Category Archive: 4.) Marc to Market

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The Possibility that the US is Toning Down its April 2 Tariff Threat Helps Lift Equities

2025-03-24

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2025-03-24

Overview: Investors are finding some comfort in a signal from some senior US official that toned down the double-barrel threat of reciprocal and sectoral tariffs on April 2. The focus is said to be on the former, with some exemptions. Although the administration is two-months old, there have been many conflicting signals and there still is much uncertainty. After last week's gains, the greenback has begun the new week mostly softer against the G10...

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Week Ahead: Is the Dollar Bottoming?

2025-03-22

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2025-03-22

After falling steadily since from the end of Q3 24 through the first part of January, the dollar stabilized last week, despite the dovish market takeaway from the Federal Reserve. The median projection for growth was shaved while the inflation project was raised. Still, despite the Atlanta Fed's GDP Now tracking a contraction here in Q1, few are that pessimistic. None of the 58 economists in Bloomberg's survey see a contraction, and only one...

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March Madness? The Dollar is Closing in on its Best Week this Month

2025-03-21

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2025-03-21

Overview:  The dollar's down trend, which began at least a week before President Trump's second inauguration stalled this week, and preliminary technical signs suggest a bottom may be in the process of forming. The uncertainty over US reciprocal and sector tariff announcement on April 2 is boosting uncertainty among policymakers, investors, and businesses. The greenback is mostly firmer today and near the week's best levels against most of the...

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Dollar Comes Back Bid

2025-03-20

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2025-03-20

Overview:  The Federal Reserve's projections show a little more inflation and a little less growth this year and next, but the median projection showed, as it did in December, two rate cuts this year. This, coupled with the reduction of the balance sheet unwind of Treasury holdings (QT) gave a dovish cast to the FOMC outcome, though the dispersion of forecasts showed upside risks to inflation, and even the two rate cuts anticipated was a closer...

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Fed: When Words are Actions

2025-03-19

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2025-03-19

Overview: Often it is said that what the Fed does is more important than what it says. But this is not so today. There is little doubt that the Fed continues to remain on hold but it will updates its forecasts, and Chair Powell will likely reiterate his recent assessment that the economy is in a position that allows the central bank to be patient and wait for clearer signals of the impact of the administration's policies. The Summary of Economic...

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Europe Leads Dollar Drop, Unwinding Last Year’s Record Purchases of US Equities

2025-03-18

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2025-03-18

Overview: The greenback remains under pressure and fell to new lows for the move against the euro, sterling, and the Norwegian krone. It is softer against nearly all the G10 currencies but the Japanese yen, where more disappointing data were reported and polls showed support for Prime Minister Ishiba plunged following his admission of doling out JPY100k (~$672) to 15 first-term LDP members of parliament. It makes for a poor backdrop for the upper...

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China Underwhelms, PBOC sets Dollar Fix Lower, Bessent’s Lack of Concern Weighs on US Stocks, and More US Tariffs Coming

2025-03-17

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2025-03-17

Overview: The US dollar begins the new week quietly. The week features five G10 central bank meetings, and real sector data that may show the US economy is resilient despite the Atlanta's Fed's pessimism (which will be updated today). President Trump renewed his warning that reciprocal and sectoral tariffs will be announced on April 2. The greenback is trading with a mostly softer but consolidative bias today. Emerging market currencies are mixed,...

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Week Ahead: New FOMC Projections; BOE, BOJ, and Riksbank Standpat, While SNB to Approach Zero -Bound (Again)

2025-03-15

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2025-03-15

The architects of the new US foreign economic policy expected dollar appreciation to absorb some of the cost of US tariffs and expected some exporters to cut prices. Instead, the dollar has mostly fallen against the major currencies. Last week, the greenback recorded new lows for the year against the Chinese yuan, Mexican peso, euro, sterling, the Japanese yen, the Swedish krona, and Norwegian krone. Beijing acted forcefully against Walmart's...

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Gold and the Mexican Peso Trade at New Highs, Sterling is Resilient in the Face of the Unexpected Contraction in January

2025-03-14

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2025-03-14

Overview: The US dollar is mixed but the risk-appetites are finishing the week on an update. In the foreign exchange market, this is reflected in the dollar-bloc currencies leading the G10 higher, with the yen and Swiss franc the laggards. Japan's spring wage negotiation round is producing solid preliminary results, but a new funding scandal may weaken the minority government led by Prime Minister Ishida. Most emerging market currencies are also...

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A Break in the Drama, Greenback Consolidates

2025-03-13

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2025-03-13

Overview: There seems to be a nervous calm in the foreign exchange market as the dollar consolidates mostly inside yesterday's ranges, in largely uneventful turnover. In addition to the US steel and aluminum tariffs, and retaliatory moves by the EU, Canada, and China, the other big development this week is the effort to achieve a 30-day ceasefire in Ukraine. US-Russian officials meet today. Ahead of the talks, Russia reported captured a...

