Tag Archive: Japan

Higher for Longer

2023-06-22

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2023-06-22

Overview:  The central banks of Norway and Switzerland have hiked rates by 50 bp and 25 bp, respectively. Attention is on the Bank of England. A 25 bp hike is widely expected but after strong inflation report, the risk is clearly for a 50 bp hike. In fact, we suspect a quarter-point move could see sterling sold. With a new orthodox economics team in Turkey, a large rate hike is expected today. Late in the North American session, Mexico's central...

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UK Inflation Surprises to the Upside and Weighs on Sterling

2023-06-21

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2023-06-21

Overview: The UK surprised with higher-than-expected consumer inflation and budget deficit, and the odds of a 50 bp hike tomorrow edged higher. Sterling has been sold on the news and is the weakest of the G10 currencies, off about 0.5%. The dollar is mixed with the euro, Swedish krona, Canadian dollar, and Swiss franc posting small gains. Emerging market currencies are lower, including the Chinese yuan, which is at new lows since last November. The...

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BOJ Stands Pat while the Dollar is Consolidating Ahead of the Weekend

2023-06-16

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2023-06-16

Overview: The market has not yet become convinced that the Fed will in fact deliver the two hikes the median dot anticipates this year, and the dollar was sold off sharply yesterday, the day after the FOMC meeting. In fact, the swaps market is more convinced that the ECB hikes in July than the Fed. Outside of the yen, which was sold after the BOJ stood pat, the G10 currencies are mostly little changed, consolidating the recent moves. Emerging...

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ECB’s Turn

2023-06-15

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2023-06-15

Overview: The Fed's hawkish hold and signal that it may raise rates two more time this year sent ripples through the capital markets. Risk appetites have been dealt a blow. However, China's rate cut and likely additional supportive measures after disappointing data, helped lift the CSI 300 by 1.6%, the most this year. The Hang Seng rose by nearly 2.2%, the most in three months. Europe's Stoxx 600 is snapping a three-day advance and US index futures...

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Fed Day: Skip = Hawkish Pause, but Market Says Finito

2023-06-14

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2023-06-14

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

2023-06-08

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2023-06-08

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

2023-06-06

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2023-06-06

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

2023-06-01

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2023-06-01

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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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 Dollar Reverses Early Gains

2023-05-30

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2023-05-30

Overview:  The debt ceiling drama is not over. The agreement between the negotiating teams of President Biden and House Speaker McCarthy sets the stage for the next act in the drama: each side must deliver the votes. A preliminary vote today in the House of Representatives is likely today ahead of floor vote tomorrow. Still, the market is optimistic, and risk is favored. Asia Pacific bourses were mixed today. We note that the chip sector helped...

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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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Fitch Puts US on Negative Credit Watch and the Dollar Extends its Gains

2023-05-25

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2023-05-25

Overview: Concerned about the political wrangling over servicing US debt, Fitch put the US on negative credit watch. Besides chin wagging and finger pointing, it has had little perceptible impact. The dollar is mostly higher, reaching new highs for the year against the Japanese yen, Chinese yuan, and the Antipodean currencies. The euro and sterling met retracement objective we have targeted (~$1.0735 and $1.2435, respectively). The greenback is...

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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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Yen Recovers from New 2023 Low, while Sterling Sets a New Low for the Month

2023-05-23

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2023-05-23

Overview:  The dollar is bid. Only the Japanese yen is holding its own against the greenback but only after it fell to new lows for the year. The Scandis and Antipodeans are the heaviest among the G10 currencies, while sterling has fallen to a new low for the month. The prospect of a rate hike tomorrow has not protected the New Zealand dollar much and it is off nearly 0.5%. Emerging market currencies are more mixed. Outside of the Russian rouble,...

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Key Chart Points Hold and the Dollar’s Rally Stalls Ahead of the Weekend

2023-05-19

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2023-05-19

Overview: Hawkish comments from Fed officials and the first decline in continuing unemployment claims below 1.8 mln in two months boosted US rates and the odds of a June rate hike rose to about 37%. This represents a near tripling of the probability in the past week. It has been a trend with the odds rising in 9 of the past 11 sessions. The two-year note yield has risen for the past five sessions coming into today for a cumulative gain of about 35...

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Yen and Yuan Fall to New Lows for the Year

2023-05-18

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2023-05-18

Overview: Some creeping optimism about the US debt ceiling, easing of pressure on bank shares, and a continued rise in US rates helped the dollar extend its recent recovery. Over the past two weeks or so, the US 2-year premium has risen 25-30 bp against Germany and nearly 25 bp against the UK. The 10-year US Treasury has risen from the lower end of its seven-month range (~3.30%) earlier this month to approach the upper end of the range that has...

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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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Markets Catch Breath as Politics Trumps Economics

2023-05-15

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2023-05-15

Overview: The dollar is mostly consolidating last week's gains. The big news has been on the political front. Thailand's opposition parties dealt the military-led government a powerful blow. But in Turkey, Erdogan staved off a serious challenge and a run-off later this month looks likely, while his party maintained its parliamentary majority. Tensions over arms shipments to Russia have eased between the US and South Africa, giving the rand a boost....

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Sterling is Not Immune to Greenback Gains ahead of the BOE

2023-05-11

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2023-05-11

Overview: The US dollar has come back bid today. It is rising by 0.25%-0.50% against all the G10 currencies. The Canadian dollar is the most resilient today, which is often the case when the greenback is firm. The Australian dollar is off the most after reaching its strongest level since late February yesterday. Sterling is a middling performer today ahead of the anticipated Bank of England rate hike. The dollar is also firmer against most emerging...

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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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