Category Archive: 4.) Marc to Market

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Consolidation Featured

2024-08-08

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2024-08-08

Overview:  Yesterday's poor 10-year note US Treasury auction helped turn the equity market lower and this carried over into Asia Pacific and European activity today. Today, Treasury completes its quarterly refunding with the sale of $25 bln 30-year bonds. The general tone in the foreign exchange market is one of consolidation. Japanese investors were buyers of foreign stocks on bonds last week, according to the latest portfolio flow report, which...

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BOJ Offers Verbal Support, Extends the Yen’s Pullback

2024-08-07

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2024-08-07

Overview:  The calls earlier this week for an emergency rate cut seemed to be a call for the Fed put, which, we argue is misunderstood. It is not about the stock market per se but financial stability, which did not seem threatened in the US. Japan is a different story, and the Bank of Japan offered a verbal put today, with an indication that it wants to maintain low (accommodative) rates. The markets reacted accordingly. The yen was sold (and...

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Fragile Turn Around Tuesday

2024-08-06

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2024-08-06

Calmer markets are prevailing today, but an unease remains, and market moves continue to be sharp even if less dramatic. Still, it is in these somewhat less volatile conditions that the US dollar is doing better. It is firmer against all the G10 currencies today.

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Risks to Financial Stability Fan Speculation of Emergency Rate Cuts

2024-08-05

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2024-08-05

Overview: The Black Monday talked about over the weekend has materialized. Japanese equity indices more than 12% today. The Nikkei is off around 26.5% form the high set on July 11. Taiwan and South Korean equities were tagged for more than 8% in a sea of red that spared no one. Europe's Stoxx 600 is off 2.4%, nearly matching its pre-weekend loss. It is back at levels last seen in February. The S&P 500 futures are off almost 3% and the Nasdaq...

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August 2024 Monthly

2024-08-03

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2024-08-03

We suspect the long-anticipated turn of the US dollar is at hand. The policy mix of tight monetary policy and loose fiscal policy is coming to an end. The moderation of price pressures for the past three months has boosted the confidence of Federal Reserve officials that inflation is headed back toward its 2% target. At the conclusion of the July FOMC meeting, Federal Reserve Chair Powell gave his strongest signal yet that a rate cut at the next...

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Equity Meltdown Continues as Attention turns to the US Employment Report

2024-08-02

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2024-08-02

Overview: Federal Reserve Chair Powell said that although confidence has risen that inflation is on course back to 2%, the Fed is not quite confident enough to cut rates. The market effectively eased for it. Since the FOMC meeting began on Tuesday, the two-year US yield tumbled from 4.40% to 4.10%. The US 10-year yield settled below 4% for the first time in six months. The risk-off spurred by the weaker than expected US manufacturing ISM helped...

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Dollar Storms Back (but not Against the Yen) After Fed Signals Low Bar to September Cut

2024-08-01

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2024-08-01

Overview: Neither the FOMC statement nor Fed Chair Powell's press conference dented the markets confidence that the Federal Reserve will begin an easing cycle at its next meeting in September. Yet, the dollar is bid against most of the G10 currencies, but the yen and Swiss franc. The Norwegian krone, apparently helped by a stronger PMI and the recovery in oil prices, is the strongest with a 0.25% gain. Most Asian emerging market currencies, but the...

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BOJ Delivers, Sending Greenback to Almost JPY150; Now Over to the Federal Reserve

2024-07-31

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2024-07-31

Overview: A 15 bp hike by the BOJ and plans to halve its bond purchases by the end of FY25 (in March 2026), coupled with a hawkish press conference by Governor Ueda sent the dollar to nearly JPY150, its lowest level in four months. A soft-core inflation reading in Australia send the Aussie lower and is the weakest of the G10 currencies. The others are little changed. The focus is now on the Federal Reserve, which is expected to signal that its...

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Yen Slumps, Germany Contracts, and the Week’s Key Events Still Lie Ahead

2024-07-30

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2024-07-30

Overview: An unexpected decline in Japan's unemployment did not prevent a retreat in the yen to a four-day low ahead of tomorrow's data and conclusion of the BOJ meeting. The dollar has probed the JPY155 area where nearly $3.5 bln options expire today. An unexpected contraction Germany's Q2 GDP was offset in the aggregate by better French, and especially Spanish figures, leaving the euro consolidating in a narrow range (~$1.0815-$1.0835). The...

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Market Boosts Odds of a BOE Rate Cut this Week

2024-07-29

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2024-07-29

Overview: The US dollar is mostly firmer today ahead of what promises to be an eventful week. Sterling is bearing the brunt today, off a little less than half-of-a-cent as expectations creep up of a rate cut this week and Chancellor of the Exchequer Reeves plays up the poor state of public finances left by the Conservative government. Sterling (and the euro's) five- and 20-day moving averages have crossed. The yen is mostly within the pre-weekend...

