Tag Archive: US

Higher for Longer Helps the Dollar while Weighs on Equities

2023-03-02

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2023-03-02

Overview: The jump in prices paid in yesterday's US ISM manufacturing coupled with the stronger eurozone inflation, with a new cyclical high reported in the core rate, underscores the market theme of higher-for-longer. This is seen as dollar supportive but also negative for risk-assets, including and especially equities. European benchmark 10-year yields are up another couple of basis points today and the 10-year US Treasury yield is pushing above...

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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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Potential Brexit Breakthrough Helps Sterling, while France and Spain Report Stronger Price Pressures

2023-02-28

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2023-02-28

Overview: There are two important developments. First, the stronger than expected February inflation reports from France and Spain have sparked a jump in European interest rates and the swaps market is beginning to price in a 4% terminal rate by the European Central Bank. The deposit rate is now at 2.50% and is widely expected to rise to 3.0% in the middle of next month. Second, a tentative agreement to resolve the dispute over the Northern Ireland...

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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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Investors Shaken by Rising Rates

2023-02-22

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2023-02-22

Overview: The surge in US interest rates and sharp losses in US stocks sent the dollar broadly higher in North America yesterday. The $42 bln of two-year notes auctioned by the US Treasury saw the highest yield in more than a quarter-of-a-century (4.67%) and it still produced a small tail. Sterling, helped by its own surprisingly strong data, was the only G10 currency to have gained against the surging dollar. Still, no important technical levels...

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Upside Surprise in UK’s Flash PMI and Better-than-Expected January Public Finances Lift Sterling

2023-02-21

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2023-02-21

Overview: Rising interest rates are weighing on risk appetites and the dollar is broadly stronger. Sterling is a notable exception after a stronger than expected flash PMI and better than expected public finances. The correlation between higher US rates and a weaker yen is increasing and the greenback looks poised to rechallenge the JPY135 area. A slightly better than expected preliminary PMI and hawkish minutes from the recent RBA meeting has done...

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Markets Catch Collective Breath

2023-02-16

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2023-02-16

Overview:  On the heels of a dramatic jump in US job creation and firmer than expected year-over-year CPI, the US reported a larger than expected jump in retail sales and a strong recovery in manufacturing output. Few think that economic momentum that the recent data implies can be repeated, the "no landing" camp has gained adherents. We suspect that says more about psychology than the economy. The US two-year note is threatening to snap...

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US Dollar Comes Back Better Bid

2023-02-15

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2023-02-15

Overview: Although the US January CPI was in line with expectations, the year-over-year rate was a little firmer than expected. Still, the measure that Fed Chair Powell has underscored, core services, excluding shelter, moderated with a 0.3% month-over-month gain. US rates shot up and this lent the dollar support, while weighing on equities and risk sentiment. The US two-year note yield rose to almost 4.64% yesterday, the highest in three months....

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Dollar and Rates Soften a Little Ahead of US CPI

2023-02-14

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2023-02-14

The focus is on the US CPI report today, but the price action is anything but intuitive. Although the revisions of the basket and methodological changes reinforce expectations for the largest rise in three months, the US dollar continues to trade heavily after rallying last week. The dollar-bloc currencies are underperforming today. And US rates are softer. The US 2- and 10-year yields are 1-2 bp lower.

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Anti-Climactic Return of China

2023-01-30

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2023-01-30

Overview: The re-opening of China's mainland market amid reports of strong activity during the holiday, was relatively subdued. The CSI 300 rose less than 0.5% and the Shanghai Composite eked out less than a 0.2% gain. The 0.5% gain in the yuan was largely in line with the performance of the offshore yuan. Indeed, it seems like a bit like "buy the rumor sell the fact" type of activity as Hong Kong's Hang Seng tumbled 2.75%, to give back...

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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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Euro Closed above $1.09 but Follow-Through Buying Limited

2023-01-26

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2023-01-26

Overview: After some intraday penetration, the euro finally settled above $1.09 yesterday. However, follow-through buying has been limited and technical and option-related resistance is seen in the $1.0940-50 area. The dollar is more broadly mixed today, with the dollar-bloc and Norwegian krone leading the advancers. The euro, yen, and sterling are nursing small losses near midday in Europe. The recovery of US equity indices yesterday after gap...

