Tag Archive: inflation

Debt Ceiling Progress, Weak Chinese and Japanese Data, and Soft EMU CPI, Sends the Dollar Higher

2023-05-31

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2023-05-31

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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The Greenback Stalls after Yesterday’s Surge as US Negotiators Move Closer to Last-Minute Deal

2023-05-26

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2023-05-26

Overview: Yesterday's dollar surge has stalled. It is consolidating its gains and is softer against all the G10 currencies. After popping above JPY140 yesterday, there were no follow-through greenback buying in Tokyo. Most emerging market currencies are also firmer, including the South African rand, which plummeted by 2.8% yesterday on the back of the central bank's warning of downside currency risks as it delivered a 50 bp hike. The Chinese yuan...

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RBNZ Delivers a Dovish Hike and UK Inflation Surprises to the Upside

2023-05-24

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2023-05-24

Overview: Equities in the Asia Pacific region and Europe are being led lower by the sell-off in the US yesterday. All the large Asia Pacific markets fell with Hong Kong and mainland shares setting the pace. Europe's Stoxx 600 is off nearly 1.5%, which would be the largest loss in two months. Consumer discretionary, financials and real estate sectors are off nearly 2%. US equity futures have a softer bias. European 10-year yields are mostly 2-3 bp...

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The Yen is Sold Despite Better than Expected Q1 GDP and the Greenback Pushes Above CNY7.0

2023-05-17

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2023-05-17

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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Narrow Ranges in FX: Calm before the Storm?

2023-05-10

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2023-05-10

Overview: Equity markets are mostly weaker, and benchmark 10-year yields are a little softer. The foreign exchange market is subdued ahead of today’s US CPI. The large bourses in Asia Pacific region with the exception of India worked lower and Europe’s Stoxx 600 is off for the second consecutive session. US futures have a heavier bias. Yesterday the US bank share indices filled the gap created at the end of last week but recovered. Today’s price...

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US CPI is Unlikely to Tell Us Anything We Don’t Already Know

2023-04-12

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2023-04-12

Overview:  Today's highlight is the March US CPI, and while everyone is talking about it, it is unlikely to tell us anything we do not already know. Headline price pressures are easing but the core rate is sticky, and despite comments from the Chicago Fed president about the need for patience, the odds of a hike next month have crept up. Understanding the Fed's reaction function, it seems clear that for most officials, inflation is remains too high...

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March: Going Out like A Lamb after Wrestling with a Lion

2023-03-31

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2023-03-31

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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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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Investor Anxiety Continues to Run High even If More Comfortable ECB 50 BP Tomorrow and 25 bp Next Week by the Fed

2023-03-15

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2023-03-15

Overview: The capital markets remain unsettled. Asia-Pacific bourses rose, but European markets are sharply lower, with the Stoxx 600 off 1.3%, giving back the lion's share of yesterday's gains and US equity futures are lower. Benchmark 10-year yields are off 3-9 bp in Europe, with widening core-periphery yields. The yield on the 10-year US Treasury is off a dozen basis points to about 3.56%. Two-year yields are also sharply lower, led by the 15-16...

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Yen Jumps Despite Poor GDP Ahead of Tomorrow’s BOJ Outcome

2023-03-09

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2023-03-09

Overview: Seeing the drama he inspired on Tuesday, the Fed chair tried soft-pedaling the idea that he was signaling a 50 bp hike in March. The market did not buy it. And the odds, discounted by the Fed funds futures rose a little above 70% from about 62% at Tuesday's close. The two-year note yield solidified its foothold above the 5% mark. With the Bank of Canada confirming its pause, the Reserve Bank of Australia does not seem that far behind, and...

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Higher for Longer Helps the Dollar while Weighs on Equities

2023-03-02

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2023-03-02

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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Potential Brexit Breakthrough Helps Sterling, while France and Spain Report Stronger Price Pressures

2023-02-28

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2023-02-28

Overview: There are two important developments. First, the stronger than expected February inflation reports from France and Spain have sparked a jump in European interest rates and the swaps market is beginning to price in a 4% terminal rate by the European Central Bank. The deposit rate is now at 2.50% and is widely expected to rise to 3.0% in the middle of next month. Second, a tentative agreement to resolve the dispute over the Northern Ireland...

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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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Dollar and Rates Soften a Little Ahead of US CPI

2023-02-14

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2023-02-14

The focus is on the US CPI report today, but the price action is anything but intuitive. Although the revisions of the basket and methodological changes reinforce expectations for the largest rise in three months, the US dollar continues to trade heavily after rallying last week. The dollar-bloc currencies are underperforming today. And US rates are softer. The US 2- and 10-year yields are 1-2 bp lower.

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This Will Be The Biggest Theft of This Century

2023-02-10

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2023-02-10

In 1983 a total of 6,840 gold bars were stolen from a high security vault in Heathrow in what is still considered to be ‘the crime of the century’. 40 years on and the gold heist is still the biggest single-theft of gold in history. What’s incredible is that the perpetrators never even expected to steal any gold. They were instead expecting to find around £3 million in cash. 

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“Fundamentals and technical analysis are two sides of the same coin”

2023-02-07

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2023-02-07

Interview with Laurent Halmos For most die-hard physical gold investors and students of history like myself and most of my readers and clients, technical analysis is often seen as a bit of a taboo, or at best something irrelevant to our worldview and investment approach. Nevertheless, to paraphrase the old saying about politics, just because you are not interested in the charts doesn’t mean that the charts are not interested in you.  I met...

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Weekly Market Pulse: Happy Days Are Here Again!

2023-02-07

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2023-02-07

Your cares and troubles are gone There’ll be no more from now on! Happy days are here again! The skies above are clear again Let us sing a song of cheer again Happy days are here again! Lyrics: Jack Yellen, Music: Milton Ager That’s certainly how it’s felt since the turn of the new year with the NASDAQ up nearly 15%, European stocks continuing to recover, emerging markets anticipating a Chinese recovery and a solid January for the S&P...

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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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