Category Archive: 4) FX Trends
What Can the Fed tell the Market it Does Not Already Know?
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
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
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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The Yuan Puts Together its Strongest Two Week Rally in Decades and it has Nothing to do with its Trade Surplus (which Shrank more than expected)
The G10 currencies traded with a heavier bias against the dollar last week. The Swiss franc was the sole exception, and it edged up about 0.25%. The thwarted putsch in Germany and the relaxation of vaccine and quarantine protocols in China were notable developments.
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Five G10 Central Banks Meet and US CPI on Tap
Half of the G10 central banks meet in the week ahead. The Fed is first on December 14, and the ECB, BOE, Swiss National Bank, and Norway's Norges Bank meet the following day. Before turning a thumbnail sketch of the central banks, let us look at the November US CPI, which will be reported as the Fed's two-day meeting gets underway on December 13.
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Chinese Stocks Extend Rally Even Though Covid Infections Appear to be Spreading
Overview:
The easing of vaccination, quarantine, and some travel protocols
related to Covid in China (and Hong Kong) continues to draw funds back into Chinese
stocks, wherever they trade. The Hang Seng rose 2.3% today to close the week
with a nearly 6.6% advance. The index of mainland companies that trade there
rose 2.5% on the day for a7.3% weekly gain. The CSI 300 of mainland shares rose
1% today and almost 3.3% for the week. Japan’s 1% gain...
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Political Developments Overshadow Economics
Overview: There is nervous calm in the capital
markets today. The weakness of US shares
yesterday is taking a toll today. An exception in the Asia Pacific region is
the Hang Seng and the index of mainland shares that trade there, which up
around 3.5% today on thUe easing of some Covid protocols. Europe’s Stoxx 600 is off for a fifth day,
its longest losing streak in nearly two months. US futures are posting minor
gains. Benchmark 10-year yields...
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Risk Appetites Challenged after US Equities Tumble
Overview: The sharp sell-off of US stocks yesterday as
sapped the risk appetite today. Equities are being sold. Hong Kong and the
index of mainland shares that are listed there led the regional decline with
3.2%-3.3% losses. Europe’s Stoxx 600 is off about 0.65% in late morning
turnover, the fourth day of losses. US futures are trading with a lower bias as
well. European 10-year bonds are mostly 1-2 bp firmer. The US 10-year Treasury is
practically...
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Yesterday’s Dollar Recovery Questioned Today
Overview: The 11 bp jump in the 10-year US yield yesterday after dropping nearly 26 bp in the previous three sessions, helped the greenback recover and took a toll on stocks. Still, the S&P 500 is above the low set on November 30 (~3939) before Fed Chair Powell's talk that day.
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Chinese Yuan Jumps While the Dollar recovers After Losses were Extended Against the Euro and Sterling
Overview: The markets remain hopeful about a re-opening in
China and continue to pour into Chinese stocks on the mainland and in Hong Kong. The
index of Chinese companies that trade in the US rose nearly 22.4% last week. Large
bourses in the Asia Pacific region were mixed, but China and Hong Kong stand out.
Europe’s Stoxx 600 is nursing a small loss for the second consecutive session. US
equity futures have a slightly heavier bias. European 10-year...
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Dollar Bears have the Upper Hand
Once again, the dollar was sold into a shallow bounce as the bears maintained the upper hand. There is a growing conviction that the peak in the Fed's tightening cycle is within view, despite more robust than expected jobs growth and an unexpectedly strong rise in average weekly earnings.
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Week Ahead: RBA and BOC Meetings Featured and China’s Inflation and Trade
The week ahead
is more than an interlude before five G10 central banks meet on December
14-15. The data highlights
include the US ISM services and producer prices, Chinese trade and inflation
measures, Japanese wages, household consumption, and the current account.
Also, the Reserve Bank of Australia and the Bank of Canada hold policy
meetings. Central banks from India, Poland, Brazil, Peru, and Chile also meet.The dollar appreciated in Q1 and Q2...
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Attention turns to US Jobs while the Yen’s Surge Continues
Overview: There have been significant moves in the capital markets this week
and participants are turning cautious ahead of the US employment report. After the
US equity market rally stalled yesterday, nearly all the Asia Pacific bourses fell
today. The strength of the yen (~3.8% this week) has weighed on Japanese equities
(Nikkei -1.8% this week) and spurred the BOJ to buy ETFs today for the first
time in five months. Europe’s Stoxx 600 is...
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December 2022 Monthly
As the year of aggressive monetary tightening winds down, the
Federal Reserve, the European Central Bank, and the Bank of England will likely
slow the pace of rate hikes. All three delivered 75 bp hikes in November and
will probably hike by 50 bp this month and moderate the pace again in the first
part of next year.Price
pressures remain elevated even if near or slightly past the peaks. The G10
central banks are not finished tightening, though...
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What Did Powell Say?
Overview: Asia Pacific stocks rallied on the heels of the surge in US equities. China’s CSI 300 led the large bourses higher with a 1% advance. Europe’s Stoxx 600 is matching yesterday’s gain of a little more than 0.6%, while US futures
are a touch softer. European yields are 9-13 bp lower, with the peripheral premiums shrinking.
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Hope Springs Eternal in China
Overview: Hope that the recent events in China are cathartic continues to lift risk appetites. Led by Hong Kong and mainland shares that trade there, the large bourses in the Asia Pacific region rallied. Japan, where macro data continues to disappoint, was the notable exception. Europe’s Stoxx 600 is snapping a three-day down draft and is up about 0.6% in late morning turnover. US futures are trading with a slightly firmer bias.
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China Steps away from the Abyss and Animal Spirits are Rekindled
Overview: Chinese officials using the carrot and the stick have succeeded in dampening the protests and easing some anxiety and rekindled the animal spirits. Hong Kong’s Hang Seng rallied 5.25% and its index of mainland shares surged 6.20%.
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China Shakes Markets, Euro Shakes it Off
Overview: The surging Covid cases in China and the protests in
several cities seemed to set the tone for today’s session. Equities are lower. China,
Hong Kong, Taiwan, and South Korea were marked down the most. Of the large
bourses, only India escaped unscathed. Europe’s Stoxx 600 is off more than 0.8%
and US futures are poised to gap lower. Bond markets are quieter. The 10-year
US Treasury yield is off a little more than one basis point to around...
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USD Outlook: Caught between Belief that it has Peaked and Oversold Momentum Indicators
We think the US dollar has put in a
significant high. However, the near-term technical readings are stretched. The
dollar's bounce from November 15 to November 21 met or approached minimum
retracement targets, but the momentum indicators did not correct. These
conflicting impulses need to be navigated in the days ahead. On balance, we
look for a firmer greenback, which we see as corrective. That is the
prism through which we look at the price...
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US Jobs and Eurozone CPI Highlight the Week Ahead
Two high-frequency economic
reports stand out in the week ahead: The US November employment report
and the preliminary eurozone CPI. The Federal Reserve has deftly distanced itself from any one
employment report. As a result, it would take a significant miss of the median forecast
(Bloomberg survey) to alter market expectations for a 50 bp hike when the FOMC
meeting concludes on December 14.Economists are looking for
around a 200k increase in US...
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