Tag Archive: macro

Week Ahead: Greenback’s Recovery Looks Poised to Continue

2025-05-17

by

2025-05-17

The dollar traded choppily last week but settled higher against all the G10 currencies. It finished the week on a firm note. The messy upside correction for the dollar may continue. Despite disappointing retail sales and manufacturing output, and softer than expected CPI and PPI, the market has pushed the next Fed cut into Q4 …

Read More »

Week Ahead: Reaction to Sino-American Trade Talks, US CPI, Japan and UK Q1 GDP, and Banxico to Cut 50 bp Featured

2025-05-10

by

2025-05-10

Many seemed optimistic that the weekend trade talks between the US and China will de-escalate the tension. We are less sanguine. Even if the tariffs on both sides were halved, there would still be an effective bilateral embargo. In the larger picture we are concerned that blocking PRC's  exports and denying it a direct investment …

Read More »

Week Ahead: FOMC in No Hurry to Cut Rates while BOE Easing set to Accelerate

2025-05-03

by

2025-05-03

President Trump says there are trade talks with China. Beijing denies it. Around the time the US reports that the world's largest economy contracted slightly in Q1 (0.3% annualized), US Treasury Secretary Bessent said that the effective embargo was shutting down the China's economy. The week ended with China's Commerce Ministry statement that it was …

Read More »

The Week Ahead: Trade War and Price Action are More Important than US and China’s CPI

2025-04-05

by

2025-04-05

April 2, what President Trump called, "Liberation Day" will indeed go down in history. The markets quaked. A trade war with China escalated as Beijing took strong retaliatory measures, with not only a sharp rise in its tariff on US imports but imposed (more) restrictions on rare earth exports. Canada and Mexico were spared the "reciprocal tariffs,” but both made clear declarations of intent to diversify their trade and economic...

Read More »

April 2025 Monthly

2025-03-29

by

2025-03-29

The world is different. After a four-year restoration of the traditional globalist US elite, a majority of the American electorate seems to have rejected it. President Trump is indeed a transformational president, and his reversal of many traditional elements of US domestic and foreign policy are triggering dramatic action in other parts of the world. Many Americans and European had been critical of Germany's self-imposed fiscal strait jacket   In...

Read More »

Week Ahead: Is the Dollar Bottoming?

2025-03-22

by

2025-03-22

After falling steadily since from the end of Q3 24 through the first part of January, the dollar stabilized last week, despite the dovish market takeaway from the Federal Reserve. The median projection for growth was shaved while the inflation project was raised. Still, despite the Atlanta Fed's GDP Now tracking a contraction here in Q1, few are that pessimistic. None of the 58 economists in Bloomberg's survey see a contraction, and only one...

Read More »

Week Ahead: New FOMC Projections; BOE, BOJ, and Riksbank Standpat, While SNB to Approach Zero -Bound (Again)

2025-03-15

by

2025-03-15

The architects of the new US foreign economic policy expected dollar appreciation to absorb some of the cost of US tariffs and expected some exporters to cut prices. Instead, the dollar has mostly fallen against the major currencies. Last week, the greenback recorded new lows for the year against the Chinese yuan, Mexican peso, euro, sterling, the Japanese yen, the Swedish krona, and Norwegian krone. Beijing acted forcefully against Walmart's...

Read More »

Week Ahead: US Growth Worries and Europe’s Fiscal Initiative Weaken American Exceptionalism’s Bull Case

2025-03-08

by

2025-03-08

The combination of continued growth concerns in the US and the fiscal/defense initiatives in Europe saw the dollar fall every day last week. The Atlanta Fed's GDP tracker says the US economy is contracting at an annualized rate of 2.4%, which seems exaggerated. After falling by about 50 bp in a seven-week slump, the US 10-year yield rose by about 15 basis points last week. Eurozone 10-year benchmark yields rose around 35 bp. The US premium on...

Read More »

March 2025 Monthly

2025-03-01

by

2025-03-01

In recent weeks, while Russia's war on Ukraine continues and Beijing continues to harass its neighbors, the U.S. tariff threats and doubts that its defense commitments will be sustained, have emerged as the most significant challenge for businesses, investors, and policymakers. These tariffs are aimed at protecting domestic industries, forcing a re-shoring of production, and raising revenue. If, and when implemented, the tariffs can be expected to...

Read More »

Week Ahead: Tariffs Loom and the State of the Trump Trade

2025-02-22

by

2025-02-22

Many observers seem confused. They express disappointment that the so-called "Trump trade", a rally in the dollar has not materialized. Yet, in some ways, isn't that what happened from late last September, ironically around the Federal Reserve's 50 bp rate cut, around the time investors began taking US election polls more seriously? In Q4 24, the Federal Reserve's real broad trade weighted dollar index rose by 4.9%, the best quarterly...

