Category Archive: 4.) Marc to Market

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US Dollar Soars and US Rates Jump

2024-11-06

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2024-11-06

Overview: Shortly after the North American markets closed, before any results were known, the market jumped back into the "Trump trade," which it had pared on Tuesday. The dollar and US interest rates soared. The euro is the hardest hit among the G10 currencies today, off about 1.6% and the Canadian dollar, the best performer … Continue...

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Nervous Calm Hangs over the Markets

2024-11-05

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2024-11-05

Overview: A nervous calm hangs over the markets as the US goes to the polls. The proximity of the presidential contest warns that the results may not been known as soon as people hope. Indeed, many fear the voting simply begins the next phase of the contest, with premature declarations of victory and disputes over votes. The dollar is in mostly narrow ranges today, but the Antipodeans and Scandis are the strongest, and the Reserve Bank of Australia...

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US Polls Spur Position Adjusting Ahead of Tomorrow’s Election

2024-11-04

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2024-11-04

Overview: Weekend polls in the US made it seem that the Trump victory, which many large pools of capital, had discounted, was not so inevitable after all. The most dramatic market response was taking US yields and the dollar lower. The US 10-year yield is off about nine basis points to straddle 4.30% and the two-year yield down four basis points to around 4.16%. The greenback is also against all the G10 currencies. Most emerging market currencies...

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November 2024 Monthly

2024-11-02

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2024-11-02

We have all experienced how capital markets exaggerate. A few months ago, the focus was on the carry-trade, then the unwind. More recently, it was the euphoria around the numerous measures Beijing announced to support the property and stock markets and the attempt to reduce the risk of the local government debt. And now, as the US election approaches, it has become an important market driver. If the markets were fully rational, we might explain...

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US Job Report may Offer Little Relief ahead of Next Week’s US Election and Meetings by Half of the G10 Central Banks

2024-11-01

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2024-11-01

Overview: The first of what promises to be two tumultuous weeks is winding down. The US jobs data is the last big event. It is widely recognized that it will be skewed to the downside because of hurricanes and some mostly temporary factors. Anticipating the market’s reaction is also complicated by the weekend, and reports that Iran may strike back at Israel (through bases in Iraq?), and next Tuesday's US election, and five G10 central bank meetings...

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Ueda Lifts Yen, Stocks Slump, Gilts Under Pressure Post-Budget

2024-10-31

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2024-10-31

Overview: The main move in the foreign exchange market today is the recovery of the yen following what was seen as hawkish comments by BOJ Governor Ueda. Otherwise, the tone is one of consolidation. The equity market sell-off today may be weighing on the Scandis and dollar-bloc currencies amid risk-off impulses. Emerging market currencies are mixed. The Mexican peso, which fell to a new low for the year yesterday, is stabilizing today and is among...

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Eurozone Growth Surprises, Lifts Euro, while UK Budget is Awaited

2024-10-30

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2024-10-30

Overview:  The US 10-year yield is off around a dozen basis points off yesterday's high and European growth in Q3 was better than expected. This appears to have encouraged some dollar liquidation today. The greenback is softer against the G10 currencies, but the Canadian dollar and sterling. The much-awaited UK Autumn budget will be announced shortly. Sterling is consolidating around $1.30. Most emerging market currencies also are enjoying a firmer...

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Consolidative Tone in FX Ahead of Key Events and Data

2024-10-29

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2024-10-29

Overview: A consolidative tone is emerging in the foreign exchange market as the week's key events begin tomorrow:  UK budget, eurozone and US Q3 GDP, and the US ADP private sector jobs estimate, and quarterly refunding. Outside of the Norwegian krone, which is up nearly 0.5%, the other G10 currencies are largely +/- 0.1%. The yen, Swiss franc, and antipodeans are trading with a slightly heavier bias. Among emerging market currencies, most from the...

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Japan’s LDP Loses Majority, Sending Yen Lower, and Oil Gaps Lower on Middle East Developments

2024-10-28

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2024-10-28

Overview: The next couple of weeks in the capital markets are likely to be tumultuous, and the loss of the LDP majority in Japan get it started. The yen gapped lower amid the immediate uncertainty. The yen is off about 0.5% toward the middle of today's range. Leaving aside the Scandis, where are mixed, the other G10 currencies are little changed, +/- 0.15%. The euro has recovered above $1.08, where options for 2.3 bln euros expire tomorrow....

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Week Ahead: Buckle Up–Turbulence Coming

2024-10-26

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2024-10-26

The US dollar extended its dramatic recovery against the major currencies for the fourth consecutive week. The dollar's rally seems to stand on two-legs. The first shift in the expected trajectory of Fed policy, which has been partly encouraged by relatively firm economic data, both surveys and real sector reports. The derivatives market has from discounting 75 bp of cuts before the end of the year to not be quite sure that 50 bp will be delivered....

