Tag Archive: Mexico

Hawkish ECB Comments Boost Risk of a 50 bp Hike Next Month

2023-04-14

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2023-04-14

Overview: The 0.5% decline in US March producer prices pushed on the door opened by the softer-than-expected CPI on Wednesday. The Fed funds futures market sees the year end rate to a 4.33%, while still pricing in a nearly 70% chance of a hike on May 3 to 5.25%. The dollar tumbled to new lows for the year against the euro, sterling, and Swiss franc. The Dollar Index made a new low for the year today, a few hundredths of an index point below the low...

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Greenback Pares Yesterday’s Gains

2023-04-11

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2023-04-11

Overview: As the long-holiday ends, risk appetites have returned. Equities and yields are mostly higher. The dollar is seeing yesterday's gains pared. Yesterday's setback in the yen helped lift Japanese stocks, with the Nikkei advancing 1%. Several other markets in the region also gained more than 1%, including Australia and South Korea. China's CSI was an exception. It slipped fractionally. Europe's Stoxx 600 is up nearly 0.6% through the European...

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Fragile Calm Casts a Pall over the Capital Markets

2023-04-06

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2023-04-06

Overview: There is a fragile calm in the capital markets today ahead of the long holiday weekend for many. The poor US economic data yesterday and third consecutive decline in the KBW bank index weighed on risk sentiment. Most of the large bourses in the Asia Pacific region fell, with Hong Kong and India notable exceptions. In Japan, the Topix bank index fell 1.1% after a 1.9% decline yesterday and is now lower on the week. Europe's Stoxx 600 is...

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Pressure Returns to Bank Shares and seems to Help Propel Gold Higher

2023-04-05

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2023-04-05

Overview: There are three themes today. First, the sharp decline in US rates seen yesterday (-14 bp on the two-year yield) on the back disappointing economic data seemed a bit exaggerated and the two-year yield has bounced back to almost 3.90% from around 3.81%. This appears to be helping the dollar consolidate today. Second, bank shares are coming under renewed pressure. The US KBW bank index fell almost 2% yesterday after a 0.5% decline on...

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RBA Holds Fire, Sterling Reaches Best Level since last June, and the Dollar Struggles to Find Much Traction

2023-04-04

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2023-04-04

Overview: The jump in oil prices is the newest shock and the May WTI contract is holding above $80 a barrel as it consolidates yesterday's surge. A week ago, it settled near $73.20. Australian and New Zealand bond yields moved lower, partly in catch-up and partly after the RBA stood pat. South Korean bonds also rallied on the back of softer inflation (4.2% vs. 4.8%). But European and US benchmark yields is 2-4 bp higher. The large equity markets...

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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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Dollar Soft but Stretched

2023-03-30

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2023-03-30

Overview: While bank stress seems to continue to ease, the dollar languishes against most of the major currencies. The Japanese yen is the notable exception. It is off about 1.5% this week. The Dollar Index has given back the gains scored at the end of last week but remains inside the range set last Thursday and Friday (~101.90-102.35). Perhaps the participants are waiting for Friday. In addition to month-, quarter, and fiscal-year ends, it is...

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Calmer Markets to Start the New Week

2023-03-27

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2023-03-27

Overview: There did not appear to be any negative surprises over the weekend, and this is helping calm investors' nerves at the start of the new week. Deutsche Bank shares have recovered most of the pre-weekend loss in the German market, and Stoxx bank index is posting a gain for the first time in four sessions. The AT1 ETF is slightly softer. In Japan, the Topix bank index slipped around 0.5%, its fourth decline in the past five sessions. Asia...

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Banking Stress Eases

2023-03-21

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2023-03-21

Overview: The banking crisis is ebbing. The Bank of England and European Central Bank assured investors that the AT1 bonds are senior to equity claims, and Switzerland is a unique case. Bank share indices in the Europe and the US rose yesterday, even though the shares of First Republic Bank fell by 47% yesterday. The $123-stock at the end of last month reached almost $11 yesterday. It is trading around $14.75 pre-market. Global equities are...

