Tag Archive: U.K.

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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Biden to Go to G7 Summit with Debt Ceiling Unresolved

2023-05-16

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2023-05-16

Overview:  The US debt ceiling talks resume at the White House today but a deal is unlikely to be announced. President Biden will attend the G7 summit in Hiroshima with the debt ceiling still looming. The dollar is mostly softer as last week's gains are pared. The Swiss franc and Japanese are the strongest in the G10. The Thai baht and South African rand, among the market's favorites yesterday are seeing those gains retraced. The JP Morgan Emerging...

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Limited Follow-Through Dollar Buying After Yesterday’s Gains

2023-05-12

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2023-05-12

Overview: The dollar sprang higher yesterday but follow-through buying today has been limited. The little more than 0.5% gain in the Dollar Index was among the largest since mid-March. And yet, the debt ceiling anxiety and weak US bank shares persist. Today's talks at the White House have been postponed until early next week. Both sides are incentivized to bring it to the brink to demonstrate to their constituencies that they got the best deal...

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The Greenback Continues to Struggle

2023-05-08

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2023-05-08

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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The Greenback Remains Heavy Ahead of the Employment Report

2023-05-05

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2023-05-05

Overview: The US dollar is weaker against all the G10 currencies today but the Swiss franc. The backdrop seems fragile even though a few regional bank shares have done better in after-hours trading and Apple's earnings were received well by the markets. Due to seasonal factors and other considerations, many are warning about a US jobs report, even though ADP's estimate surprised to the upside earlier this week. Equities were mixed in the Asia...

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RBA Surprises with a Quarter-Point Hike

2023-05-02

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2023-05-02

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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Dollar Comes Back Bid, as First Republic Taken Over (Mostly) by JP Morgan

2023-05-01

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2023-05-01

Overview: Most markets are closed for the May Day holiday. News that JP Morgan will acquire most of First Republic assets will be a relief for the markets. US equity futures are slightly firmer, and the 10-year Treasury yield is around three basis points higher, slightly above 3.45%. Recall that before the weekend, it has fallen from almost 3.55% to 3.42%. The market has more than a 90% chance of a quarter-point hike discounted for Wednesday. The...

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The Dollar Begins New Week mostly Softer

2023-04-24

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2023-04-24

Overview:  The dollar is mostly lower, led by the Swiss franc and euro. However, despite softer US rates and a victory for the LDP in local Japanese elections, the yen is trading with a softer bias. Japanese stocks recovered from the pre-weekend profit-taking seen after the Nikkei make new highs for the year. Most other large bourses in the region except Taiwan and India also moved lower. Note that China's CSI 300 fell for the fourth consecutive...

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The Dollar Comes Back Bid

2023-04-19

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2023-04-19

Overview: It has taken some time, but the dollar has found better traction. It traded above JPY135 for the first time since mid-March and yesterday's setback has been mostly recouped against the other G10 currencies. Sterling is the most resilient after higher-than-expected inflation. Equities are lower. Japan's Nikkei snapped an eight-day advance and most of the other large bourses in the region (except Australia and South Korea) fell. Europe's...

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Dollar Pares Gains but is Poised to Recover in North America

2023-04-18

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2023-04-18

Overview:  A rise in US yields, with the two-year Treasury closing yesterday at its best level in more than three weeks help fuel follow-through dollar buying yesterday after an upside reversal at the end of last week. Key levels were approached, like $1.09 in the euro, $1.2345 in sterling, and JPY135 held, and the dollar has consolidated in Asia and Europe. The euro and sterling recouped around half of the losses seen from the Friday's high to...

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Firm US Dollar as Market is Feeling More Comfortable with May Hike

2023-04-17

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2023-04-17

Overview: The dollar fell most of last week but reversed higher before the weekend. It has seen some follow-through gains, albeit limited against most of the G10 currencies today. Despite some seemingly dovish comments by a few Fed officials last week, the Fed funds futures is pricing in the greatest chance for a hike at the early May meeting since the banking stress erupted last month. The greenback is also trading with a firmer bias against most...

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US Dollar Slumps and China Surprises with Twice the Expected Trade Surplus

2023-04-13

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2023-04-13

Overview:  The market took US short-term rates and the dollar lower after the CPI data, which was largely in line with expectations. On the one hand, the odds of a quarter-point hike next month increased slightly (73.6% vs. 71.6%) to 5.25%, but it reinforced that sense that it is last hike and that the Fed will unwind this hike and more before the end of the year. The year-end implied policy rate fell by about six basis points to 4.33%. The dollar...

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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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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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Does the US Inflation Report Matter or Has it Been Superseded by Deflationary Forces of a Financial Crisis?

2023-03-14

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2023-03-14

Overview: The dramatic shift in expectations for Fed policy is a potent shock, with reverberations throughout the capital markets.  The business press was full of accounts putting the nearly 50 bp decline in the US two-year note in an historical perspective. Yesterday, it fell by 61 bp as the market continued to unwind Fed hikes and reprice the chances of a cut as early as Q2. While the poorly received bill auctions suggests not significant deposit...

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Concerns Over US Banks Rival Today’s Jobs Report

2023-03-10

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2023-03-10

Overview: The unexpectedly large rise in US weekly jobless claims, the largest since the end of last September and concerns about the impact of the sharp rise in interest rates on the liquidity and value of assets (bonds) owned by small and medium-sized banks saw the market unwind the effect of Fed Chair Powell's comments. The yield on the US two-year note slumped almost 20 bp to 4.87% yesterday and fell to 4.75% today before stabilizing (~4.82%)....

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