Category Archive: 4.) Marc to Market

CPI Shocker Lifted the Greenback, which now needs to Take a Breath

The jump in US headline CPI above 6% crossed some Rubicon and injected dynamic into the process.  The dollar rallied, and new highs for the year were recorded against the euro and sterling.

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US Retail Sales and Industrial Output to Accelerate; China not so Much

At the halfway point of Q4, the markets' focus is on three things:  inflation, growth, and central banks' response. With US and Chinese October inflation readings behind us, the focus shifts to the real economy's performance, the world's two largest economies reporting retail sales and industrial production figures.   Helped by stronger auto sales, the first increase in six months, US retail sales likely turned in another solid showing of around...

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Euro and Sterling Record New Lows for the Year

Overview: The capital markets remain unsettled.  The US CPI with a 6%-handle has lifted bond market volatility, disrupted rallies in stocks, and extended the dollar's rally.   Small gains in the US S&P 500 and NASDAQ yesterday and a better news stream from China helped lift Asia Pacific equities today.  Benchmarks in Japan, South Korea, and India rose more than 1%.  Europe's Stoxx 600 is struggling as energy, health care, and utilities are...

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Half a Dozen Things You Should Know about FX

1.  The market is still digesting the implications of Wednesday's CPI shock.  The dollar has strengthened, yields have risen, the stock market wobbled after a long advancing streak, and in any event, stabilized in light trading during the US and Canadian holidays. However, given the low year-ago reading, there is a significant risk that inflation (including the core rate) will accelerate over the next few months. As a result, the Federal Reserve...

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China’s CPI Accelerated to 1.5%, US CPI to Approach 6%

Overview: As bond yields slumped yesterday, stocks snapped their advancing streak.  The Stoxx 600 fell for the first time in nine sessions yesterday and is lower today.  The S&P 500 ended a nine-session advance, and the NASDAQ snapped a 12-session rally.  Futures on the indices point to a lower open.  Bonds are paring yesterday's gain, which saw the US 10-year yield fall below its 200-day moving average (~1.45%) and may explain the soft auction...

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FX Daily, November 9: Falling Yields Give the Yen a Boost

Overview: Reports that the Fed's Brainard was interviewed for the Chair helped soften yields a bit, not that they needed extra pressure, on ideas she is more dovish than Powell.  In turn, the lower yields saw the yen rise to its best level in nearly a month and led the major currencies higher against the dollar. 

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Markets Await Fresh Developments

Overview: Last week's bond market rally has stalled.  Benchmark 10-year yields are up 1-3 bp in Europe, and the three bp increase in the US puts the yield slightly below 1.50%.  Equities were mixed in the Asia Pacific region. 

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Profit-Taking on Dollar Longs after Better than Expected Jobs Report Sets Stage Until CPI

The US dollar turned in a solid week's performance, rising against most currencies and recording a marginal new high for the year against the euro.  Sterling and the Australian dollar competed for the worst performer.  Both central banks pushed against market expectations for aggressive near-term tightening. The central banks triggered a short squeeze in the bond market, where 10-year benchmark yields from 10 bp in the US to 34 bp in Italy.  UK...

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US and China’s October Inflation Featured in the Week Ahead

The cycle of the major central bank meetings has passed.  The Anglo-American central banks and Norway are ahead among the high-income countries in the adjustment of monetary policy. Meanwhile, the pandemic continues to scar, and flare-ups are extending the economic and social disruption in some large countries, including China and Russia.  Parts of Europe are experiencing another wave, including Ireland, the UK, and Germany. From the RBA and ECB to...

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Profit-Taking on Dollar Longs after Better than Expected Jobs Report Sets Stage Until CPI

The US dollar turned in a solid week's performance, rising against most currencies and recording a marginal new high for the year against the euro.  Sterling and the Australian dollar competed for the worst performer. 

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Isn’t the Labor Shortage Transitory?

Overview:  The major central banks have successfully pushed back against the aggressive tightening the market had discounted.  The Bank of England's decision not to raise rates after key officials seemed to suggest one was imminent. On the heels of what we argued was a dovish tapering announcement by the Fed, it spurred a dramatic decline in short and long-term interest rates. The drop in UK rates--21 bp in the 2-year and nearly 14 bp in the...

