Category Archive: 4.) Marc to Market

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Markets Calm after Dramatic Swings on Powell’s Comments

2023-02-08

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2023-02-08

The US dollar is mostly trading with a downside bias today against the G10 and most emerging market currencies. It had begun the week extending the gains spurred by the dramatic jump in nonfarm payrolls and the strong ISM services survey. Market expectations for the trajectory of Fed policy in the first part of this year converged with the Fed's December dot plot. The market now leans toward two more quarter-point hikes this year.

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No Turn Around, but Consolidation Featured

2023-02-07

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2023-02-07

Overview:  After large moves yesterday, the capital markets ae quieter today. Stocks are mostly firmer, and the 10-year US yield is a little softer near 3.62%. Strong nominal wage increases in Japan and a hawkish hike by the Reserve Bank of Australia helped their respectively currencies recover, though remain within yesterday's ranges. The euro briefly traded below $1.07, and sterling has been sold through $1.20. That said, a consolidative tone is...

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Greenback Extends Recovery

2023-02-06

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2023-02-06

Overview: The honeymoon for risk assets that began the year ended with a bang at the end of last week with the monster US jobs report and the rebound in the service ISM. Disappointing news from several large US tech companies provided extra encouragement. The yen's weakness helped Japanese stocks today, but the other larger bourses in the Asia Pacific area were sold, with losses in Hong Kong, the CSI 300, South Korea, and Taiwan off more than 1%....

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February 2023

2023-02-04

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2023-02-04

The new year began amid optimism among investors. Equities and bonds rallied in January, clawing back some losses from last year. The dollar traded heavily, falling against most G10 and emerging market currencies. However, after the February 1 FOMC meeting, the dollar's sell-off exhausted the near-term selling pressure. An upside correction may be seen in the first part of February. We see this as a countertrend move and expect dollar weakness to...

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The Dollar Pares Yesterday’s Gains but Near-term Change in Sentiment may be at Hand

2023-02-03

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2023-02-03

Overview: The dollar remained firm yesterday, even after the ECB's hawkish stance, reaffirming its intention to hike rates by another 50 bp next month. We had expected the greenback to have been sold in North America yesterday. That this did not materialize warns that despite its pullback in Asia and especially Europe today, that near-term sentiment may be changing with the Fed and ECB meetings over and die cast for next month, where the Fed is...

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North America likely will Sell USD Bounce Seen in Europe

2023-02-02

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2023-02-02

Overview: The failure of the Federal Reserve to push harder against the market's dovish views and the easing of financial conditions encouraged a risk-on trade that saw the dollar and yields slump and equities rally. There has been limited follow-through dollar selling today, and a small recovery ahead of the Bank of England and European Central Bank meetings.

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Will What the Fed Says be More Important than What it Does?

2023-02-01

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2023-02-01

Overview:  The focus is squarely on the Federal Reserve today. There is nearly universal agreement that it will lift the target by 25 bp. The market is inclined to see the shift as a sign that the Fed is nearing the end of its tightening cycle, and sees, at most, one more quarter-point hike. Despite the Fed's warnings, including in the December FOMC minutes, about the premature easing of financial conditions, the market has done precisely that.

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Position Adjustments at Month-End and Ahead of FOMC Outcome Lifts the Greeenback

2023-01-31

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2023-01-31

Overview: A combination of month-end adjustments and positioning ahead of the outcome of tomorrow's FOMC meeting has taken the shine off equities and has helped lift the dollar. On the heels of yesterday's sharp decline on Wall Street, several large markets in the Asia Pacific region, including China's CSI 300, the Hang Seng, and both South Korea's Kospi and Taiwan's Taiex fell by more than 1%. Although the eurozone eked out a small expansion in Q4...

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Anti-Climactic Return of China

2023-01-30

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2023-01-30

Overview: The re-opening of China's mainland market amid reports of strong activity during the holiday, was relatively subdued. The CSI 300 rose less than 0.5% and the Shanghai Composite eked out less than a 0.2% gain. The 0.5% gain in the yuan was largely in line with the performance of the offshore yuan. Indeed, it seems like a bit like "buy the rumor sell the fact" type of activity as Hong Kong's Hang Seng tumbled 2.75%, to give back...

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Week Ahead Alchemy: Can Powell Turn a Quarter-Point Move into a Hawkish Hike?

2023-01-28

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2023-01-28

The new year is still young, but the week ahead may be one of the most important weeks of the year. The divergence that the market has been anticipating will materialize. The Federal Reserve will most likely hike by 25 bp on Wednesday, followed by half-point moves by the European Central Bank and the Bank of England the following day. On Friday, February 3, the US will report its January employment situation. It could be the slowest job creation...

