Tag Archive: EMU
RBA Surprises with a Quarter-Point Hike and German Factory Orders Disappoint
Overview: The Reserve Bank of Australia surprised
many with a quarter-point hike and German factory orders unexpectedly fell.
Reports suggest that China has asked banks to cut deposit rates. The next
result is the Australian dollar is the strongest currency in the G10 and helped
lift the Canadian dollar ahead of the Bank of Canada meeting tomorrow. Australian
stocks sold off (~1.2%) while large markets outside of China rose in the region.
Europe's...
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Dollar Steadies After Fed’s Push Back
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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Debt Ceiling Progress, Weak Chinese and Japanese Data, and Soft EMU CPI, Sends the Dollar Higher
Overview: The US budget agreement passed a House
committee vote by 7-6 and the bill is scheduled to be voted on by the entire
House today before the Senate take it up with the idea of passing it Monday.
The procedural step plus the weakness of China and Japanese data and soft CPI
figures from Europe has lifted the greenback against all the major currencies. The
euro and Australian dollar have been sold to new lows, while the dollar holds
ever so...
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Yen Recovers from New 2023 Low, while Sterling Sets a New Low for the Month
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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The Yen is Sold Despite Better than Expected Q1 GDP and the Greenback Pushes Above CNY7.0
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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Markets Catch Breath as Politics Trumps Economics
Overview: The dollar is mostly consolidating last
week's gains. The big news has been on the political front. Thailand's
opposition parties dealt the military-led government a powerful blow. But in
Turkey, Erdogan staved off a serious challenge and a run-off later this month
looks likely, while his party maintained its parliamentary majority. Tensions
over arms shipments to Russia have eased between the US and South Africa,
giving the rand a boost....
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The Greenback Remains Heavy Ahead of the Employment Report
Overview: The US dollar is weaker against all the
G10 currencies today but the Swiss franc. The backdrop seems fragile even
though a few regional bank shares have done better in after-hours trading and
Apple's earnings were received well by the markets. Due to seasonal factors and
other considerations, many are warning about a US jobs report, even though
ADP's estimate surprised to the upside earlier this week. Equities were mixed
in the Asia...
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The Euro Stalled Near Its Best Level since April 2022 Ahead of ECB’s Decision
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
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
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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Yen Slumps on Cautious BOJ
Overview: The market took a dovish message away from
the Bank of Japan and sent the dollar above JPY136, its best level since March
10 and spurred a sharp rally in JGBs. Japanese equities led the rally among the
Asia Pacific markets. Europe has not been able to follow suit. It disappointed
with Q1 GDP (0.1% rather than 0.2%). The Stoxx 600 is of about 0.3%, leaving it
off about 1.3% this week, its first weekly loss since the middle of March. US...
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Markets Becalmed Ahead of Key Data and BOJ Meeting Outcome
Overview: Some regional bank earnings were weighing
on investor sentiment but reports that the FDIC is running out of patience with
First Republic Bank to strike a private deal and could decide to downgrade its
assessment. This could lead to limits on its ability to use the Fed's emergency
facilities. Other reports said that the bank's advisers are securing
commitments to buy a new stock as part of a broader restructuring. Still, while
the KBW bank...
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Greenback Pares Yesterday’s Gains
Overview: As the long-holiday ends, risk appetites
have returned. Equities and yields are mostly higher. The dollar is seeing
yesterday's gains pared. Yesterday's setback in the yen helped lift Japanese
stocks, with the Nikkei advancing 1%. Several other markets in the region also
gained more than 1%, including Australia and South Korea. China's CSI was an
exception. It slipped fractionally. Europe's Stoxx 600 is up nearly 0.6%
through the European...
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Pressure Returns to Bank Shares and seems to Help Propel Gold Higher
Overview: There are three themes today. First, the
sharp decline in US rates seen yesterday (-14 bp on the two-year yield) on the
back disappointing economic data seemed a bit exaggerated and the two-year
yield has bounced back to almost 3.90% from around 3.81%. This appears to be
helping the dollar consolidate today. Second, bank shares are coming under
renewed pressure. The US KBW bank index fell almost 2% yesterday after a 0.5%
decline on...
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OPEC+ Surprises while Manufacturing Remains Challenged
Overview: News of OPEC+ unexpected output cuts saw May WTI gap
sharply higher and helped lift bond yields. May WTI settled near three-week
highs before the weekend near $75.65 and opened today near $80. It reached
almost $81.70 before stabilizing and is straddling the $80 area before the
North American session. The high for the year was set in the second half of
January around $83. Benchmark 10-year yields are up 2-5 bp points. The 10-year
US...
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March: Going Out like A Lamb after Wrestling with a Lion
Overview: The banking stress that roiled the markets
this month has eased. However, the emergency lending by the Federal Reserve,
vias the discount window and new Bank Term Funding Program hardly slowed in the
past week ($152.6 bln vs. $163.9 bln). Money markets took in more funds. Almost
$305 bln has flowed to them over the past three weeks. The US KBW bank index is
up 3.75% this week coming into day (after pulling back 1.2% yesterday). Europe's...
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The Dollar Jumps Back
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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Tumbling Tokyo Prices Gives Ueda Breathing Space
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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Higher for Longer Helps the Dollar while Weighs on Equities
Overview: The jump in prices paid in yesterday's US
ISM manufacturing coupled with the stronger eurozone inflation, with a new
cyclical high reported in the core rate, underscores the market theme of
higher-for-longer. This is seen as dollar supportive but also negative for
risk-assets, including and especially equities. European benchmark 10-year
yields are up another couple of basis points today and the 10-year US Treasury
yield is pushing above...
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Doubt Chinese Data, but Its Stronger-than-Expected PMI Lifts Risk Assets
Overview: Many investors may be skeptical of the
accuracy of Chinese data, but its stronger than expected February PMI animated
the animal spirits and bolstered risk-taking appetites. Asia Pacific equities
jumped, led by the 4.2% rally in Hong Kong and a 5% surge in the index that
tracks mainland shares. Among the long bourses Australia and Singapore slipped,
and South Korean markets were closed for a national holiday. Europe's Stoxx 600
is posting...
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