Tag Archive: developed markets

Our Latest Thoughts on the Dollar

2020-06-10

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2020-06-10

Dollar Index, 2015-2020
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

2020-05-30

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2020-05-30

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

2020-05-28

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2020-05-28

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

2020-05-02

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2020-05-02

Dollar's YTD Performance, 2020
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

2020-04-27

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2020-04-27

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

2020-04-26

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2020-04-26

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?

2020-04-10

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2020-04-10

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

2020-03-30

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2020-03-30

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

2020-03-27

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2020-03-27

ECB Balance Sheet Total Assets, 2010-2019
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

2020-03-23

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2020-03-23

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

2020-03-11

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2020-03-11

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

2020-03-09

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2020-03-09

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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Updated Democratic Primary Timeline

2020-03-05

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2020-03-05

RCP Betting Average
Super Tuesday has come and gone. Bloomberg has suspended his campaign after an extremely poor showing, and Warren is expected to follow suit soon. Here is our updated take on the likely Democratic candidate.

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Drivers for the Week Ahead

2020-03-02

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2020-03-02

The dollar has softened as Fed easing expectations have picked up. Late Friday, Chair Powell issued an unscheduled statement saying the Fed is monitoring the virus and will act as appropriate. This is a big data week for the US; the Fed releases its Beige Book report Wednesday. Super Tuesday comes this week; Bank of Canada meets Wednesday.

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Seven Big-Picture Considerations for Covid-19

2020-02-26

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2020-02-26

Yuan Performance vs. Major Trading Partners, 2020
Below is a non-exhaustive list of medium- and long-term implications from the Covid-19. We discuss the yuan, China’s competitiveness, its position in the global production chains, the impact on the Phase One trade deal, and rising financial stability risks. Globally, the virus will bring about a new wave of fiscal spending and revive the discussions about the limits of monetary policy.

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DM Equity Allocation Model For Q1 2020

2020-02-21

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2020-02-21

Developed equity markets remain near the highs despite mounting concerns about the impact of the coronavirus. MSCI World made a new all-time high last week near 2435 and is up 2.5% YTD. Our 1-rated grouping (outperformers) for Q1 2020 consists of Ireland, Israel, New Zealand, Spain, and Switzerland.

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Drivers for the Week Ahead

2020-02-17

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2020-02-17

We get the first February data from the US manufacturing sector this week; the US economy remains strong; FOMC minutes will be released Wednesday. Canada reports some key data this week. Preliminary eurozone February PMI readings will be reported Friday; UK has a busy data week.

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Drivers for the Week Ahead

2020-02-10

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2020-02-10

Risk-off sentiment intensified last week; the dollar continues to climb. This is another big data week for the US; the US economy remains strong. Fed Chair Powell testifies before the House Tuesday and the Senate Wednesday; the Senate holds confirmation hearings for Fed nominees Shelton and Waller Thursday.

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Some Thoughts on the Latest Treasury FX Report

2020-01-15

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2020-01-15

FX Report
The US Treasury’s latest “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” report no longer considers China a currency manipulator. The underlying message is that the Trump administration will continue to use an ad hoc “carrot and stick” approach to improve US access to the domestic markets of its major trading partners.

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Hard Brexit Redux?

2019-12-19

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2019-12-19

The risks of a hard Brexit are perhaps higher than markets appreciated. Here, we set forth some possible scenarios as to what may unfold after the January 31 deadline. Uncertainty is likely to be protracted and markets hate uncertainty. As such, we see UK assets continuing to underperform.

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