Category Archive: 4.) Marc to Market

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FX Daily, July 24: China Turns To Domestic Stimulus, Weighs on Yuan but Lifts Stocks

2018-07-24

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2018-07-24

Following a record injection via the medium-term lending facility yesterday, China's officials unveiled a set of policies designed to support the weakening economy that soon could face a substantial drag from US tariffs. The effort focuses on boosting domestic demand. Measures include targetted tax cuts and accelerating new infrastructure.

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Cool Video: Bloomberg Television–Dollar Outlook

2018-07-24

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2018-07-24

The issue is the dollar's outlook. The greenback had looked to be on the verge of breaking out higher before the US President expressed disapproval with the Fed rate hikes and, then the following day, aggressively accused the EU and China of manipulating their currencies.

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FX Daily, July 23: Dollar Consolidates Trump-Inspired Losses, BOJ Resolve Tested

2018-07-23

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2018-07-23

US Treasury Secretary Mnuchin told G20 finance ministers and central bankers that President Trump was not trying to interfere in the foreign exchange market or encroach upon the Federal Reserve's independence. Trump's comments and tweets last Thursday and Friday effectively capped the dollar as it was looking to break out to the upside.

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FX Weekly Preview: It was Supposed to be a Quiet Week

2018-07-23

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2018-07-23

It was supposed to be a quiet week. The economic data and event calendar was light. There were three features, and none would likely disrupt the markets much. The first two are in Europe. The eurozone flash PMI for July, the first insight into how Q3 has begun. The PMI is expected to paint a mostly steady economic activity.

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Euro, Yen, and Equities: Reviewed

2018-07-21

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2018-07-21

US equities and the dollar appear to be moving higher together.  The greenback is near its best level this year against most of the major and emerging market currencies.  The Chinese yuan is not an exception to this generalization.  At the same time, the S&P 500 is at its best levels since the downdraft February, and the NASDAQ set a new record high earlier in the week. 

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FX Daily, July 20: Dollar Consolidates after Trump Wades In

2018-07-20

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2018-07-20

The US dollar is little changed but mostly softer as the week draws to a close. The market is digesting the implications of yesterday's comments by President Trump about interest rates and foreign exchange, and without fresh economic data, are content to go into the weekend. Since Trump's comments yesterday, the euro has not been below $1.1625 nor above $1.1680.

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FX Daily, July 19: Greenback Extends Gains

2018-07-19

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2018-07-19

The US dollar is extending its recent gains against most of the world's currencies.   We continue to see the most compelling case for the macro driver being the diverging policy mixes.  There are also more immediate factors too.  The surprisingly poor UK retail sales report, for example, managed to do what the Brexit chaos and softer than expected CPI fail to do. 

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FX Daily, July 18: Greenback Extends Gains-For Now

2018-07-18

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2018-07-18

After softening in Europe yesterday, the dollar recovered in the North American session with the help of assurances by Fed Chair Powell who reaffirmed the path gradual path despite clear recognition that tariffs threaten wages and growth.  The greenback has extended those gains today and is higher against all the emerging market currencies, expected the Turkish lira, which is slightly firmer.

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Great Graphic: Fed Raising Rates, but Yields Still Negative

2018-07-18

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2018-07-18

3-month US Treasury
The yield on the 3-month US Treasury bill is pushing above 2% today for the first time since 2008. The yield had briefly dipped below zero as recently as late 2015. Although today's yield seems high, this Great Graphic shows the nominal generic three-month yield going back to 1990. Then the three-month bill yielded 8%. The peak in the last cycle (2006-2007) was a little above 5%.

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FX Daily, July 17: Dollar on Back Foot Ahead of Powell

2018-07-17

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2018-07-17

The US dollar eased in Asia session and the European morning. The greenback had appeared technically vulnerable, and the economic news stream is light. Sterling, unlike most of the other major currencies, remains within yesterday's range. Yesterday's high, a little above $1.3290, maybe reinforced a little today by the GBP245 mln $1.33 option that is expiring. Brexit concerns may also be acting as a drag.