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Week Ahead: Alphabet Soup–BOJ, EMU CPI, FOMC, BOE, US NFP

2024-07-27

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2024-07-27

A dollar-centric narrative would note that the greenback rose against most of the G10 currencies last week. Yet, the dollar, the most actively traded currency, was arguably not the prime mover in recent days. Rather, the unwinding of carry trades seems to be the driver of much of the price action. The low yielding yen and Swiss franc were the only G10 currencies to rise against the US dollar. The Australian and New Zealand dollars were the worst...

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Is the Dramatic Yen Short Squeeze Over?

2024-07-26

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2024-07-26

Overview:  The powerful yen short squeeze that has roiled the capital market this week has stalled today. It is the first day this week that the dollar has not fallen below the previous day's low and has risen, though slightly, above previous session's high. The Antipodeans and Scandis are trading with a firmer bias. The yen and Swiss franc are the only two G10 currencies that are not stronger today. The stability of the yen appears to have removed...

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Yen’s Surge Continues, while PBOC Surprises with Another Rate Cut, and US 2-30 Year Yield Curve Ends Inversion

2024-07-25

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2024-07-25

Overview: The capital markets are in flux. The powerful short-covering rally of the yen and unwinding of carry trades continues. For the second time this week, the PBOC has surprised by cutting interest rates. The dramatic sell-off of equities continues. The unexpected contraction of South Korea's Q2 GSP (-0.2%) is seen as confirmation of broader economic weakness Speculation of a more aggressive Federal Reserve is gaining ground. It is not that...

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Greenback and Yen Extend Gains

2024-07-24

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2024-07-24

Overview: The dollar's gains have been extended today, but in the risk-off mode, and unwinding of carry positions, the Japanese yen and Swiss franc are firmer.  the dollar has stabilized in late European morning turnover. The Bank of Canada is widely expected to cut rates today and the greenback is pushing against CAD1.38, which it has not traded above for three-months. The US dollar gains, which we anticipated, are coming despite interest rates...

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Short Covering Squeezes the Yen Higher

2024-07-23

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2024-07-23

The US dollar is firmer against all the G10 currencies but the Japanese yen. Local reports and the price action are consistent with short covering of the previously sold yen positions ostensibly ahead of next week's BOJ and FOMC meetings. Still, the greenback is holding above last week's low, slightly below JPY155.40.

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Dollar Mixed as Markets Digest US Political Developments

2024-07-22

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2024-07-22

Overview: News that President Biden will not seek re-election has left investors unsure of the next step, but PredictIt.org still points to a Trump advantage of slightly better than 60-40. It is not clear yet whether Vice-President Harris will be challenged for the nomination. The dollar is mixed against the G10 currencies, with the dollar bloc and Norway weaker. The yen is up around 0.45% to lead the others higher. The Swiss franc, euro and...

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Week Ahead: US Dollar to Extend Recovery while Stocks Correct Lower

2024-07-20

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2024-07-20

The consolidative phase for the dollar, we anticipated last week, after its recent drop, is evolving into a proper upside correction. We expect the dollar to trade broadly firmer over the next week or so. It is also part of a larger picture, where US interest rates also look to have put in a near-term bottom and are set to recover. Ideas that next US administration may favor a weaker dollar has become a talking point. Yet, of all the forces that...

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Dollar Consolidation is Morphing into Correction

2024-07-19

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2024-07-19

Jury duty assignment prevents a more comprehensive note, but here is a snapshot. Overview: The failure of computer systems has disrupted airlines, banks, media companies, and the London Stock Exchange, ostensibly stemming from an update from a third-party software update, according to Microsoft. The dollar is trading with a firmer bias. The consolidation, we anticipated, appears to be morphing into a correction. Weaker than expected retail sales...

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Euro Trades Quietly Ahead of ECB Meeting

2024-07-18

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2024-07-18

Jury duty assignment prevents a more comprehensive note, but here is a snapshot. Overview: The US dollar enjoys a firmer bias today, in mostly quiet turnover in narrow ranges. The Australian dollar is a noted exception, and the better than expected jobs growth may have lent it some resilience today. The greenback initially was sold to almost JPY155.35, a new low (since June 7) before recovering to nearly JPY156.60 in Europe. The UK's employment...

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Dollar Crushed, Stocks Slump

2024-07-17

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2024-07-17

Jury duty assignment prevents a more comprehensive note, but here is a snapshot. Overview: The dollar is broadly lower, and stocks are under pressure. Comments by a Japanese official, which did not appear to break new ground, coupled with Trump's interview in BusinessWeek, where he was critical that Japan was benefiting from a weak yen, despite having apparently spent some $80 bln this year trying to stop it from falling, may have been the trigger....

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