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Bannockburn World Currency Index Recoups 50% of Loss since June 2021 High, with Golden Cross

2023-01-27

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2023-01-27

The Bannockburn’s World Currency Index (BWCI) is a GDP-weighted currency basket representing the currencies of the top 12 economies, with the eurozone counted as one. The US is the world’s largest economy and the dollar’s share of the index is almost 31%. China is the second-largest economy and has a nearly 22% weight. The euro is next with a 19% weight, followed by Japan with about a 7.5% weight. After that, the weights drop off to less than 5%...

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Subdued Ending to a Quiet Week, Ahead of Next Week’s Fireworks

2023-01-27

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2023-01-27

Overview: Leaving aside the Australian dollar, which is benefiting from the optimism over China's re-opening and a reassessment of the trajectory of monetary policy after a stronger than expected inflation report, the other G10 currencies traded quietly this week and are +/- less than 0.5%. The risk-on honeymoon to start the year remains intact. The MSCI Asia Pacific Index has risen every day this week and index of mainland shares that trade in...

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Euro Closed above $1.09 but Follow-Through Buying Limited

2023-01-26

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2023-01-26

Overview: After some intraday penetration, the euro finally settled above $1.09 yesterday. However, follow-through buying has been limited and technical and option-related resistance is seen in the $1.0940-50 area. The dollar is more broadly mixed today, with the dollar-bloc and Norwegian krone leading the advancers. The euro, yen, and sterling are nursing small losses near midday in Europe. The recovery of US equity indices yesterday after gap...

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Bank of Canada may say Pause, but the Market Hears Finished

2023-01-25

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2023-01-25

Overview: Amid sharp losses in the US equity futures, the US dollar is mostly firmer against the G10 currencies. The notable exception is the Australian dollar, where high-than-expected inflation boosts the risk of a more aggressive central bank.

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No Follow-Through Euro Buying while S&P Holds Yesterday’s Breakout

2023-01-24

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2023-01-24

Overview:  A quiet consolidative session has been recorded so far today as North American leadership is awaited. The preliminary PMI readings are mixed. Japan and the eurozone look somewhat better, but Australia and the UK disappointed.  The dollar is trading with a mostly firmer bias, but largely confined to yesterday's ranges.  The markets seem to be looked ahead toward next week's Fed, ECB, and BOE meetings, and the return of China from this...

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Euro Pokes Above $1.09. Will it be Sustained?

2023-01-23

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2023-01-23

Overview: The Lunar New Year holiday has shut many centers in Asia until the middle of the week, though China's mainland is on holiday all week. The signaling of a downshift in the pace of Fed tightening by some notable hawks helped lift risk appetites ahead of the weekend and saw the S&P 500 snap a four-day decline.

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Are We Still on the New Year Honeymoon? A Look at the Week Ahead

2023-01-21

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2023-01-21

There are several macro highlights in the week ahead, during which Chinese markets are closed for the Lunar New Year celebration. The preliminary January purchasing managers surveys pose headline risk. However, the survey data, for example, had the US composite below the 50 boom/bust level every month in H2 22, which likely overstates the case, as the first look at Q4 22 US GDP will probably show. While some improvement is expected, composite PMI...

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Dismal UK Retail Sales Weigh on Sterling, While the Yen Softens

2023-01-20

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2023-01-20

Overview: The US dollar is mostly softer today against the G10 currencies, with the notable exception, yen, Swiss franc, and sterling. The risk-on mood is seen in the foreign exchange market with the Antipodean and Scandi currencies leading the move against the greenback. The yen has fallen by about 1.3% this week, leading losers, while sterling's 1.1% gain puts it at the top. Despite the poor showing of US equities yesterday, risk appetites...

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Poor US Data Cast Doubts on New Found Hopes of a Soft-Landing

2023-01-19

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2023-01-19

Overview:  Yesterday's string of dismal US economic data delivered a material blow to those still thinking that a soft-landing was possible. Retail sales by the most in the a year. Manufacturing output fell by nearly 2.5% in the last two months of 2022. Bad economic news weighed on US stocks. The honeymoon of New Year may have ended yesterday. The US 10-year yield fell below 3.40% for the first time since the middle of last September. The Atlanta...

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The BOJ Surprises by Standing Pat

2023-01-18

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2023-01-18

Overview: The BOJ defied speculation and stuck to its current policy, which saw the yen sell-off sharply. The dollar rallied about 3.4 yen before falling back. The greenback is broadly lower against the other G10 currencies. However, for the fifth consecutive session, the euro has stalled around $1.0870. While UK headline inflation softened, mostly due to fuel, core prices were unchanged, and this may have helped sterling extend its recent gains to...

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