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Great Graphic: Two-year Rate Differentials

2018-07-17

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2018-07-17

Two-year interest rate differential between the US and four countries
Given that some of the retail sales that were expected in June were actually booked in May is unlikely to lead to a large revision of expectations for Q2 US GDP, the first estimate of which is due in 11 days.  Before the data, the Atlanta Fed's GDPNow projects the world's biggest economy expanded at an annualized pace of 3.9% in Q2. 

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FX Daily, July 16: Dollar Softens a Little as Market Awaits Developments

2018-07-16

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2018-07-16

The US dollar is slightly softer against most of the major currencies but is in narrow ranges ahead of today's key events, which include US retail sales and the debate in the UK parliament over Brexit.  The yen is the main exception.  The local markets are closed for a public holiday, and the yen did initially strengthen (the dollar eased to ~JPY112.10) but surrendered those gains and consolidating its biggest loss last week in 10 months.

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FX Weekly Preview: For the Millionth Time: Investors Exaggerate Trade Tensions at Their Own Peril

2018-07-16

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2018-07-16

You would never have guessed it reading many of the op-eds and pundits pronouncing the end to globalization or the West, or liberalism. Global equities have rallied.  Of course,  stock prices are not the end all and be all, but it stands in stark contrast to the cries that the sky is falling.

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Great Graphic: Two Stories for Two Trend Lines

2018-07-15

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2018-07-15

The Dollar Index made a marginal new high for the year at the end of June a touch below 95.55. It fell through the start of this week when it reached nearly 93.70. With the earlier gains, the Dollar Index briefly traded above the 61.8% retracement of the pullback (~94.85). A move now below 94.20 would be disappointing.

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Great Graphic: Is Mr Market Thinking About the First Fed Cut?

2018-07-14

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2018-07-14

EDZ0 Comdty - EDZ9 Comdty, Jan 2017-Jul 2018
The US economy is among the strongest among the large economies. Goosed by the never-fail elixir of tax cuts and spending increases, the US economy is accelerating. Nevertheless, we continue to see the fiscal boost as short-lived, and a recent Fed paper suggested that fiscal stimulus in an upswing may not have the same multiplier as during a downturn.

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FX Daily, July 13: Trump Trips Sterling, but Greenback Enjoys Broad Gains

2018-07-13

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2018-07-13

President Trump weighed in on Brexit and spurred the largest drop in sterling in more than two weeks.  Trump encouraged Brexit, but he indicated he "would have done it much differently" and that he "actually told Theresa May how to do it, but she did not listen."  Trump cautioned that May's plan would mean it would still be too close to the EU and this would "kill" a free-trade deal with the US.  In effect, Trump backed the harder Brexit camp...

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FX Daily, July 12: Dollar Remains Firm as Risk Returns

2018-07-12

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2018-07-12

The US dollar rallied yesterday as the escalating trade tensions between the world's top two economies choked off the animal spirits and a marked down in equities and risk assets.  It remains firm today even as risk has come back.  Equities are mostly higher today and bonds lower.  Emerging market currencies, from Turkey to South Africa are firmer, as is the Chinese yuan. 

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FX Daily, July 11: Escalating Trade Tensions Set Tone for Capital Markets

2018-07-11

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2018-07-11

The US took the first step in making good its threat to put a 10% tariff on $200 bln of Chinese goods in response to the PRC retaliating for the 25% tariff on $34 bln of its exports. The US provided a list of products that will get the new tariffs after the public comment period is completed at the end of next month. This time the list included numerous consumer goods, like digital cameras, baseball gloves, but have left off popular products, like...

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FX Daily, July 10: May Survives to Fight Another Day, but Sterling’s Recovery Falters

2018-07-10

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2018-07-10

The political obituary of UK's May, who many see as an "accidental" Prime Minister, has been written many times in the past year and a half only to be withdrawn.  Again, it looked like the resignation of two ministers, and a couple of junior ministers was going to spur a leadership challenge. While this still may come to pass, the hard Brexit camp, which has huffed and puffed, simply does not appear to represent a majority of the Tory Party, and...

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Central Bank Investment Strategies

2018-07-10

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2018-07-10

A survey of central banks and sovereign wealth funds by Invesco sheds light on their investment plans. The traditional separation of markets and the state may be helpful for ideological arguments, but the real situation is more complicated.  Central banks and their investment vehicles (sovereign wealth funds) are market participants.  In some activities, such as custodian, central banks compete with the private sector.

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