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FX Becalmed Ahead of the Weekend and Next Week’s Big Events

2024-10-25

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2024-10-25

Overview: The dollar is trading quietly, with a slightly firmer today. There has been little follow-through selling after yesterday's setback. The Canadian dollar and sterling are faring best. The yen is a little softer after Tokyo's CPI came in lower as expected due to the government's energy subsidy. The election for the lower house of the Diet is held Sunday. Emerging market currencies are also mostly softer. The JP Morgan Emerging Market...

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Turn Around Tuesday Comes Late

2024-10-24

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2024-10-24

Overview:  It is ironic that a few months ago, many wanted to sell the dollar because the Republican president and vice president candidates said they wanted a weaker dollar. With the election drawing near and the race very tight, there has been a surge in the betting markets of a Trump-Vance victory, and this has corresponded with the dollar's dramatic rise. US rates held on the lion's share of their gains despite the sharpest loss in the S&P...

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Continued Backing Up of US Rates Extend the Greenback’s Gains

2024-10-23

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2024-10-23

Overview: The persistent rise in US rates continues to help fuel dollar gains. The euro has been sold through $1.08 and the greenback has jumped over 1% against the yen to JPY152.75. It finished last week closer to JPY149.55. So far, Japanese officials have been fairly quiet, but this seems likely to change. The US two-year premium over Germany has widened by around 65 bp since late September to return to levels that prevailed in June. The...

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Greenback Consolidates

2024-10-22

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2024-10-22

Overview:  US interest rates remain firm and the dollar is mostly consolidating against the G10 currencies, in a muted "Turn Around Tuesday." The greenback is straddling the JPY151 area, its best level since the end of July. Despite bearish price action yesterday, the euro, sterling, and Australian dollar have seen limited follow-through selling and modest …

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The Dollar and Gold Firm

2024-10-21

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2024-10-21

Overview: The US dollar is firm to start the new week. The Japanese yen and Australian dollar are the heaviest with in the G10 (~0.30%). The euro and sterling are trading heavier but inside the pre-weekend range. The market anticipates the Bank of Canada to deliver a 50 bp rate cut in the middle of the week, and the Canadian dollar is threatening to extend its losses for the fourth consecutive week. China's prime lending rates were cut by 25 bp,...

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Week Ahead: Is the Closeness of the US Election a Source of Dollar Demand?

2024-10-19

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2024-10-19

The dollar rose against all the G10 currencies last week, but it was not because of higher US rates. In fact, the 10-year US Treasury yield fell for the first time in five weeks. The two-year yield did not rise for the first time in three weeks. Rather than an increase in US rates, several other countries' rates fell. The result was that the US 2-year premium over Germany rose for the fourth consecutive week and is now the most since June. The US...

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Dollar Firm, China Briefing Light on Details, and Its Data Remain Poor

2024-10-14

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2024-10-14

Business travel will prevent the updating of the blog in the coming days. It resumes October 19 with the Week Ahead. The lack of details from China's fiscal briefing, the soft CPI (and deeper PPI deflation), and a smaller than expected trade surplus did not prevent Chinese equities from advancing (CSI 300 +1.9%).

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Week Ahead: Is the US Rate Adjustment Nearly Over? Be On Guard for Reversal Patterns

2024-10-12

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2024-10-12

The combination of the stronger-than-expected US September jobs report and the slightly firmer inflation readings lifted US interest rates and the dollar. Several Fed officials spoke, and it did not appear that the employment or price reports changed views as much as it had impacted the capital markets.

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Tomorrow’s China Briefing Did Not Prevent the Continued Slide in Chinese Stocks Today

2024-10-11

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2024-10-11

Overview: The combination of the firmer than expected US CPI and larger than expected rise in initial and continuing jobless claims saw short-term US rates fall, and the odds of a quarter-point cut by the Fed rose from about 83% to about 93%. The Fed funds futures market boosted the odds of another quarter-point cut in December (~90% vs.78%). The dollar initially weakened but recovered, though the key levels held, such as $1.09 in the euro, $1.30...

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Soft US Headline CPI is Unlikely to Be Sufficient to Reanimate Expectations of another Large Fed Cut

2024-10-10

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2024-10-10

Overview: The US dollar is mostly softer ahead of the September CPI. The euro and Canadian dollar have recorded new lows for the move. The greenback extended its gains against the yen to JPY149.55 but has fallen to new session lows in the European morning near JPY148.85. Given the pushback against Fed Chair Powell's 50 bp cut last month revealed in the FOMC minutes, it will take more than a soft headline CPI today to renew speculation of another...

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