Tag Archive: EMU

Doubt Chinese Data, but Its Stronger-than-Expected PMI Lifts Risk Assets

2023-03-01

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2023-03-01

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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Fed Tightening Seen Extending into Q3

2023-02-23

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2023-02-23

Overview:  The prospect that the Federal Reserve tightening cycle continues into early Q3 is underpinning the greenback today against most of the G10 currencies. The dollar bloc is the notable exception, and they are posting minor gains, perhaps encouraged by the firmer equity markets. The minutes of this month’s FOMC meeting appear to show wide support for quarter point hikes going forward and there did not seem to be much discussion of the...

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Upside Surprise in UK’s Flash PMI and Better-than-Expected January Public Finances Lift Sterling

2023-02-21

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2023-02-21

Overview: Rising interest rates are weighing on risk appetites and the dollar is broadly stronger. Sterling is a notable exception after a stronger than expected flash PMI and better than expected public finances. The correlation between higher US rates and a weaker yen is increasing and the greenback looks poised to rechallenge the JPY135 area. A slightly better than expected preliminary PMI and hawkish minutes from the recent RBA meeting has done...

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Dramatic Swing in Sentiment Extends the Greenback’s Rally

2023-02-17

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2023-02-17

Overview:  A series of strong US high-frequency data points after a poor finish to last year has spurred a dramatic shift in market expectations. And talk among a couple of (non-voting) FOMC members of a 50 bp hike has provided added fodder. The greenback is extending its recovery today against all the major currencies, with the Australian and New Zealand dollars hit the hardest. Emerging market currencies have also been knocked back. This is part...

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US Dollar Comes Back Better Bid

2023-02-15

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2023-02-15

Overview: Although the US January CPI was in line with expectations, the year-over-year rate was a little firmer than expected. Still, the measure that Fed Chair Powell has underscored, core services, excluding shelter, moderated with a 0.3% month-over-month gain. US rates shot up and this lent the dollar support, while weighing on equities and risk sentiment. The US two-year note yield rose to almost 4.64% yesterday, the highest in three months....

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No Turn Around, but Consolidation Featured

2023-02-07

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2023-02-07

Overview:  After large moves yesterday, the capital markets ae quieter today. Stocks are mostly firmer, and the 10-year US yield is a little softer near 3.62%. Strong nominal wage increases in Japan and a hawkish hike by the Reserve Bank of Australia helped their respectively currencies recover, though remain within yesterday's ranges. The euro briefly traded below $1.07, and sterling has been sold through $1.20. That said, a consolidative tone is...

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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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Position Adjustments at Month-End and Ahead of FOMC Outcome Lifts the Greeenback

2023-01-31

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2023-01-31

Overview: A combination of month-end adjustments and positioning ahead of the outcome of tomorrow's FOMC meeting has taken the shine off equities and has helped lift the dollar. On the heels of yesterday's sharp decline on Wall Street, several large markets in the Asia Pacific region, including China's CSI 300, the Hang Seng, and both South Korea's Kospi and Taiwan's Taiex fell by more than 1%. Although the eurozone eked out a small expansion in Q4...

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No Follow-Through Euro Buying while S&P Holds Yesterday’s Breakout

2023-01-24

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2023-01-24

Overview:  A quiet consolidative session has been recorded so far today as North American leadership is awaited. The preliminary PMI readings are mixed. Japan and the eurozone look somewhat better, but Australia and the UK disappointed.  The dollar is trading with a mostly firmer bias, but largely confined to yesterday's ranges.  The markets seem to be looked ahead toward next week's Fed, ECB, and BOE meetings, and the return of China from this...

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Greenback Consolidates Near Recent Lows Ahead of Tomorrow’s US CPI

2023-01-11

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2023-01-11

Overview: Fed Chair Powell did not push against the easing of US financial conditions when he ostensibly had an opportunity yesterday. This coupled with expectations of another decline in the US CPI, which will be reported tomorrow, has kept the greenback mostly consolidating the losses seen last Friday and Monday.

