in the second half, the US dollar fell against the G10 currencies, but found support beginning around the middle of the July as the market was reluctant to return to pricing...

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