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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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Doubt Chinese Data, but Its Stronger-than-Expected PMI Lifts Risk Assets

2023-03-01

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2023-03-01

Overview: Many investors may be skeptical of the accuracy of Chinese data, but its stronger than expected February PMI animated the animal spirits and bolstered risk-taking appetites. Asia Pacific equities jumped, led by the 4.2% rally in Hong Kong and a 5% surge in the index that tracks mainland shares. Among the long bourses Australia and Singapore slipped, and South Korean markets were closed for a national holiday. Europe's Stoxx 600 is posting...

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Markets Catch Collective Breath

2023-02-27

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2023-02-27

Overview: After last week's flurry of activity that saw the US dollar extend its recovery, it has begun off the new week largely consolidating in relatively narrow ranges. The Australian and New Zealand dollar's remains softer, and the Swiss franc is virtually flat, but the other G10 currencies, led by sterling are posting small gains. A break-through on the Northern Ireland protocol, which has been rumored for a more than a week may be announced...

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Ueda Day

2023-02-24

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2023-02-24

Overview:  Rising rates and falling stocks provided the backdrop for the foreign exchange market this week. The dollar appreciated against all the G10 currencies but the Swedish krona, which is still correcting higher after the hawkish pivot by the central bank. The market looks for a later and higher peak in the Fed funds rate. This coupled with the risk-off sentiment helped the dollar extend its recovery after falling since last...

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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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Monday: A Short Note while US is on Holiday

2023-02-20

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2023-02-20

The dollar is mostly softer, but turnover is mostly quiet.  The Swedish krona leads the move after higher-than-expected underlying inflation.  It is a mild risk-on day with equities moving higher too.  In the Asia Pacific region, China stood with the CSI 300 up almost 2.5%.  Europe’s Stoxx 600 is up fractionally to recoup most of the pre-weekend decline.  US equity futures are narrowly mixed.  European bond yields are little changed, with a couple...

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Dramatic Swing in Sentiment Extends the Greenback’s Rally

2023-02-17

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2023-02-17

Overview:  A series of strong US high-frequency data points after a poor finish to last year has spurred a dramatic shift in market expectations. And talk among a couple of (non-voting) FOMC members of a 50 bp hike has provided added fodder. The greenback is extending its recovery today against all the major currencies, with the Australian and New Zealand dollars hit the hardest. Emerging market currencies have also been knocked back. This is part...

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A Day of Surprises

2023-02-10

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2023-02-10

(I am on a business trip and did not intend to post any analysis today. However, there have been a number of unexpected developments that warrant some commentary. Thanks for bearing with me.) Japanese press reports that the BOJ Deputy Governor Amamiya turned down the opportunity to become the next BOJ governor. Instead, next week, former BOJ board member Kazuo Ueda will be nominated. The market reacted dramatically, taking the yen sharply higher...

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US Interest Rate Adjustment Post-Jobs is Over as the 2-Year Yield Backs Away from 4.50%

2023-02-09

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2023-02-09

Overview: The capital markets have shrugged off the more than 1% loss of the Nasdaq and S&P 500 yesterday and have jumped back into risk assets. The stocks and bonds have been bought and the dollar sold. Chinese and Hong Kong shares gained more than 1% today. Japan was mixed and Taiwan and South Korean equites saw minor losses. Europe's Stoxx 600 is up over 1%. Nasdaq futures are up nearly 1.2% while the S&P 500 is lagging slightly....

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Subdued Ending to a Quiet Week, Ahead of Next Week’s Fireworks

2023-01-27

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2023-01-27

Overview: Leaving aside the Australian dollar, which is benefiting from the optimism over China's re-opening and a reassessment of the trajectory of monetary policy after a stronger than expected inflation report, the other G10 currencies traded quietly this week and are +/- less than 0.5%. The risk-on honeymoon to start the year remains intact. The MSCI Asia Pacific Index has risen every day this week and index of mainland shares that trade in...

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Weekly Market Pulse: A Fatal Conceit

2023-01-24

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2023-01-24

Inflation* in the US is falling rapidly with the CPI rising just 0.9% in the second half of 2022 versus 5.4% in the first six months. Existing home sales are down 14.6% in the last 3 months and 34% over the last year. Housing starts are down 22% and permits are down 30% year-over-year. Orders for durable goods are down 1.2%, exports are down 3.8%, and imports are down 4.3% over the last 3 months.

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