Tag Archive: EMU
Position Squaring Ahead of US Data Helps the Dollar Recoup Some Recent Losses
Overview: Position-squaring ahead of today's US
personal consumption data and perhaps tomorrow's jobs report is giving the
dollar a firmer profile against most G10 and emerging market currencies. The
Scandis have been the hit hardest and are off 0.75%-0.85%. The euro and
sterling about 0.35%-0.45% lower. The yen is the only G10 currency that is
slightly firmer. The dollar-bloc is nursing small losses (0.10%-0.15%). Despite
the firmer than expected...
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Market Awaits US Data and Leadership
Overview: The dollar staged a major technical
reversal yesterday, in a dramatic reaction to a considerably weaker JOLTs
report than expected, spurring a large drop in US interest rates. And this is
despite press reports that the participation rate in the survey is half of what
was three years ago. We suspect the price action said as much about market
positioning as it did about the data. The path to the US jobs data on Friday
goes through...
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Still No Follow-Through Dollar Buying After Last Week’s Surge
Overview: The dollar was threatening to break higher
at the end of last week, and the euro and sterling closed below key supports. However,
so far this week, the greenback is consolidating and has not seen
follow-through buying. The key data this week, US consumption and jobs, and the
eurozone's CPI still lay ahead. The Antipodeans and Norwegian krone enjoy a
firmer today. A 0.8% contraction in Sweden's Q2 GDP was not as deep as had been
feared,...
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Dollar Bid and Rates Firm Ahead of Powell
Overview: The euro and sterling took
out important chart levels near $1.08 and $1.26, respectively. They have
steadied in the European morning but remain fragile ahead of Fed Chair Powell's
speech at Jackson Hole. A couple of ECB officials sounded a bit hawkish and a
less hawkish comment by ECB President Lagarde could renew the pressure on the
euro. The market appears to be going into Powell's speech with a hawkish bias
and the odds of a hike next...
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Dollar Eases, Stocks and Bonds Advance
Overview: For the first time in more than a week,
North American dealers will take to their posts with the dollar softer against
all the G10 and most of the emerging market currencies. Despite stepped up
efforts by Chinese officials and a firmer yen, the yuan remains on the
defensive and is one of the handful of emerging market currencies softer on the
day. Stocks and bonds are mostly higher too. The yuan might not be benefitting
from a softer...
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US Jobs Report and OPEC Statement Featured Ahead of the Weekend
Overview: The
capital markets are calmer today but the US (and Canadian) jobs data stand in
the way of the weekend. While equity markets are firmer, the rise in yields
continues with new highs for the week being recorded today. European benchmark
yields are 2-3 bp higher and the US 10-year Treasury yield is approaching 4.20%.
Most of the large market in the Asia Pacific region advanced, but South Korea
and Taiwan where the superconductor...
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Markets Remain Unsettled, Bonds and Stocks Retreat, Dollar Gains Ahead of BOE
Overview: The global
capital markets remain unsettled. The combination of the BOJ adjustment of its
monetary policy, Fitch's downgrade of the US to AA+, ahead of a flood of
supply, and new measures by China have injected volatility into the summer
markets. The US dollar has extended it gains today against the G10 currencies
and most emerging market currencies. The yen has recovered a bit after the BOJ
stepped in and bought JGBs for the second time...
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RBA Holds Fire, Greenback Rebounds
Overview: The dollar has
come back bid. It is rising against all the major currencies today. The Reserve
Bank of Australia left rates steady and the poor Chinese Caixin PMI is weighing
on the Australian dollar, which is off about 1.25% today. Sterling is the best
G10 performer, off about 0.1%. Perhaps, the BOE's meeting on Thursday is
helping to deflect some of the selling pressure. Emerging market currencies are
also nearly all lower, led by the...
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BOJ Moves to Slow JGB Sell-Off, while Month-End is Making for Subdued Price Action in FX outside the Yen
Overview: The Bank of Japan took the market by
surprise with its adjustment of the cap on the 10-year yield before the
weekend, and then stepped in to buy the government bond as yields rose in
reaction today. The move helped lift the dollar to JPY142.50. from where it had
settled on Friday (~JPY141.15). The dollar is mostly softer, however, with only
the yen and Swiss franc weaker. The Australian dollar is leading the other
currencies higher ahead...
