Category Archive: 4.) Marc to Market

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On Our Radar Screen for the Week Ahead

2023-01-14

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2023-01-14

The week ahead is chock full of data, including Japan, the UK, and Australia's CPI. The UK and Australia report on the labor market. The US, UK, and Canada also report retail sales. The early Fed surveys from New York and Philadelphia for January will be released.

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Dollar Index Gives Back Half of 21-Month Gains in 3 1/2 Months

2023-01-13

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2023-01-13

Overview: The continued easing of US price pressures has strengthened the market's conviction that the Federal Reserve will further slow the pace of rate hikes and that the terminal rate will be near 5.0%. The decline in US rates has removed a key support for the US dollar, which has fallen against all the G10 currencies this week. The Dollar Index has now retraced half of what it gained since bottoming on January 6, 2021. Meanwhile, there are...

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Is it Too Easy to Think the Market Repeats its Reaction to a Soft US CPI?

2023-01-12

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2023-01-12

The market expects a soft US CPI print today, which has recently been associated with risk-on moves. The US 10-year yield is holding slightly above 3.50%, the lowest end of the range since the middle of last month. The two-year yield is a little above 4.20%, also the lower end of its recent range. Most observers see the Federal Reserve slowing the pace of its hikes to a quarter point on February 1.

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Greenback Consolidates Near Recent Lows Ahead of Tomorrow’s US CPI

2023-01-11

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2023-01-11

Overview: Fed Chair Powell did not push against the easing of US financial conditions when he ostensibly had an opportunity yesterday. This coupled with expectations of another decline in the US CPI, which will be reported tomorrow, has kept the greenback mostly consolidating the losses seen last Friday and Monday.

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Consolidative Tone in FX

2023-01-10

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2023-01-10

Overview: After sharp losses yesterday, the US dollar has stabilized today arguably ahead of Fed Chair Powell's speech at the Riksbank symposium. Yesterday's Fed speakers stuck to the hawkish rhetoric, and this seemed to help reverse the equity market gains, though the greenback remained soft.

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Greenback’s Sell-off may Stall Ahead of Powell Tomorrow

2023-01-09

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2023-01-09

Overview: Don't fight the Fed went the manta as the market took the US two-year yield back up to 4.50% in the aftermath of the FOMC minutes last week, the highest in over a month. The minutes warned of a premature easing of financial conditions. And then bam, softer than expected hourly earnings and a weak service PMI and bonds and stocks rallied, and the dollar was sold. This is a key part of the backdrop for this week, for which several Fed...

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Falling US Yields Stymie the Dollar’s Recovery

2023-01-08

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2023-01-08

We have been torn between our conviction that the dollar's cyclical rally ended last September-October, and the near-term momentum indicators that warned that the dollar's pullback was overdone. Aside from the Japanese yen, a consolidative phase dominated December, but the momentum indicators still seemed to suggest upside potential dollar. 

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US CPI Featured and Why the Fed may Still Hike by 50 bp

2023-01-07

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2023-01-07

The most important economic report in the week ahead is the US December Consumer Price Index on January 12. To be sure, the Federal Reserve targets an alternative measure, the deflator of personal consumption expenditures. However, in this cycle, when households, businesses, investors, and policymakers are particularly sensitive to inflation, CPI, which is reported a couple of weeks before the PCE deflator, has stolen the thunder.

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USD Stretched Ahead of Employment Report, while Yuan Jumps on Hopes of New Property Initiatives

2023-01-06

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2023-01-06

Overview: The US dollar extended yesterday's gains as the market adjusts positions ahead of the jobs data. Yesterday and today's price action looks to have strengthened the near-term technical outlook for the greenback. However, the intraday momentum indicators are stretched. This warns of the risk of a counter-intuitive move after the data, barring a significant surprise. Meanwhile, one of the Fed's leading hawkish voices, St. Louis Fed President...

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The Market Appears to Shrug Off the Fed’s Warning

2023-01-05

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2023-01-05

Overview: The US dollar is consolidating in a mixed fashion today. The FOMC minutes drew much attention but failed, at least initially, to spur a significant shift in expectations. The pricing in the Fed funds futures strip is still consistent with a cut later this year, which the minutes were clear, no officials anticipate. Today's US ADP jobs estimate, and November trade balance are being overshadowed by tomorrow's nonfarm payroll figures. The...

