Tag Archive: Australia

Japan’ Q1 GDP was Revised Up, While the Eurozone’s was Revised Down

2023-06-08

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2023-06-08

Overview: The back-to-back surprise rate hikes by the Australia and Canada spurred speculation that the Fed could hike next week, and this lifted US rates and helped the dollar recover. The odds of a hike increased, according to the indicative pricing in the Fed funds futures market from about a 20% chance to a little above 35%. now. At yesterday's high, the two-year yield was up a little more than 25 bp since the low before the US employment data...

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Dollar Steadies After Fed’s Push Back

2023-06-01

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2023-06-01

Overview: The market was gearing up for a June Fed hike and officials and this helped lift the greenback. However, the Fed Governor Jefferson, nominated to be the next vice-chair, pushed back against it. His views are thought to reflect the Fed's leadership. Philadelphia Fed's Harker, who is a voting member of the FOMC also backed a pause. This is not quite what we expected when we suggested the US interest rate adjustment was complete or nearly...

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The Greenback Stalls after Yesterday’s Surge as US Negotiators Move Closer to Last-Minute Deal

2023-05-26

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2023-05-26

Overview: Yesterday's dollar surge has stalled. It is consolidating its gains and is softer against all the G10 currencies. After popping above JPY140 yesterday, there were no follow-through greenback buying in Tokyo. Most emerging market currencies are also firmer, including the South African rand, which plummeted by 2.8% yesterday on the back of the central bank's warning of downside currency risks as it delivered a 50 bp hike. The Chinese yuan...

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Fitch Puts US on Negative Credit Watch and the Dollar Extends its Gains

2023-05-25

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2023-05-25

Overview: Concerned about the political wrangling over servicing US debt, Fitch put the US on negative credit watch. Besides chin wagging and finger pointing, it has had little perceptible impact. The dollar is mostly higher, reaching new highs for the year against the Japanese yen, Chinese yuan, and the Antipodean currencies. The euro and sterling met retracement objective we have targeted (~$1.0735 and $1.2435, respectively). The greenback is...

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Yen Recovers from New 2023 Low, while Sterling Sets a New Low for the Month

2023-05-23

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2023-05-23

Overview:  The dollar is bid. Only the Japanese yen is holding its own against the greenback but only after it fell to new lows for the year. The Scandis and Antipodeans are the heaviest among the G10 currencies, while sterling has fallen to a new low for the month. The prospect of a rate hike tomorrow has not protected the New Zealand dollar much and it is off nearly 0.5%. Emerging market currencies are more mixed. Outside of the Russian rouble,...

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Yen and Yuan Fall to New Lows for the Year

2023-05-18

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2023-05-18

Overview: Some creeping optimism about the US debt ceiling, easing of pressure on bank shares, and a continued rise in US rates helped the dollar extend its recent recovery. Over the past two weeks or so, the US 2-year premium has risen 25-30 bp against Germany and nearly 25 bp against the UK. The 10-year US Treasury has risen from the lower end of its seven-month range (~3.30%) earlier this month to approach the upper end of the range that has...

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The Yen is Sold Despite Better than Expected Q1 GDP and the Greenback Pushes Above CNY7.0

2023-05-17

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2023-05-17

Overview: Better than expected US core retail sales and manufacturing output sent US rates higher and helped lift the greenback during the North American session after a heavier tone in Asia and Europe. The US two-year note rose to almost 4.12% and the 10-year note yield increased to 3.57%. Both are the best levels in two weeks. The dollar traded firmer against most of the major currencies and the Dollar Index approached the one-month high set on...

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Consolidative Session Marked by Weak Chinese Imports and White House Debt Ceiling Talks

2023-05-09

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2023-05-09

Overview: The market sentiment remains fragile. Equities are mostly lower. Japan was a notable exception, and concerns about China's economy after a sharp decline in imports took mainland and Hong Kong listed companies sharply lower. Europe's Stoxx 600 is giving back yesterday's 0.35% gain plus more. Bank shares are off 0.65% after rallying 4.20% over the past two sessions. US equity futures are heavier. Benchmark 10-year yields are mostly a couple...

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The Euro Stalled Near Its Best Level since April 2022 Ahead of ECB’s Decision

2023-05-04

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2023-05-04

Overview: Without making a commitment, the Federal Reserve opened the door to a pause in its tightening cycle and the market has concluded it is over. The dollar slumped to new lows for the move against sterling (and the Mexican peso), while euro stalled as it approached last week's high, which was the best level since April 2022. The dollar remains soft against most of the G10 currencies, today. The Norwegian krone is leading after the 25 bp hike...

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Fed Day

2023-05-03

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2023-05-03

Overview: A sharper than expected decline in US job openings and weaker factory orders coupled with intensifying bank stress sent ripples through the capital markets. The large US bank index fell 4.5% yesterday, the most in six weeks, while the regional bank index fell nearly 5.5%, its biggest loss since March 13. Both indices took out the March lows. The US 10-year yield unwound Monday's increase and the two-year note yield fell back below 4.0%...

