Tag Archive: Bank of England

Narrow Ranges in FX: Calm before the Storm?

2023-05-10

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2023-05-10

Overview: Equity markets are mostly weaker, and benchmark 10-year yields are a little softer. The foreign exchange market is subdued ahead of today’s US CPI. The large bourses in Asia Pacific region with the exception of India worked lower and Europe’s Stoxx 600 is off for the second consecutive session. US futures have a heavier bias. Yesterday the US bank share indices filled the gap created at the end of last week but recovered. Today’s price...

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Market Hears Dovish Fed Hike and Sells Dollars

2023-03-23

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2023-03-23

Overview:  The dollar remains under pressure following the Federal Reserve's rate hike. The market thinks it heard that the Fed was done hiking, even though Fed Chair Powell held out the possibility that "some additional firming may be necessary."  The Norwegian krone is the strongest of the G10 currencies today, up more than 1%, spurred by a 25 bp hike and a commitment to do more. The Dollar Index briefly traded below 102.00 for the...

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Terms of UBS Acquisition Wipes out Additional Tier 1 Capital and Spurs Fresh Concerns

2023-03-20

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2023-03-20

Overview:  UBS takeover of Credit Suisse, the sale of Signature bank assets, and the daily dollar swaps could have helped stabilize the budding banking crisis. However, the wipeout of the additional tier 1 capital cushion (16 bln Swiss francs) at Credit Suisse has raised concern about the vulnerability of other such assets, which post-GFC is a $275 bln market in Europe. Asia Pacific equities was a sea of red, led by a 2.65% drop in the Hang Seng...

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The Dollar Pares Yesterday’s Gains but Near-term Change in Sentiment may be at Hand

2023-02-03

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2023-02-03

Overview: The dollar remained firm yesterday, even after the ECB's hawkish stance, reaffirming its intention to hike rates by another 50 bp next month. We had expected the greenback to have been sold in North America yesterday. That this did not materialize warns that despite its pullback in Asia and especially Europe today, that near-term sentiment may be changing with the Fed and ECB meetings over and die cast for next month, where the Fed is...

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North America likely will Sell USD Bounce Seen in Europe

2023-02-02

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2023-02-02

Overview: The failure of the Federal Reserve to push harder against the market's dovish views and the easing of financial conditions encouraged a risk-on trade that saw the dollar and yields slump and equities rally. There has been limited follow-through dollar selling today, and a small recovery ahead of the Bank of England and European Central Bank meetings.

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Will What the Fed Says be More Important than What it Does?

2023-02-01

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2023-02-01

Overview:  The focus is squarely on the Federal Reserve today. There is nearly universal agreement that it will lift the target by 25 bp. The market is inclined to see the shift as a sign that the Fed is nearing the end of its tightening cycle, and sees, at most, one more quarter-point hike. Despite the Fed's warnings, including in the December FOMC minutes, about the premature easing of financial conditions, the market has done precisely that.

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European Rates Continue to Surge, Sending Stocks Spiraling Lower

2022-12-16

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2022-12-16

Overview: Seven of the G10 central banks pumped the brakes between last week and this week as they purposely seek to push demand back into line with supply. And there are more signs that they are succeeding in weakening growth impulses. The dramatic surge in European bond yields continues today with 10-year rates mostly rising another 13-15 bp.

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The Greenback Recovers After the Initial Post-Fed Wobble

2022-12-15

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2022-12-15

Overview: The US dollar has come back bid after losing ground against most currencies as the markets reacted to the FOMC decision and press conference. The Antipodeans and Scandis have been tagged the hardest, illustrating the risk-off mood, and arguably the weakening growth prospects. Countries that peg their currencies to the dollar have hiked rates, as has the Philippines and Taiwan. The Swiss National Bank and Norway have also lifted policy...

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Markets Await Central Banks and Data

2022-12-12

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2022-12-12

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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Five G10 Central Banks Meet and US CPI on Tap

2022-12-10

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2022-12-10

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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Caution Advised in Chasing FX, but Wow!

