Category Archive: 4) FX Trends

Main Author Marc Chandler
Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
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Anticipation of Osborne’s Budget Weighs on Sterling

2016-03-15

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2016-03-15

If UK Chancellor of the Exchequer Osborne wants to position himself to be the next Prime Minister, the budget to be unveiled tomorrow may not be particularly helpful.  There is little room to relax fiscal policy, given the self-imposed constraints. The deficit for the current fiscal year was projected to be GBP73.5 bln, but through …

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Before the FOMC, Another Look at the ECB’s Actions

2016-03-15

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2016-03-15

The market's focus has shifted to the two-day FOMC meeting that begins today.  The Federal Reserve should be pleased with recent developments.  Labor market slack continues to be absorbed.  Core inflation measures continue to edge higher. Market-based measures of inflation expectations have risen, and the 10-year breakeven is a little above levels that prevailed before …

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FX Daily, 03/15: Dollar and Yen Firmer

2016-03-15

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2016-03-15

The US dollar is steady to firmer against most of the major and emerging market currencies.  Equity markets are heavier, and oil continues to surrender some of its recent gains.  Profit-taking is weighing on eurozone bonds and JGBs while US Treas...

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Is the Oil Correction Over?

2016-03-14

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2016-03-14

The price of oil is seeing its biggest decline today since February 23.   The ostensible reason is that Iran once again reiterated it would only consider capping its output after it reached four million barrels a day, its pre-sanction output.  ...

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One Investor’s Poison is Another’s Windfall

2016-03-14

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2016-03-14

The introduction of negative interest rates in Japan and the subsequent chance for yields has seen domestic investors move further out on the curve.  They have also stepped up their purchases of foreign bonds. In three weeks (through March 4) since the negative deposit rate went into effect, Japanese investors bought JPY4.4 trillion of foreign …

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FX Daily, 03/14: Dollar Firmer to Start the Week

2016-03-14

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2016-03-14

The US dollar is firmer but largely confined to the ranges seen before the weekend against most of the major currencies.  The yen is also firmer as dollar sellers reemerged near JPY114.00.    The dollar is gaining against most emerging market c...

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Emerging Market Preview: Week Ahead

2016-03-13

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2016-03-13

EM enjoyed an extended rally last week, and it should carry over to the early part of the week. The Wednesday FOMC meeting poses a risk to EM, especially if markets continue to price in a more hawkish Fed. The dot plots and press conference will be very important. BOE and the Norges Bank also … Continue reading »

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FX Daily 03/14: Five Central Banks Meet as Monetary Policy is Downgraded

2016-03-13

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2016-03-13

Fixed exchange rates limit the degrees of freedom for policymakers.  The breakdown of Bretton Woods in 1971 removed this constraint on official action, and the results were larger budget deficit and higher inflation.  The zero bound on interest rates also posed a constraint on behavior. Until this year, despite the long struggle against deflation, the Bank …

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Weekly Speculative Positions: Cut Long Sterling Exposure While Adding to Long Aussie

2016-03-12

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2016-03-12

The Commitment of Traders reporting period ending March 8 showed little position adjusting ahead of the ECB meeting two days later.  A little more than 3/4 of the gross positions we track saw less than 5k contract change and only two were above 6k. The gross long speculative sterling position was cut by a quarter …

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FX Daily, 03/12: Greenback’s Tone Sours, Sterling may Shine

2016-03-12

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2016-03-12

The reversal of the US dollar's gains half way through Draghi's press conference has undermined the near-term technical tone.  The risk is on the downside, at least in the first part of the week, ahead of the FOMC meeting.   The US Dollar Inde...

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A Few Thoughts Ahead of the Weekend

2016-03-11

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2016-03-11

The market reaction to Draghi's indication, once again, that interest rate policy has run its course, will be debated for some time.    Draghi delivered the goods that many investors said was lacking last December.  The ECB policy more than an...

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FX Daily, 03/11: Dollar Recovers Against the Euro and Yen

2016-03-11

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2016-03-11

The euro is paring the recovery that began in the middle of the ECB's press conference yesterday. The markets had reacted as one intuitively would expected to broad easing of interest rates and credit conditions.   The market reversed, and viol...

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FX Daily 03/10: Draghi Delivers, but Now What?

2016-03-10

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2016-03-10

Draghi delivered.  He managed to get approval for everything.  Rate cuts, acceleration of purchases, including corporate bonds to the purchase program and new long-term repos were announced.   The knee-jerk reaction was favorable.  The euro fell over 1% and peripheral European bonds rallied. The deposit rate was cut 10 bp to minus 40 bp.  The …

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ECB Meeting Promises Fireworks

2016-03-10

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2016-03-10

Fasten your seat belts.  The ride is going to get bumpy.   Economists may differ on what the ECB will do.   Investors may differ on the market response.  This uncertainty ensures a strong market reaction. The euro is off about 0.25% after recovering in the North American session yesterday.  The euro has spent this week thus … Continue...

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(5.6.1) Crowther’s Balances and Imbalances of Payments: METI Paper

Geoffrey Crowther
The former chief editor of "The Economist" Geoffrey Crowther published a great work on the development of balance of payments and current accounts over the long-term. It divides development into six phases, which are analogous to Shakespeare's seven phases of life. The seven stages are: Young debtor nation, Mature debtor nation, Debt repayment nation, Young creditor nation, Mature creditor nation, Credit disposition /Asset Liquidation nation and...

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Thoughts on the Chinese Export Puzzle

2016-03-10

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2016-03-10

Investors are skeptical of Chinese economic data.  However, news yesterday that Chinese exports fell by a quarter in February was shocking. Many worry about the implications not just for China, but for world growth.  It comes as the IMF is signaling it will likely cut its 3.4% global growth forecast next month. There are three … Continue...

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Merkel’s Challenge

2016-03-09

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2016-03-09

German Chancellor Merkel was right. As the Greek crisis was winding down last summer, she noted that the refugee problem would be even more difficult.  And indeed, it is. The refugee issue is challenging Merkel’s leadership in Europe.  While her trademark has been her sensitivity to swings in sentiment, she has seemed rather tone-deaf in …

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Great Graphic: Vulnerability of the Canadian Dollar

2016-03-09

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2016-03-09

The Canadian dollar appears vulnerable.  It remains firm while the US two-year premium over Canada has risen sharply.   Like others, we do not expect the Bank of Canada to cut rates today and are looking past it. This Great Graphic was composed on Bloomberg.  It shows the 2-year spread (white line) and the US dollar …

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FX Daily, 03/09: Euro Pushes Lower Ahead of ECB

2016-03-09

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2016-03-09

The euro has peeled off a cent from yesterday's high near $1.1060 as some short-term players move to the sidelines ahead of the ECB meeting.  Recall that after peaking near $1.1375 on February 11 when the New Year's market angst peaked, the euro fell back to the lower end of its old range near $1.0825 … Continue reading »

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A Few Things on Our Mind

2016-03-09

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2016-03-09

A few weeks ago investors were bemoaning a new bear market for equities, and there was much ink spilled drawing parallels between now and 2008-2009.   Falling commodities, weakening growth, and prospects of Fed tightening saw the MSCI Emerging Market equity index fall 21.5% from early-November through the third week in January.  Since then it has …

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