Tag Archive: Japan
Fed Day: Skip = Hawkish Pause, but Market Says Finito
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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?
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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Consolidative Session Marked by Weak Chinese Imports and White House Debt Ceiling Talks
Overview: The market sentiment remains fragile.
Equities are mostly lower. Japan was a notable exception, and concerns about
China's economy after a sharp decline in imports took mainland and Hong Kong
listed companies sharply lower. Europe's Stoxx 600 is giving back yesterday's
0.35% gain plus more. Bank shares are off 0.65% after rallying 4.20% over the
past two sessions. US equity futures are heavier. Benchmark 10-year yields are
mostly a couple...
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The Greenback Continues to Struggle
Overview: There is a nervousness that hangs over the capital markets.
Although US banks shares recovered at the end of last week, many continue to
see the sector’s challenges as the harbinger of a dramatic reversal in the Fed’s
stance. America’s debt ceiling looms large and could be a few weeks away. China
led Asia Pacific bourses higher, and, ironically, its bank shares extended their
rally. Japan, returning from last week’s holiday was notable...
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RBA Surprises with a Quarter-Point Hike
Overview: A combination of a surprisingly strong
prices paid component to the US manufacturing PMI, corporate supply, and US
debt woes spurred an almost 15 bp spike in the US 10-year yield and 13 bp jump
in the two-year yield. The rise in US rates appeared to lend the dollar support.
The greenback's gains have been extended today, but a surprise hike by the
Reserve Bank of Australia is seeing the Australian dollar (and New Zealand
dollar) traded...
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Markets Becalmed Ahead of Key Data and BOJ Meeting Outcome
Overview: Some regional bank earnings were weighing
on investor sentiment but reports that the FDIC is running out of patience with
First Republic Bank to strike a private deal and could decide to downgrade its
assessment. This could lead to limits on its ability to use the Fed's emergency
facilities. Other reports said that the bank's advisers are securing
commitments to buy a new stock as part of a broader restructuring. Still, while
the KBW bank...
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