2022-11-11

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2022-11-11

Overview:  The softer than expected US inflation figures unleashed significant market adjustment that continue to ripple through the capital markets. The modification of some of China’s Covid stance may have also fanned some optimism, but we suggest that measures are modest tweaks, and the surge in infections will prevent the end of disruptive restrictions.

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US Dollar Offered Ahead of the Employment Report

2022-11-04

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2022-11-04

Overview: Risk appetites have returned but may be tested by the US jobs report. News of progress with US auditors in China helped lift Hong Kong and Chinese equities. Most of the large bourses in the region also rose. Europe’s Stoxx 600 is up a little more than 1% near midday after shedding 1.3% over the past two sessions. US futures also are trading with an upside bias. Benchmark 10-year yields are mostly a little softer today. The 10-year US...

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Fed’s Hawkishness Roils the Capital Markets

2022-11-03

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2022-11-03

Overview: The Fed delivered the expected 75 bp rate hike, and although it says it will take into account the cumulative effect of past hikes and their lagged impact, the takeaway has been a hawkish message. Risk appetites have evaporated. The dollar is stronger, while stocks and bonds have been sold. Japan’s markets were spared due to the national holiday, but the other large markets in the area were sold, lead by the 3% decline in the Hang Seng....

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RBA, FOMC, BOE Meetings Featured while the Greenback’s Recovery can be Extended

2022-10-29

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2022-10-29

The week ahead is important from a macro perspective. The data highlights include China's PMI, eurozone preliminary October CPI and Q3 GDP, and the US (and Canadian) employment reports. In addition, the Federal Reserve meeting on November 2 is sandwiched between the Reserve Bank of Australia meeting and the Bank of England meeting.

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Is Central Banks’ License to Print Money About to Expire?

2022-10-29

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2022-10-29

One of the biggest reasons for people deciding to buy gold bars or to own silver coins is because of the folly of central banks and government. It seems bizarre to most people that we are all aware that money doesn’t grow on trees and yet those responsible for financial stability have forgotten this basic life-lesson.

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Greenback Holds Above JPY150, while BOJ goes MIA

2022-10-21

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2022-10-21

Overview: The continued surge in US rates and inability of the equity market to sustain gains saw the post-Truss sterling rally unwind amid a broader recovery of the dollar. Sterling has been sold to new lows for the week.

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Week Ahead: Focus Shifts away from the US after Robust Jobs Data and Stronger than Expected Inflation

2022-10-15

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2022-10-15

The latest US employment and inflation figures are passed. The market is confident of a 75 bp rate hike next month. While a 50 bp in December is still the odds-on favorite, the market has a slight chance (~15%) of a 100 bp move instead after the robust jobs report and stronger-than-expected September CPI.

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Can We Look Past US CPI ?

2022-10-13

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2022-10-13

Overview: There seems to be a nervous calm today ahead of the US CPI. The dollar is hovering near JPY147 but the risk of BOJ intervention in the North American session seems slim. The BOE’s emergency Gilt buying operation ends tomorrow and UK bonds yields have tumbled. While equities in the Asia Pacific region lost ground, Europe’s Stoxx 600 is trying to snap a six-day decline.

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The Tragedy of the Commons

2022-10-12

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2022-10-12

Overview: The dramatic moves spurred by the BOE maintaining the end of the week deadline for its Gilt purchases, which have been quite modest given its wherewithal, have calmed. Sterling is firmer on the day, though long-end Gilt yields are higher. The dollar has pushed above JPY145.90, where the BOJ intervened last month.

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Bank of England Steps in to Buy Inflation-Linked Bonds for the First Time

2022-10-11

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2022-10-11

Overview:  The dollar continues to ride high. It reached its highest level against the yen since the recent intervention. The Canadian dollar has fallen to its lowest level in two-and-a-half years and the New Zealand dollar is approaching the 2020 extreme.

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