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The Dollar Jumps

2023-01-03

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2023-01-03

Overview: Market participants have returned from the New Year celebrations apparently with robust risk appetites. Equities and bonds are rallying, and the dollar has surged higher. The markets seem to be looking past the surge in China's Covid cases and anticipates a recovery, helping Chinese equities lead Asia Pacific bourses higher, where Japanese markets are still on holiday.

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Chinese Yuan Jumps While the Dollar recovers After Losses were Extended Against the Euro and Sterling

2022-12-05

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2022-12-05

Overview: The markets remain hopeful about a re-opening in China and continue to pour into Chinese stocks on the mainland and in Hong Kong. The index of Chinese companies that trade in the US rose nearly 22.4% last week. Large bourses in the Asia Pacific region were mixed, but China and Hong Kong stand out. Europe’s Stoxx 600 is nursing a small loss for the second consecutive session. US equity futures have a slightly heavier bias. European 10-year...

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What Did Powell Say?

2022-12-01

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2022-12-01

Overview:  Asia Pacific stocks rallied on the heels of the surge in US equities. China’s CSI 300 led the large bourses higher with a 1% advance. Europe’s Stoxx 600 is matching yesterday’s gain of a little more than 0.6%, while US futures are a touch softer. European yields are 9-13 bp lower, with the peripheral premiums shrinking.

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Hope Springs Eternal in China

2022-11-30

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2022-11-30

Overview: Hope that the recent events in China are cathartic continues to lift risk appetites. Led by Hong Kong and mainland shares that trade there, the large bourses in the Asia Pacific region rallied. Japan, where macro data continues to disappoint, was the notable exception. Europe’s Stoxx 600 is snapping a three-day down draft and is up about 0.6% in late morning turnover. US futures are trading with a slightly firmer bias.

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China Shakes Markets, Euro Shakes it Off

2022-11-28

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2022-11-28

Overview: The surging Covid cases in China and the protests in several cities seemed to set the tone for today’s session. Equities are lower. China, Hong Kong, Taiwan, and South Korea were marked down the most. Of the large bourses, only India escaped unscathed. Europe’s Stoxx 600 is off more than 0.8% and US futures are poised to gap lower. Bond markets are quieter. The 10-year US Treasury yield is off a little more than one basis point to around...

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US Jobs and Eurozone CPI Highlight the Week Ahead

2022-11-26

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2022-11-26

Two high-frequency economic reports stand out in the week ahead:  The US November employment report and the preliminary eurozone CPI. The Federal Reserve has deftly distanced itself from any one employment report. As a result, it would take a significant miss of the median forecast (Bloomberg survey) to alter market expectations for a 50 bp hike when the FOMC meeting concludes on December 14.Economists are looking for around a 200k increase in US...

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Calm Markets with Japan on Holiday Today and the US Tomorrow

2022-11-23

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2022-11-23

Overview: The capital markets are quiet today with Japan on holiday and the US on holiday tomorrow. Asia Pacific equities were mostly firmer after yesterday’s rally on Wall Street. Europe’s Stoxx 600 is about 0.25% higher and at its best level in three months. US futures are steady to slightly higher. Benchmark 10-year yields are little changed. The dollar is narrowly mixed against the major currencies, with Scandis leading the way. Sweden is...

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Consolidative Session, even if Not Turn Around Tuesday

2022-11-22

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2022-11-22

Overview: The US dollar is trading with a somewhat heavier bias after bouncing higher yesterday. All the G10 currencies are higher, led by the New Zealand dollar, where the central bank is expected to hike first thing tomorrow. Most emerging market currencies are also firmer. Those that are not, like the South Korean won and Mexican peso, are nursing minor losses. The surge in Covid cases weighed on Chinese shares that trade in Hong Kong, while the...

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Capital Flows Outstrip Trade Flows and that is Where to Look for Drivers of FX

2022-11-12

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2022-11-12

Policymakers have often said that exchange rates should reflect fundamentals. What does that really mean? Can they do anything but that? It begs the question of which fundamental factors they should reflect.

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Markets Consolidate After US Election

2022-11-09

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2022-11-09

Overview: It is difficult to see the impact of the US midterm election in the immediate aftermath. The dollar is stronger against all the major currencies, but this seems to be mostly position adjusting ahead of tomorrow’s CPI report after a pullback in recent days.

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