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Dismal UK Retail Sales Weigh on Sterling, While the Yen Softens

2023-01-20

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2023-01-20

Overview: The US dollar is mostly softer today against the G10 currencies, with the notable exception, yen, Swiss franc, and sterling. The risk-on mood is seen in the foreign exchange market with the Antipodean and Scandi currencies leading the move against the greenback. The yen has fallen by about 1.3% this week, leading losers, while sterling's 1.1% gain puts it at the top. Despite the poor showing of US equities yesterday, risk appetites...

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Poor US Data Cast Doubts on New Found Hopes of a Soft-Landing

2023-01-19

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2023-01-19

Overview:  Yesterday's string of dismal US economic data delivered a material blow to those still thinking that a soft-landing was possible. Retail sales by the most in the a year. Manufacturing output fell by nearly 2.5% in the last two months of 2022. Bad economic news weighed on US stocks. The honeymoon of New Year may have ended yesterday. The US 10-year yield fell below 3.40% for the first time since the middle of last September. The Atlanta...

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The BOJ Surprises by Standing Pat

2023-01-18

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2023-01-18

Overview: The BOJ defied speculation and stuck to its current policy, which saw the yen sell-off sharply. The dollar rallied about 3.4 yen before falling back. The greenback is broadly lower against the other G10 currencies. However, for the fifth consecutive session, the euro has stalled around $1.0870. While UK headline inflation softened, mostly due to fuel, core prices were unchanged, and this may have helped sterling extend its recent gains to...

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Monday and Beyond

2023-01-16

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2023-01-16

Monday Ranges: Euro: $1.0802-$1.0874JPY/$: JPY127.23-JPY128.87GBP: $1.2172-$1.2289CAD/$: CAD1.3353-CAD1.3418AUD: $0.6941-$0.7019MXN/$: MXN18.7313-MXN18.8566Rumors of an emergency BOJ meeting sent the dollar to its lows in Tokyo, slightly below the pre-weekend low (~JPY127.46). The on-the-run (most current) 10-year yield settled above the 0.50% cap and the generic 10-year bond has not traded below the 0.50% level since January 5. The market...

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Greenback’s Sell-off may Stall Ahead of Powell Tomorrow

2023-01-09

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2023-01-09

Overview: Don't fight the Fed went the manta as the market took the US two-year yield back up to 4.50% in the aftermath of the FOMC minutes last week, the highest in over a month. The minutes warned of a premature easing of financial conditions. And then bam, softer than expected hourly earnings and a weak service PMI and bonds and stocks rallied, and the dollar was sold. This is a key part of the backdrop for this week, for which several Fed...

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The Dollar Jumps

2023-01-03

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2023-01-03

Overview: Market participants have returned from the New Year celebrations apparently with robust risk appetites. Equities and bonds are rallying, and the dollar has surged higher. The markets seem to be looking past the surge in China's Covid cases and anticipates a recovery, helping Chinese equities lead Asia Pacific bourses higher, where Japanese markets are still on holiday.

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Chinese Stocks Extend Rally Even Though Covid Infections Appear to be Spreading

2022-12-09

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2022-12-09

Overview: The easing of vaccination, quarantine, and some travel protocols related to Covid in China (and Hong Kong) continues to draw funds back into Chinese stocks, wherever they trade. The Hang Seng rose 2.3% today to close the week with a nearly 6.6% advance. The index of mainland companies that trade there rose 2.5% on the day for a7.3% weekly gain. The CSI 300 of mainland shares rose 1% today and almost 3.3% for the week. Japan’s 1% gain...

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Political Developments Overshadow Economics

2022-12-08

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2022-12-08

Overview: There is nervous calm in the capital markets today.  The weakness of US shares yesterday is taking a toll today. An exception in the Asia Pacific region is the Hang Seng and the index of mainland shares that trade there, which up around 3.5% today on thUe easing of some Covid protocols.  Europe’s Stoxx 600 is off for a fifth day, its longest losing streak in nearly two months. US futures are posting minor gains. Benchmark 10-year yields...

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