Read More »

Week Ahead: RBA to Begin Easing Cycle and USD Downside Correction may be Nearly Over

2025-02-15

by

2025-02-15

The US threat of aluminum and steel tariffs and reciprocal tariffs initially shook the markets, but the implementation at some future date gives the impression that the threats are negotiating ploys helped take away the sting. In his first term, Trump converted some of the tariffs to quotas, and that is one possible scenario now. Still there is great uncertainty of the US intent and strategy. For its part, the greenback finished last week lower...

Read More »

Week Ahead: Firm US CPI may Underpin Dollar, Barring New Drama from Washington

2025-02-08

by

2025-02-08

Many market participants appear to have forgotten the drama of Trump's first term. It was driven home with the tariff threat on Canada and Mexico, which was postponed at the last minutes. The apparent fascination with his "authenticity" seemed to have overshadowed his ability to dissemble during the election but it has been underscored in the past few weeks, including apparently on what the US Navy will be charged for using the Panama...

Read More »

February 2025 Monthly

2025-02-01

by

2025-02-01

There is great uncertainty for investors and policymakers. The magnitude and timing of U.S. tariffs are not clear. China unveiled DeepSeek, which appears to give other advanced language model AIs a run for their money and calls into question the effectiveness of technology curbs. While Russia's invasion of Ukraine, the war in the Middle East, and China's harassment of its neighbors have dominated the geopolitical story, the U.S. has entered the...

Read More »

Week Ahead: Can the Dollar’s Downside Correction Withstand the Divergence of Policy?

2025-01-25

by

2025-01-25

US President Trump's tariff threats roiled the foreign exchange market at the start of last week, but by the end, the market seemed to have taken what many see increasingly as negotiating positions in stride. The dollar had topped out against several of the major currency pairs a week or so before the election as some participants began moving to the sidelines. We anticipated "buy the rumor, sell the fact" type of activity but thought the...

Read More »

Week Ahead: Book-Ended by Trump’s Inauguration and the BOJ Rate Decision

2025-01-18

by

2025-01-18

There were four important macro developments to note in recent days. First, the recent string of US economic data was firmer than expected and GDP looks to have expanded close to 3% in Q4. With the help of guidance by Federal Reserve Waller, who is thought to be a possible successor to Chair Powell, played up the possibility of a cut in H1, and the market implemented the guidance and has next cut nearly priced in for the June FOMC meeting. Second,...

Read More »

Week Ahead: Fed to Cut, but Should it? BOJ and BOE to Stand Pat, but Should They?

2024-12-14

by

2024-12-14

(Happy Holidays. Daily Commentary will resume on January 6.  January monthly will post on January 4) The Swiss National Bank and the Bank of Canada delivered 50 bp rate cuts last week, and the European central bank cut by a quarter-point. The monetary easing cycle looks set to carry into next year. The Reserve Bank of Australia remains on hold and a stronger than expected employment report dampened speculation of a cut in Q1 25. The US CPI was in...

Read More »

Week Ahead: 4 G10 Central Banks Meet, Three to Cut, Brazil to Hike 75 bp and US CPI may hold Key to FOMC

2024-12-07

by

2024-12-07

The US dollar advanced against all the G10 currencies last week but the Swiss franc but turned in a most mixed performance against emerging market currencies. The US 10-year yield fell for the third consecutive week and near 4.16%, it is around a dozen basis points below where it settled the night before the US election. The two-year yield fell for the second consecutive week and settled near 4.10% is about half a dozen basis points below the...

Read More »

December 2024 Monthly

2024-11-30

by

2024-11-30

The trends were already entrenched before the US election and continued through most of last month. The trend toward higher rates and higher equities stalled, while the dollar remained strong. Investors and business continue to wrestle with the implications of the Republican sweep in the US elections.There are two broad issues that are the source of uncertainty. The first is the broad tariff Trump has advocated on the campaign trail: 60% on China...

Read More »

Week Ahead: Little to Stop the Surging Dollar

2024-11-23

by

2024-11-23

The dollar's Q4 rally continued last week. The Dollar Index has risen in the first eight weeks of the fourth quarter, gaining a little more than 7%. Half of the G10 currencies (the euro, the Swedish krona, the Norwegian and Danish krone, and New Zealand dollar) fell to new lows for the year last week. Part of the story is the paring of Fed cut speculation. The derivatives market no longer has even 50 bp of cut discounted between now and the middle...

Read More »

Week Ahead: Powerful Forces Rippling Through the Capital Markets Do Not Appear Exhausted

2024-11-16

by

2024-11-16

There are powerful forces in the capital markets, and they do not appear exhausted even if there is some near-term consolidation. The Dollar Index has risen for seven weeks, which is to say that it has not fallen on a weekly basis so far here in Q4. The US two-year yield has risen for the past four weeks and six of the past seven. It has surged from about 3.55% at the end of September to 4.38% last week. The US 10-year yield has fallen in only two...

Read More »