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Yesterday’s Gains Unwound may Make the Greenback a Better Buy Ahead of FOMC Minutes

2023-01-04

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2023-01-04

Overview:  Yesterday's greenback gains have been mostly reversed today. New efforts by China in its property market and anticipation of more stimulus helped rekindle the animal spirits today. Asia and Europe shrugged off yesterday's losses on Wall Street and the rally in bonds continued. The 8-12 bp decline in European benchmark 10-year yields comes even though the final composite PMI was better than expected fanning hopes of a short and shallow...

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The Dollar Jumps

2023-01-03

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2023-01-03

Overview: Market participants have returned from the New Year celebrations apparently with robust risk appetites. Equities and bonds are rallying, and the dollar has surged higher. The markets seem to be looking past the surge in China's Covid cases and anticipates a recovery, helping Chinese equities lead Asia Pacific bourses higher, where Japanese markets are still on holiday.

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January 2023

2022-12-29

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2022-12-29

The US dollar's bull market appears to have come to a climactic end late in Q3 22 and early Q4. In the last three months of 2022, the G10 currencies, except the Canadian dollar, rose by more than 5% against the greenback. In addition, six of the G10 currencies appreciated more than 7.5%. Such significant moves are often followed by consolidation and corrections. These countertrend moves can offer new opportunities to adjust currency exposures.Three...

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Japan Surprises

2022-12-20

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2022-12-20

The Bank of Japan surprised everyone may lifting the 10-year yield curve cap to 0.50% from 0.25%.The BOJ also said it would increase its bond purchases to JPY9 trillion (~$68 bln) a month compared to the current JPY7.3 trillion.   BOJ Kuroda, whose term ends next April, insisted that the easy monetary policy stance will continue.   The surprise decision sent ripples across the capital markets.  Japanese stocks slumped, with the Nikkei falling...

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Happy Holidays

2022-12-16

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2022-12-16

There will be no daily commentary over the next couple of weeks.  The next post will be the January monthly outlook on December 29.  Here is to a happy and healthy New Year.  Good luck to us all.

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European Rates Continue to Surge, Sending Stocks Spiraling Lower

2022-12-16

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2022-12-16

Overview: Seven of the G10 central banks pumped the brakes between last week and this week as they purposely seek to push demand back into line with supply. And there are more signs that they are succeeding in weakening growth impulses. The dramatic surge in European bond yields continues today with 10-year rates mostly rising another 13-15 bp.

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The Greenback Recovers After the Initial Post-Fed Wobble

2022-12-15

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2022-12-15

Overview: The US dollar has come back bid after losing ground against most currencies as the markets reacted to the FOMC decision and press conference. The Antipodeans and Scandis have been tagged the hardest, illustrating the risk-off mood, and arguably the weakening growth prospects. Countries that peg their currencies to the dollar have hiked rates, as has the Philippines and Taiwan. The Swiss National Bank and Norway have also lifted policy...

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What Can the Fed tell the Market it Does Not Already Know?

2022-12-14

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2022-12-14

Overview: The softer than expected US CPI drove the dollar and interest rates lower, while igniting strong advances in equities, risk assets, commodities, and gold. Calmer market conditions are prevailing today, and we suspect that in the run-up to the FOMC meeting, a broadly consolidative tone will emerge. The dollar is mostly softer, but within yesterday’s ranges. Only the New Zealand and Canadian dollars among the G10 currencies are softer....

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US CPI ahead of FOMC Outcome Tomorrow

2022-12-13

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2022-12-13

Overview: The dollar softer against the G10 currencies ahead of today’s CPI report and the FOMC meeting the concludes tomorrow. Emerging market currencies are most mixed. The Hungarian forint leads the complex with around a 1% gain on news of a preliminary deal struck with the EU. The South African rand is the worst performer, off around 0.8%, as impeachment proceedings against Ramaphosa proceed. Global equities are mostly higher today after the...

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Markets Await Central Banks and Data

2022-12-12

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2022-12-12

Overview: There are two themes today. First, there has been a modest bout of profit-taking on Chinese stocks (and yuan) after last week’s surge. Second, the ahead of the five G10 central bank meeting this week a series of market-sensitive economic reports, a consolidative tone is seen in most of the capital markets. Most of the large bourses in the Asia Pacific region fell, led by a 2.2% loss in Hong Kong and 3% loss in its index of mainland shares.

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