Tag Archive: federal-reserve

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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Dollar Index Gives Back Half of 21-Month Gains in 3 1/2 Months

2023-01-13

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2023-01-13

Overview: The continued easing of US price pressures has strengthened the market's conviction that the Federal Reserve will further slow the pace of rate hikes and that the terminal rate will be near 5.0%. The decline in US rates has removed a key support for the US dollar, which has fallen against all the G10 currencies this week. The Dollar Index has now retraced half of what it gained since bottoming on January 6, 2021. Meanwhile, there are...

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Here are three things you can learn from the Fed

2023-01-13

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2023-01-13

Anyone who has decided to buy gold, or follows the gold price will be aware of how powerful the US Federal Reserve is. This year the Federal Reserve will turn 110 years old, only in recent years is dollar hegemony appearing to falter. Below we look at the central bank’s origins and three lessons we can learn from the history of the world’s most powerful bank, in order to help our investment decisions in 2023.

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Consolidative Tone in FX

2023-01-10

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2023-01-10

Overview: After sharp losses yesterday, the US dollar has stabilized today arguably ahead of Fed Chair Powell's speech at the Riksbank symposium. Yesterday's Fed speakers stuck to the hawkish rhetoric, and this seemed to help reverse the equity market gains, though the greenback remained soft.

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Greenback’s Sell-off may Stall Ahead of Powell Tomorrow

2023-01-09

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2023-01-09

Overview: Don't fight the Fed went the manta as the market took the US two-year yield back up to 4.50% in the aftermath of the FOMC minutes last week, the highest in over a month. The minutes warned of a premature easing of financial conditions. And then bam, softer than expected hourly earnings and a weak service PMI and bonds and stocks rallied, and the dollar was sold. This is a key part of the backdrop for this week, for which several Fed...

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Weekly Market Pulse: The Consensus Will Be Wrong

2023-01-09

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2023-01-09

What’s your outlook for this year? I’ve heard that question repeatedly over the last month and if you’re reading this hoping I’ll let you have a peak at my crystal ball, you’re going to be disappointed. Because I don’t have a crystal ball and neither, I hasten to add, does anyone else in this business.

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US CPI Featured and Why the Fed may Still Hike by 50 bp

2023-01-07

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2023-01-07

The most important economic report in the week ahead is the US December Consumer Price Index on January 12. To be sure, the Federal Reserve targets an alternative measure, the deflator of personal consumption expenditures. However, in this cycle, when households, businesses, investors, and policymakers are particularly sensitive to inflation, CPI, which is reported a couple of weeks before the PCE deflator, has stolen the thunder.

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Yesterday’s Gains Unwound may Make the Greenback a Better Buy Ahead of FOMC Minutes

2023-01-04

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2023-01-04

Overview:  Yesterday's greenback gains have been mostly reversed today. New efforts by China in its property market and anticipation of more stimulus helped rekindle the animal spirits today. Asia and Europe shrugged off yesterday's losses on Wall Street and the rally in bonds continued. The 8-12 bp decline in European benchmark 10-year yields comes even though the final composite PMI was better than expected fanning hopes of a short and shallow...

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What Can the Fed tell the Market it Does Not Already Know?

2022-12-14

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2022-12-14

Overview: The softer than expected US CPI drove the dollar and interest rates lower, while igniting strong advances in equities, risk assets, commodities, and gold. Calmer market conditions are prevailing today, and we suspect that in the run-up to the FOMC meeting, a broadly consolidative tone will emerge. The dollar is mostly softer, but within yesterday’s ranges. Only the New Zealand and Canadian dollars among the G10 currencies are softer....

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US CPI ahead of FOMC Outcome Tomorrow

2022-12-13

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2022-12-13

Overview: The dollar softer against the G10 currencies ahead of today’s CPI report and the FOMC meeting the concludes tomorrow. Emerging market currencies are most mixed. The Hungarian forint leads the complex with around a 1% gain on news of a preliminary deal struck with the EU. The South African rand is the worst performer, off around 0.8%, as impeachment proceedings against Ramaphosa proceed. Global equities are mostly higher today after the...

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Markets Await Central Banks and Data

2022-12-12

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2022-12-12

Overview: There are two themes today. First, there has been a modest bout of profit-taking on Chinese stocks (and yuan) after last week’s surge. Second, the ahead of the five G10 central bank meeting this week a series of market-sensitive economic reports, a consolidative tone is seen in most of the capital markets. Most of the large bourses in the Asia Pacific region fell, led by a 2.2% loss in Hong Kong and 3% loss in its index of mainland shares.

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