Tag Archive: US

Data Thursday but Markets Unimpressed

2024-08-15

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2024-08-15

Overview: An eerie calm hangs over the foreign exchange market on this the anniversary of the end of the Bretton Woods agreement 53 years ago today. Narrow ranges are dominating. Strong Australian jobs data and a cautious Norwegian central bank have underpinned their respective currencies today. A firm Q2 UK GDP appears to have given sterling a boost. The euro and the Swiss franc are struggling, while the yen is recording its narrowest range in...

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Is the US CPI Anti-Climactic?

2024-08-14

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2024-08-14

Overview: Today's US CPI is the focus but the bar to a Fed cut next month is low, and it could prove anti-climactic. The more moderate inflation reading creates more space for the central bank to respond to signs of a continued slowing of the US labor market and adopt less restrictive policy. The dollar is mixed as the North American session gets under way. The rate cut by the Reserve Bank of New Zealand, not a total surprise, but has seen fall 1%....

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Are Risk Appetites Recovering?

2024-08-13

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2024-08-13

Overview: The Antipodeans and sterling lead the G10 currencies today. The New Zealand dollar is the strongest, though the central bank is likely to deliver its first rate cut tomorrow. The Australian dollar rose to a three-week near $0.6610. Sterling was lifted by a stronger than expected employment report (though wage growth slowed) ahead of tomorrow's CPI. The yen and Swiss franc nursing modest losses. Emerging market currencies are mostly...

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Subdued Market Compared to a Week Ago: Is the Dramatic Position Unwinding Over?

2024-08-12

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2024-08-12

Overview: The capital markets have begun the week in subdued fashion. Japanese markets were closed for the Mountain Day celebration, and this week's key events, which include US and UK CPI, and the Reserve Bank of New Zealand meeting and potentially its first rate cut. The uncertainty about the market positioning and the extent of the carry-trade may also be dampening activity. The yen and Swiss franc are the weakest of the G10 currencies today,...

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No, Chicken Little, the Sky is Not Falling

2024-08-09

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2024-08-09

Overview: The most recent data showed that Japanese investors took advantage of the yen's strength last week to buy foreign bonds and stocks. The US weekly jobs claims to their lowest level in four weeks, suggesting that the slowdown in the labor market remains gradual. The sky is not falling. There is no emergency. With a 28% drop in Japanese bank shares in the first three sessions of the month, stress in Japan was acute, but Japanese official...

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BOJ Offers Verbal Support, Extends the Yen’s Pullback

2024-08-07

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2024-08-07

Overview:  The calls earlier this week for an emergency rate cut seemed to be a call for the Fed put, which, we argue is misunderstood. It is not about the stock market per se but financial stability, which did not seem threatened in the US. Japan is a different story, and the Bank of Japan offered a verbal put today, with an indication that it wants to maintain low (accommodative) rates. The markets reacted accordingly. The yen was sold (and...

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Equity Meltdown Continues as Attention turns to the US Employment Report

2024-08-02

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2024-08-02

Overview: Federal Reserve Chair Powell said that although confidence has risen that inflation is on course back to 2%, the Fed is not quite confident enough to cut rates. The market effectively eased for it. Since the FOMC meeting began on Tuesday, the two-year US yield tumbled from 4.40% to 4.10%. The US 10-year yield settled below 4% for the first time in six months. The risk-off spurred by the weaker than expected US manufacturing ISM helped...

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Yen Slumps, Germany Contracts, and the Week’s Key Events Still Lie Ahead

2024-07-30

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2024-07-30

Overview: An unexpected decline in Japan's unemployment did not prevent a retreat in the yen to a four-day low ahead of tomorrow's data and conclusion of the BOJ meeting. The dollar has probed the JPY155 area where nearly $3.5 bln options expire today. An unexpected contraction Germany's Q2 GDP was offset in the aggregate by better French, and especially Spanish figures, leaving the euro consolidating in a narrow range (~$1.0815-$1.0835). The...

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Is the Dramatic Yen Short Squeeze Over?

2024-07-26

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2024-07-26

Overview:  The powerful yen short squeeze that has roiled the capital market this week has stalled today. It is the first day this week that the dollar has not fallen below the previous day's low and has risen, though slightly, above previous session's high. The Antipodeans and Scandis are trading with a firmer bias. The yen and Swiss franc are the only two G10 currencies that are not stronger today. The stability of the yen appears to have removed...

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Yen’s Surge Continues, while PBOC Surprises with Another Rate Cut, and US 2-30 Year Yield Curve Ends Inversion

2024-07-25

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2024-07-25

Overview: The capital markets are in flux. The powerful short-covering rally of the yen and unwinding of carry trades continues. For the second time this week, the PBOC has surprised by cutting interest rates. The dramatic sell-off of equities continues. The unexpected contraction of South Korea's Q2 GSP (-0.2%) is seen as confirmation of broader economic weakness Speculation of a more aggressive Federal Reserve is gaining ground. It is not that...