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Bond Rally Continues, Greenback Consolidates with Softer Bias
Overview: The main development in the capital
markets is the decline in yields. In Europe, benchmark 10-year yields are off
7-11 bp today, extending the move that began last week. The 10-year Germany
Bund yield peaked last Thursday near 2.68% and is near 2.40% now. Similarly,
the 10-year Italian yield has fallen from 4.42% to below 4.05% today. The
10-year US Treasury yield fell in five of the last six sessions and is off
almost five basis points...
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Sobering PMI Readings Sap Risk Appetites
Overview: As US markets prepare to re-open from yesterday's holiday, the dollar
is trading mostly higher, though the euro and yen are steady to slightly firmer.
Narrow ranges are prevailing. The Canadian and Australian dollars are
exceptions and are off about 0.3%. Emerging market currencies are mostly lower,
including Russia, China, South Africa, and Turkey. Final service and composite
PMIs were mostly revised lower in Japan, Australia, and the...
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The Greenback Starts H2 on a Firm Note
Overview: The dollar is recovering from the
month-end losses seen at the end of last week. Only the New Zealand dollar
among the G10 currencies is holding its own. Japanese reports indicate that Tokyo
is in contact with the US Treasury about intervention, which is injecting a
note of caution as the greenback holds below JPY145.00. Chinese officials also
appear to be stepping up their efforts to stabilize the yuan. Among emerging
market currencies,...
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Market Continues to Converge With Fed’s Forward Guidance
Overview: A key development in recent days has been
the market's convergence with the Federal Reserve's forward guidance regarding
scope for two quarter-point hikes in the second half. The US two-yield is up
about six basis points today, extending yesterday's 15 bp increase. It is
approaching 5%. The Fed funds futures strip implies one hike has been fully
priced in and about a third of the next one. The dollar has risen against all
the G10...
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PBOC Fixes Dollar Lower, but It Recovers Against the Yuan, Riksbank Hikes and Market Yawns
Overview: The US dollar is narrowly mixed against
the G10 currencies. Stronger than expected Australian retail sales helped
steady the currency after the soft inflation data took it down. Sterling has
also steadied after it suffered its largest loss yesterday (~0.9%) in over a
month. Sweden's 25 bp rate hike has not given the krona much of a lift. Central
European currencies lead the emerging market currencies higher, while the PBOC
set the...
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Greenback Jumps on Weak Flash PMIs
Overview: As the market reluctantly edges toward the
Fed's guidance, the disappointing PMIs from Europe (but also Japan and
Australia) helped boost the greenback. The Dollar Index is trading at seven-day
highs above 103 after briefly dipping below 102 to set a new low since mid-May
yesterday. The unwinding of cross positions is helping the yen hold its own
today as it consolidates near its worst level of the year. The surging dollar
and risk-off...
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Scandis and Antipodeans Lead the Greenback’s Recovery
Overview: The market continues to resist the Fed's
signal that another 50 bp of hikes may be necessary to ensure inflation is
headed toward its target. Previously, the market had rate cuts priced in, and
it took some time for the Fed's push back to be accepted. The market converged
with the Fed, and this helped the dollar recover. We suspect a similar pattern
to play out again. The market does not have even one of the two Fed hikes
discounted. As...
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Fed Day: Skip = Hawkish Pause, but Market Says Finito
Overview: The year-end effective Fed funds rate
implied in the futures market is about 5.11%. The rate has been averaging 5.08%
since the Fed hiked rates last month The Fed may go to pains to explain that
the steady that to be announced later today is just a pause to get a better
read on the economy, the market favors this to be the end of the tightening
cycle. The dollar is trading softer against nearly all the G10 currencies. Emerging
market...
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Japan’ Q1 GDP was Revised Up, While the Eurozone’s was Revised Down
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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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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