Tag Archive: developed markets

Drivers for the Week Ahead

Dollar losses are accelerating; the virtual IMF/World Bank meetings begin Monday. A big stimulus package before the election still seems unlikely; there are a fair amount of Fed speakers during this holiday-shortened week.

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Drivers for the Week Ahead

The US political outlook has been upended by recent developments; lack of a significant safe haven bid for the dollar so far is telling. This is a very quiet week in terms of US data; FOMC minutes will be released Wednesday; there is a full slate of Fed speakers.

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ECB Preview

The ECB meets tomorrow and is widely expected to stand pat. Macro forecasts may be tweaked modestly and there are some risks of jawboning against the stronger euro, but it should otherwise be an uneventful meeting. Looking ahead, a lot of room remains for further ECB actions.

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Drivers for the Week Ahead

The dollar is likely to remain under pressure after Powell’s dovish message at Jackson Hole. August jobs data Friday will be the data highlight of the week. The Fed releases its Beige Book report Wednesday; Powell will face many questions about the Framework Review that he unveiled at Jackson Hole.

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Where Has All the Carry Gone?

Despite broad-based dollar weakness, EM currencies have not fully participated in the risk on environment that’s now in place. The good news is that fundamentals matter again. The bad news is that there are a lot of EM countries with bad fundamentals, and the secular decline in carry no longer gives these weaklings any cover.

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Recent Trade Developments Suggest Some Caution Ahead Warranted

There’s never a good time for a trade war. Yet here we are on the cusp of one between the US and the EU over unfair aircraft subsidies and comes at a time when renewed COVID-19 outbreaks are making the global economic outlook even cloudier. These developments suggest some caution ahead is warranted for risk assets like EM and equities.

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Drivers for the Week Ahead

There are some indexing events this week that could add to market volatility; the IMF will release updated global growth forecasts Wednesday. The regional Fed manufacturing surveys for June will continue to roll out; Fed speaking engagements are somewhat limited this week.

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SNB Preview

The Swiss National Bank meets Thursday. It is widely expected to maintain its current policy stances but is likely to push back against CHF strength. Here, we highlight here the potential choices that lie ahead for the SNB.

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Our Latest Thoughts on the Dollar

The dollar remains under pressure, due in large part to the Fed’s aggressive efforts to inject stimulus. We see dollar weakness persisting near-term. From a longer-term perspective, we note that the greenback remains largely rangebound and is unlikely to fall below its 2018 lows.

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Asia Lockdowns vs. Re-Openings

We apply the five-factor model used to analyse lockdowns and openings in developed markets and in Latin America to Asian Markets. It evaluates the restrictions imposed by different countries in the region, how they compare in terms of severity of lockdown, and where they are heading in the spectrum of reopening. The scale we use measures grade restrictions from 1 (open) to 4 (closed) across the following five factors: (a) schools/universities, (b)...

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Hong Kong Turbulence Likely to Rise as US-China Relations Worsen

Recent moves by China call into direct question the “one country, two systems” approach.  Hong Kong assets have held up surprisingly well but we see turbulence ahead as US-China relations are set to deteriorate further.

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Some Thoughts on Recent Foreign Exchange Intervention

Dollar softness this week will take some pressure off of the foreign currencies but it’s too early to sound the all clear.  This piece focuses on how  central banks around the world may be intervening to influence their currencies.  Most of the world, particularly EM, is grappling with supporting weak currencies but a select few are dealing with stronger currencies. This is a very opaque process and so we are simply making our best guesses.

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Drivers for the Week Ahead

The FOMC meets Wednesday; first look at Q1 US GDP comes out Wednesday; weekly jobless claims Thursday are expected at 3.5 mln vs. 4.427 mln last week. Italy dodged a bullet last Friday; ECB meets Thursday; eurozone reports Q1 GDP and April CPI data ahead of the ECB decision; Sweden’s Riksbank meets Tuesday.

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Thoughts on the Potential Market Impact of US Downgrades

Our sovereign rating model suggests the US will lose its AAA/Aaa rating.  With fiscal stimulus efforts continuing with this latest $484 bln package, the case for downgrades just keep getting stronger but the timing is unclear.  How might markets react?  We look back to 2011 for some clues.

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Lessons from Singapore?

Singapore has been hailed for its quick response to the coronavirus that limited initial infections, but the outlook is shifting.  Despite their early success, they will have to revert to a lockdown.  Can Singapore’s experience offer any lessons for European and the US policymakers?

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Drivers for the Week Ahead

Markets continue to digest the implications of the Fed’s bazooka moment last week. The data highlight this week will be March jobs data Friday; key manufacturing sector data will come out earlier in the week. On Friday, BOC delivered an emergency 50 bp rate cut to 0.25% and started QE.

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ECB Approaching its Bazooka Moment

The ECB appears to be moving closer to activating Outright Monetary Transactions (OMT).  Despite being part of Draghi’s “whatever it takes” moment, OMT has never been used.  If the Fed’s open-ended QE is seen as dollar-negative, then OMT should be seen as euro-negative.

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Drivers for the Week Ahead

Risk sentiment is likely to remain under pressure this week as the impact of the coronavirus continues to spread; demand for dollars remains strong. As of this writing, the Senate-led aid bill has stalled; the US economic outlook is getting more dire; Canada is experiencing similar headwinds. This is a big data week for the UK; eurozone March flash PMIs will be reported Tuesday; oil prices continue to slide.

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ECB Preview, March 11

Christine Lagarde will chair her third ECB meeting Thursday.  She faces growing risks of recession but also widespread skepticism within the ECB regarding the efficacy of negative rates.  Markets have priced in several rate cuts this year.  Here, we discuss what measures the ECB may take this week.

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Drivers for the Week Ahead

Risk-off sentiment continues to build as the coronavirus spreads. Fed easing expectations continue to intensify; February inflation readings for the US will be reported this week. The ECB meets Thursday and markets are split; the stronger euro is doing the eurozone economy no favors. The UK has a heavy data release schedule Wednesday; UK government also releases its budget that day.

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