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Short Covering Squeezes the Yen Higher

2024-07-23

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2024-07-23

The US dollar is firmer against all the G10 currencies but the Japanese yen. Local reports and the price action are consistent with short covering of the previously sold yen positions ostensibly ahead of next week's BOJ and FOMC meetings. Still, the greenback is holding above last week's low, slightly below JPY155.40.

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Dollar Consolidates to Start the New Week

2024-07-15

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2024-07-15

Overview: The assassination attempt on former President Trump has injected a new dynamic as his chances of being re-elected appear to have risen. There are a few trades that seem to benefit from a second term:  steepening yield curve, weaker Mexican peso, and stronger crypto. The dollar initially strengthened as the market's initially responded, while Tokyo markets were closed for Marine Day. As North American activity is about to begin, the dollar...

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Today’s Battle: Soft US CPI vs Stretched Momentum Indicators and Two Fed Cuts Discounted

2024-07-11

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2024-07-11

Overview: The focus today is on the US CPI report. Another soft reading is expected, and it may strengthen ideas of a Fed cut in September, which ostensibly gives it time to cut again before the end of the year. The dollar is trading with a softer bias against most of the G10 currencies. A stronger than expected May GDP report helped sterling reach new four month high. The greenback is also holding below yesterday's high near JPY161.80 against the...

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Narrow Ranges for the Dollar Prevail Ahead of Tomorrow’s US CPI

2024-07-10

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2024-07-10

Overview: The dollar is mostly softer today, but largely within the recent ranges, as the market appears to be waiting for tomorrow's US CPI. There are a few exceptions to note. The yen is trading near its recent lows. A less hawkish Reserve Bank of New Zealand has triggered a sell-off of the local dollar. Softer than expected Norwegian inflation has knocked the krone lower. Most emerging market currencies are firmer, with several Asia Pacific...

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Quiet Summer Tuesday with Powell’s Testimony and a Deluge of US Supply on Tap

2024-07-09

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2024-07-09

Overview: In the absence of fresh developments, the dollar is consolidating in narrow ranges today against the G10 currencies and enjoys as slight upward bias against most emerging market currencies but for a few currencies from the Asia Pacific region. With practically an empty US data calendar, Fed Chair Powell's testimony with be the highlight, and a soft headline CPI on Thursday anticipated. The US two-year premium over Germany has fallen from...

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Euro is Little Changed, while the Yen is Softer to Start the New Week

2024-07-08

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2024-07-08

Overview: The dollar is narrowly mixed against the G10 and emerging market currencies today. The euro is little changed, holding on to last week's gains, after the surprising French election results, where the focus shifts finding a prime minister that can carry a majority of the new and closely divided National Assembly. Despite firm underlying wage data, the Japanese yen has given back its initial gains, and the dollar is pushing back above...

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Sigh of Relief Lifts French Markets, But…

2024-07-01

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2024-07-01

Overview: The market feels a bit more at ease after the first round of the French elections that extreme policies will be avoided by an effort to deny the National Rally a legislative majority. French stocks have recouped some of their recent losses and the euro reached $1.0775, its best level since June 13. The yen remains soft after the Tankan survey showed little change but an uptick in capex plans. Outside of the yen and Swiss franc, the dollar...

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Will the PCE Deflator Really Contain New Information?

2024-06-28

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2024-06-28

Overview: The US dollar is narrowly mixed as North American participants prepare to return for the last session of the first half. Despite firmer than expected Tokyo CPI and stronger than expected industrial output, the market lifted the greenback around JPY161.25 before profit-taking pressures bought it back toward session lows near JPY160.65 in Europe. President Biden is thought to have lost last night's debate with Trump, but it does not appear...

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The Greenback Consolidates while Sustaining Break against the Yen

2024-06-27

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2024-06-27

Overview: The dollar is sporting a softer profile today against all the G10 currencies but the Swedish krona. The Riksbank sounded more dovish than previously, signaling the possibility of a cut in each of the last three meetings of the year. The dollar has sustained its push above JPY160 against the Japanese yen. Most emerging market currencies are also firmer, with the notable exception of Türkiye and South Africa. Türkiye is expected to keep its...

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USD Pushes above JPY160

2024-06-26

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2024-06-26

Overview: The dollar is firm, and the market is challenging the JPY160 level, which it has traded above in Europe. Japanese officials say that they do not defend a specific level. The market is nervous though and some participants have professed intentions to sell dollars above there. The Australian dollar is the main exception to the greenback's strength today. A strong monthly inflation print boosts the chances of a rate hike. The Aussie, though,...

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