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Trade War Escalates, Bank of Canada to Cut Rates, US Reports February CPI and Sells $39 bln 10-Year Notes

2025-03-12

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2025-03-12

Overview: The next phase of the evolving trade war that is both a cause and effect of strain in the traditional US alliance, in North America, Europe, and Asia Pacific has begun. The US has imposed 25% tariffs on imported steel and aluminum. Despite lobbying form various countries, no exemptions were announced. The EU quickly announced retaliation, but the measures do not go into effect for a month, which allows time for negotiations. The dollar is...

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German Political Consensus is Emerging, Helping to Extend the Euro’s Gains, While Japanese Data Disappointed

2025-03-11

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2025-03-11

Overview: After stabilizing yesterday, and into today, news of political developments in Germany suggest movement toward an agreement on defense spending and sent the dollar lower. The euro unwound its losses since the election. The US interest rate premium over the eurozone continues to trend lower. Japan disappointed with weak real household spending and Q4 GDP was revised lower. While most G10 currencies are firmer against the dollar, the yen...

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Fragile Consolidation for Greenback to Start the New Week

2025-03-10

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2025-03-10

Overview:  The on-again off-again US tariffs have raised the level of uncertainty and lack of visibility that itself has become a market factor. The dollar has begun the new week, which could see US steel and aluminum tariffs announced Wednesday, softer, but mostly consolidating within the pre-weekend range. Most of the G10 currencies are firmer, though we note the potential downside reversal in sterling. Norway's higher than expected CPI has...

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Week Ahead: US Growth Worries and Europe’s Fiscal Initiative Weaken American Exceptionalism’s Bull Case

2025-03-08

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2025-03-08

The combination of continued growth concerns in the US and the fiscal/defense initiatives in Europe saw the dollar fall every day last week. The Atlanta Fed's GDP tracker says the US economy is contracting at an annualized rate of 2.4%, which seems exaggerated. After falling by about 50 bp in a seven-week slump, the US 10-year yield rose by about 15 basis points last week. Eurozone 10-year benchmark yields rose around 35 bp. The US premium on...

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Pressure on the Greenback Remains Ahead of the Jobs Report and Powell, while European bonds Stabilize

2025-03-07

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2025-03-07

Overview: The greenback's drop has been extended today against most of the G10 currencies, but not the growth-sensitive dollar bloc, which is underperforming today. Still, ahead of the US jobs report and Fed Chair Powell's speech on the economic outlook, all the G10 currencies have appreciated by at least 1% this week. The Swedish krona's 6.7% rise tops the board, but the euro's 4.7% rally is its best weekly performance since 2009. The Turkish lira...

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European Bond Rout Continues Ahead of ECB Meeting

2025-03-06

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2025-03-06

Overview:  The run on the dollar has been extended today but it has stalled in the European morning. As North American traders return to their posts, the Australian and Canadian dollars, along with sterling are lower on the day. Higher than expected Swedish inflation has helped put the krona on the top of the G10 with more than a 1% gain. It is at its best level against the euro in a couple of years. Most emerging market currencies are lower, led...

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Dollar Slumps while European Rates Surge

2025-03-05

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2025-03-05

Overview:  Talk emerged yesterday that the dramatic losses US equities amid recession fears in light of the rash of tariff announcements and threats would draw the new administration's attention. Commerce Secretary Lutnick suggested yesterday that President Trump may consider a compromise on Mexico and Canadian tariffs announced yesterday. There was no sign of that in the president's address to the joint session of Congress yesterday. US index...

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Dollar Mostly Softer as Tariffs Implemented

2025-03-04

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2025-03-04

Overview:  The postponed US tariffs on Canada and Mexico have gone forward and China faces its second 10% tariff increase in two months. The dollar is mixed. The Swiss franc and Japanese yen are the strongest of the G10 currencies, up around 0.45%-0.60% in late European morning turnover, but the Canadian dollar is no slouch and is up about 0.35%. Canada (and China) have announced what are seen as mild initial retaliatory measures, while Mexico is...

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Asia and Europe Seem Less Keen about the Dollar than North America

2025-03-03

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2025-03-03

Overview: The dollar rallied in the second half of last week even as interest rates fell amid a new growth scare. The 25% tariffs on Canada (10% on energy) and Mexico that were postponed a month ago, could be implemented as early as tomorrow.  The only tariffs that have been imposed so far were 10% on Chinese imports, and another 10% threatened tomorrow, and apparently in April, too.  The economic disruption that the tariffs and tariff threats seem...

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March 2025 Monthly

2025-03-01

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2025-03-01

In recent weeks, while Russia's war on Ukraine continues and Beijing continues to harass its neighbors, the U.S. tariff threats and doubts that its defense commitments will be sustained, have emerged as the most significant challenge for businesses, investors, and policymakers. These tariffs are aimed at protecting domestic industries, forcing a re-shoring of production, and raising revenue. If, and when implemented, the tariffs can be expected to...

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