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RBA Surprises with a Quarter-Point Hike

2023-05-02

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2023-05-02

Overview: A combination of a surprisingly strong prices paid component to the US manufacturing PMI, corporate supply, and US debt woes spurred an almost 15 bp spike in the US 10-year yield and 13 bp jump in the two-year yield. The rise in US rates appeared to lend the dollar support. The greenback's gains have been extended today, but a surprise hike by the Reserve Bank of Australia is seeing the Australian dollar (and New Zealand dollar) traded...

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Bank Stress Hobbles the Dollar, while Dissents Make the 50 bp Hike by Sweden less than Hawkish

2023-04-26

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2023-04-26

Overview: The re-emergence of bank stress reverberated through the US markets yesterday, downgrading the perceived chances of a Fed hike next week and sending the US 2-year yield sharply lower. The yield settled 13 bp lower, the largest drop in three weeks. The risk-off sent the US dollar higher against most of the major and emerging market currencies. Follow-through US dollar gains today has been mostly limited to the Australian dollar, where...

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Risk-Off Mood Dominates

2023-04-25

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2023-04-25

Overview:  Perhaps it was the extent of First Republic Bank's loss of deposits that were reported with earnings yesterday, but risk appetites dried up today. Asia Pacific equities were trounced outside Japan today. Hong Kong and mainland shares that trade there set the tone today falling 1.7%-1.9%. China's CSI 300 fell for the fifth consecutive session. Taiwan and South Korean markets fell more 1.4%-1.6%. Europe's Stoxx 600 is off almost 0.5%,...

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US Dollar Slumps and China Surprises with Twice the Expected Trade Surplus

2023-04-13

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2023-04-13

Overview:  The market took US short-term rates and the dollar lower after the CPI data, which was largely in line with expectations. On the one hand, the odds of a quarter-point hike next month increased slightly (73.6% vs. 71.6%) to 5.25%, but it reinforced that sense that it is last hike and that the Fed will unwind this hike and more before the end of the year. The year-end implied policy rate fell by about six basis points to 4.33%. The dollar...

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Fragile Calm Casts a Pall over the Capital Markets

2023-04-06

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2023-04-06

Overview: There is a fragile calm in the capital markets today ahead of the long holiday weekend for many. The poor US economic data yesterday and third consecutive decline in the KBW bank index weighed on risk sentiment. Most of the large bourses in the Asia Pacific region fell, with Hong Kong and India notable exceptions. In Japan, the Topix bank index fell 1.1% after a 1.9% decline yesterday and is now lower on the week. Europe's Stoxx 600 is...

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The Dollar Jumps Back

2023-03-24

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2023-03-24

Overview: The pendulum of market expectations has swung dramatically and now looks for 100 bp cut in the Fed funds target this year. That seems extreme. At the same time, the dollar's downside momentum has stalled, suggesting that the dollar may recover some of the ground lost recently as the interest rate leg was knocked out from beneath it. The euro twice in the past two days pushed through $1.09 only to be turned away. Similarly, sterling pushed...

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Banking Stress Eases

2023-03-21

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2023-03-21

Overview: The banking crisis is ebbing. The Bank of England and European Central Bank assured investors that the AT1 bonds are senior to equity claims, and Switzerland is a unique case. Bank share indices in the Europe and the US rose yesterday, even though the shares of First Republic Bank fell by 47% yesterday. The $123-stock at the end of last month reached almost $11 yesterday. It is trading around $14.75 pre-market. Global equities are...

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Swiss National Bank Support Steadies Market as ECB Faces Difficult Choice

2023-03-16

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2023-03-16

Overview: The pendulum of market psychology is swinging dramatically. Amid the US banking crisis, Credit Suisse's long-running pressures percolated back to top-of-mind, sending ripples through the capital markets, trigging a sharp slide in the euro. The SNB support is helping the markets calm today. The odds of a 50 bp hike by the ECB today have been cut to about 50% compared with a nearly 100% a week ago. The market has about a 66% chance of a 25...

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Investor Anxiety Continues to Run High even If More Comfortable ECB 50 BP Tomorrow and 25 bp Next Week by the Fed

2023-03-15

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2023-03-15

Overview: The capital markets remain unsettled. Asia-Pacific bourses rose, but European markets are sharply lower, with the Stoxx 600 off 1.3%, giving back the lion's share of yesterday's gains and US equity futures are lower. Benchmark 10-year yields are off 3-9 bp in Europe, with widening core-periphery yields. The yield on the 10-year US Treasury is off a dozen basis points to about 3.56%. Two-year yields are also sharply lower, led by the 15-16...

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Tumbling Tokyo Prices Gives Ueda Breathing Space

2023-03-03

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2023-03-03

Overview: Talk from two Fed officials yesterday, which seemed to validate market expectations eased the upward pressure on the dollar and helped equities launch a dramatic recovery. The market is pricing in a terminal rate near 5.50%, a little higher than the median dot in December. The S&P 500 posted a dramatic recover and posted a potential bullish key reversal. Its 0.75% closing gain was the largest advance in nearly three weeks. A large...

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