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And the Dollar Bounces Back, While BOE is in Focus

Overview:  The Federal Reserve announced tapering and, like the Reserve Bank of Australia earlier in the week, did not validate expectations for an aggressive rate hike.  Now the focus is on the Bank of England, where several officials seemed to goad the market into lifting short-term rates. The S&P 500 and NASDAQ rallied to new record highs yesterday and helped raise global shares today.  Among the large markets in the Asia Pacific region,...

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What Might it Take for the Fed to Deliver a Hawkish Tapering Announcement?

Overview: With the FOMC's decision several hours away, the dollar is trading lower against nearly all the major currencies.  The Antipodeans and Norwegian krone are leading.  The euro, yen, and sterling are posting minor gains (less than 0.1%).  Most of the freely liquid and accessible emerging market currencies are also firmer.  The Turkish lira is a notable exception.  The decline in the core inflation and a smaller than expected rise in the...

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RBA Jettisons Yield Curve Control but Continues to Resist Market Pressure

Overview: The third record close of the S&P 500 failed to lift Asia Pacific and European shares today.  In Asia, the large bourses fell, except South Korea, which rallied a little more than 1%.  Europe's Stoxx 600 is threatening to snap a three-day advance, while US index futures are soft.  The US 10-year yield is firm, around 1.56%.  European bonds are rallying.  Peripheral yields are off 8-9 bp, while core rates are 3-5 lower.  The Reserve...

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November Monthly

Three main forces are shaping the business and investment climate:  Surging energy prices, a dramatic backing up of short-term interest rates in Anglo-American countries, and the persistence of supply chain disruptions. The US and Europe have likely passed peak growth.  Fiscal policy will be less accommodative, and financial conditions have tightened. Japan appears to be getting a handle on Covid and after a slow start.  Its vaccination rate has...

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US-EU Rapprochement, Can France and UK Do the Same?

Overview:  It is mostly a quiet start to the new month.  Most of Europe is closed for the All -Saints holiday and the week's key events start tomorrow with the Reserve Bank of Australia meeting.  News that the Liberal Democrats retained a majority in the lower chamber of the Diet helped lift Japanese indices by 2%.  Most of the large regional markets gained, though China and Hong Kong markets fell. US index futures are trading with a higher bias...

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Greenback has Legs Ahead of the Fed and Jobs

The US dollar turned in a mixed performance last week but ended on a solid note.  The pre-weekend and month-end activity may have exaggerated the greenback's gains, but we suspect ahead of the FOMC meeting and the US jobs data that is the direction. Our understanding of the technical condition also favors a stronger dollar. The jump in Australian rates may help explain why the Aussie was the strongest of the majors (~0.75%).  However, the...

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The Week Ahead: Four Central Banks and the US Jobs Report

The Bank of England and the Federal Reserve meetings are the highlights of the week ahead.  Usually, the US jobs report is the main feature of the beginning of a new month's high-frequency data cycle. However, the FOMC meeting two days earlier may take away some of its significance, even if it still possesses some headline risk.  Two other major central banks meet in the first week of November.  The Reserve Bank of Australia meets early on November...

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Rate Adjustment Continues and the Greenback Pares the Week’s Losses

Overview:  Disappointing Apple and Amazon earnings news after the NASDAQ set a record high set the stage of a weaker bias in the Asia Pacific region today.  China and Japan still posted gains, while local developments, like an unexpected drop in South Korea's industrial output, and Australia struggling to exit its yield-curve control, saw equities lose more than 1%.  Europe's Stoxx 600 is paring this week's gains but is holding on to some for the...

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Eyes Turn to the ECB and the First Look at Q3 US GDP

Overview:  The market awaits the ECB meeting and the first look at the US Q3 GDP.  The pullback in US shares yesterday was a drag on the Asia Pacific equities.  It is the first back-to-back loss of the MSCI Asia Pacific in a few weeks.  Europe's Stoxx 600 is recovering from early weakness and US future indices are firm.  The US 10-year yield is flat, around 1.55%, after falling around 15 bp over the past four sessions.  European bonds are paring...

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