Tag Archive: federal-reserve

Firmer Rates and Higher Bank Stocks Give the Greenback Little Help

2023-03-28

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2023-03-28

Overview: Financial strains eased yesterday, and short-term yields jumped. The two-year US yield jumped 25 bp to pierce 4%. Yet, the dollar fell against most of the major currencies yesterday and is mostly softer today. Banking stress is ebbing. The Topix bank index snapped a three-day decline and jumped nearly 2% today to recoup the lion's share of its three-day decline. The Stoxx 600 index of EMU banks is extending yesterday's 1,7% advance. The...

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Calmer Markets to Start the New Week

2023-03-27

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2023-03-27

Overview: There did not appear to be any negative surprises over the weekend, and this is helping calm investors' nerves at the start of the new week. Deutsche Bank shares have recovered most of the pre-weekend loss in the German market, and Stoxx bank index is posting a gain for the first time in four sessions. The AT1 ETF is slightly softer. In Japan, the Topix bank index slipped around 0.5%, its fourth decline in the past five sessions. Asia...

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Tough Fed Decisions

2023-03-22

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2023-03-22

Overview: The market has concluded that the Fed will hike rates today. The US two-year yield has risen from about 3.63% at Monday's lows almost 4.20% yesterday. It needs to rise to 4.35% to recover half of its decline since March 8 but has come back softer today. Meanwhile, the banking crisis continues to ease, and Europe's Stoxx 600 bank index is up 1.5%, its third consecutive advance. The US KBW bank index rallied almost 5% yesterday. Still,...

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Fragile Calm to End the Volatile Week even with the Quadruple Expirations

2023-03-17

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2023-03-17

Overview: The support for First Republic Bank shown by a consortium of US banks by shifting $30 bln of deposits is helping break the financial anxiety that has gripped the market for more than a week. The liquidity provisions for Credit Suisse by the Swiss National Bank also are contributing to improved sentiment. The Fed's balance sheet expanded sharply last week as the bridge banks were extended credit to help the unwind of SVB and Signature...

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US Banking Crisis Swamps Other Considerations

2023-03-13

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2023-03-13

Overview:  The US banking crisis has overwhelmed other market drivers. The strong measures announced as Asia Pacific trading got under way was embraced by the market even though moral hazard issues and gaps in the Dodd-Frank regulatory framework were exposed. The dollar is trading heavily. The prospect of a 50 bp Fed hike next week has evaporated and some are doubting that a 25 bp increase will be delivered. Rate hike expectations for the ECB this...

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Powell Sends the Two-Year Yield above 5% and Ignites Powerful Dollar Rally

2023-03-08

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2023-03-08

Overview:  Federal Reserve Chair Powell's comments to the Senate Banking Committee were seen as hawkish by the market, even though it has been clear to most observers that the 5.10% median terminal rate that the Fed projected in December would be increased. Also, it seemed well appreciated a few Fed officials support a 50 bp hike at the February 1 FOMC meeting, two days before a "hot" jobs report that showed over 500k jobs were filled. It...

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US Dollar is Better Bid Ahead of Powell, while Aussie Sells Off on Dovish Hike by the RBA

2023-03-07

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2023-03-07

Overview: The US dollar is trading with a firmer bias against nearly all the G10 currencies ahead of Federal Reserve Chairman Powell's semi-annual testimony before Congress. Speaking for the Federal Reserve, the Chair is likely to stay on message which is higher rates are necessary to cool the overheating economy. This comes on the heels of the Reserve Bank of Australia's 25 bp hike and indication that it is not pre-committing to an April hike. The...

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Yields Pull Back to Start the New Week

2023-03-06

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2023-03-06

Overview: The modest economic goals announced as China's National People's Congress starts was seen as a cautionary sign after growth disappointed last year. It seemed to weigh on Chinese stocks, though others large bourses in the region advanced, led by Japan's Nikkei and South Korea with gains of more than 1%. Europe's Stoxx 600 is little changed after rising for the past two sessions. US index futures are slightly softer. Strong gains were seen...

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Markets Catch Collective Breath

2023-02-27

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2023-02-27

Overview: After last week's flurry of activity that saw the US dollar extend its recovery, it has begun off the new week largely consolidating in relatively narrow ranges. The Australian and New Zealand dollar's remains softer, and the Swiss franc is virtually flat, but the other G10 currencies, led by sterling are posting small gains. A break-through on the Northern Ireland protocol, which has been rumored for a more than a week may be announced...

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Ueda Day

2023-02-24

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2023-02-24

Overview:  Rising rates and falling stocks provided the backdrop for the foreign exchange market this week. The dollar appreciated against all the G10 currencies but the Swedish krona, which is still correcting higher after the hawkish pivot by the central bank. The market looks for a later and higher peak in the Fed funds rate. This coupled with the risk-off sentiment helped the dollar extend its recovery after falling since last...

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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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Markets Catch Collective Breath

2023-02-16

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2023-02-16

Overview:  On the heels of a dramatic jump in US job creation and firmer than expected year-over-year CPI, the US reported a larger than expected jump in retail sales and a strong recovery in manufacturing output. Few think that economic momentum that the recent data implies can be repeated, the "no landing" camp has gained adherents. We suspect that says more about psychology than the economy. The US two-year note is threatening to snap...

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Yen Retreats Ahead of Formal BOJ Announcement Tomorrow and US CPI

2023-02-13

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2023-02-13

Overview: A consolidative tone is mostly the theme of the day. The revisions to the US CPI announced before the weekend add to the uncertainty and focus on tomorrow's report. At the same time, investors watch ongoing air space activity that has led to a few objects being shot down over the US and Canadian airspace.

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Markets Calm after Dramatic Swings on Powell’s Comments

2023-02-08

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2023-02-08

The US dollar is mostly trading with a downside bias today against the G10 and most emerging market currencies. It had begun the week extending the gains spurred by the dramatic jump in nonfarm payrolls and the strong ISM services survey. Market expectations for the trajectory of Fed policy in the first part of this year converged with the Fed's December dot plot. The market now leans toward two more quarter-point hikes this year.

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Greenback Extends Recovery

2023-02-06

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2023-02-06

Overview: The honeymoon for risk assets that began the year ended with a bang at the end of last week with the monster US jobs report and the rebound in the service ISM. Disappointing news from several large US tech companies provided extra encouragement. The yen's weakness helped Japanese stocks today, but the other larger bourses in the Asia Pacific area were sold, with losses in Hong Kong, the CSI 300, South Korea, and Taiwan off more than 1%....

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US Federal Reserve Sticks To The Script But For How Long?

2023-02-04

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2023-02-04

Those watching the gold price and price of silver will have noticed the sharp uptick following the Federal Reserve’s announcement, yesterday. This was despite the Fed doing exactly what everyone expected them to do. For now, the Federal Reserve is sticking to its relatively well-telegraphed plan but how long will it be until they need to move the goalposts in order to do so?

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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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Weekly Market Pulse: First, Kill All The Speculators

2023-01-31

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2023-01-31

The Fed meets this week and is widely expected to raise the Fed Funds rate by 0.25% to a range of 4.5% – 4.75%. The market has factored in a small probability that they do nothing and leave rates alone, but they’ll probably do what’s expected because they’ve spent the last couple of months preparing the markets for exactly this outcome.

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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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With Trepidation, the Market Awaits the BOJ

2023-01-17

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2023-01-17

With the market nearly ruling out a 50 bp hike by the Federal Reserve on February 1, the interest rate adjustment appears to have largely run its course. This may be helping to ease the selling pressure on the greenback.

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