Monday , August 2 2021
Home / Marc Chandler
Marc Chandler

Marc Chandler

He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.

Articles by Marc Chandler

Two Steps Forward, One Step Back

1 day ago

The US had a difficult week, falling against nearly all the major currencies, recording new lows for the month against the euro, Swiss franc, and sterling among the major currencies.  Indeed, the euro and sterling gains were sufficient to erase the earlier losses to post an advance for July.  It is difficult to find a common theme through the capital markets. There is much talk about new interest in the reflation trade, but the decline in rates and second consecutive weekly decline in the MSCI Emerging Market Equity Index do not line up well, even though the US S&P 500 and NASDAQ and Europe’s Dow Jones Stoxx 600 set new record highs last week.   Nor did the currency markets give unequivocal support for the reflation thesis.  The weakest two major currencies were the Australian and New

Read More »

Challenging Week Ahead

2 days ago

Three macro considerations are shaping the investment climate: the evolution of the virus and the response, the timeframe of the Fed’s tapering, and China’s broad regulatory crackdown.  Beijing’s new policy initiatives are broader and quicker than generally anticipated.  Officials seem to be opening up several different fronts, including anti-trust, data protection, discouraging foreign capital raising, and private education reform.  The common element is reining in what officials may see as excesses.  It dovetails with other efforts seeking to strengthen the Communist Party’s command and control functions.  Beijing seemed unaware or uninterested in the broader implications.  The inclusion of the yuan into the IMF’s Special Drawing Rights (SDR) and Chinese stocks and bonds into global

Read More »

Risk Appetites Start the Weekend Early

3 days ago

Overview: Disappointing revenue and sales figures by Amazon shortly after the US close yesterday set the tone for today’s equity sell-off. Many large markets in the Asia Pacific area fell by more than 1%, including Japan, Hong Kong, South Korea, and New Zealand.  New lockdown measures around the capital sent the Philippines bourse down nearly 3.5%.  Singapore, India, and China’s Shenzhen Composite were notable exceptions and posted minor gains.  After reaching record highs yesterday, the Dow Jones Stoxx 600 has retreated, led by energy and consumer discretionary sectors. The S&P 500 is poised to gap lower after it too set record highs yesterday.  The US Treasury market is bid, and the 10-year yield is below 1.25%, while European yields are mostly a little firmer.  China’s 10-year

Read More »

Chinese Officials Calm Markets

4 days ago

Overview:  More constructive signals from Chinese officials and a Federal Reserve that is gradually moving toward slowing its bond purchases have had a beneficial impact on the risk-appetites.  Led by a 3% recovery in the Hang Seng, the large equity markets in the Asia Pacific region advanced after the MSCI benchmark recorded the lows for the year yesterday.  Europe’s Dow Jones Stoxx 600 is posting modest gains that were sufficient to lift the benchmark to new record highs.  US equity futures are firm.   US and European 10-year yields are little changed.  The US is firm around 1.26%.  European yields are also 1-2 bp higher. The biggest reaction in the capital markets is the setback in the dollar, which is softer against nearly all currencies through the European morning.  Among the

Read More »

Fed Day

5 days ago

Overview:  China’s aggressive campaign has exploded on the international stage to become a major market force.  The Shanghai and Shenzhen Composites fell, but the CSI 300 managed to post a small gain after it extended its loss to around 21.5% from the February high.  The China-inspired losses saw the MSCI Asia Pacific Index fall to new lows for the year today, though Hong Kong’s Hang Seng posted a 1.3% gain.  Europe’s Dow Jones Stoxx 600 is posting the first gain of the week, led by information technology, real estate, and consumer discretionary.  Despite strong bank earnings, financials are matching the market, not outperforming it.  US futures are oscillating around little changed levels.  The US 10-year benchmark yield is firm at 1.25%, while European yields are mostly slightly softer

Read More »

China Sends Ripples Across the Markets

6 days ago

Overview: It is not China’s aggressive foreign policy that is the source of the disturbance in the capital markets, but its aggressiveness at home as it asserts control parts of the tech sector and toughens its anti-trust efforts.  Hong Kong shares are bearing the brunt.   The Hang Seng has fallen by 10% in the three sessions, including today.  The Shanghai Composite is off nearly 5.5% in the same period.  A few of the other larger markets in the region, including Japan, South Korea, and Australia, posted small gains. Moody’s affirmation of a stable credit outlook helped lift Philippines’ stocks by 2.4%, the most in a couple of months and recouped most of Monday’s slide.  Europe’s Dow Jones Stoxx 600 is off around 0.5%, led by financials and energy.  US futures are trading with a heavier

Read More »

Greenback Starts Big Week Softer

7 days ago

Overview:  The price action in the foreign exchange and bond markets has been consistent with the risk-off narrative, spurred arguably by the surge in Delta mutation of the virus.  However, equity markets were less consistent with it.  Last week’s weakness in the MSCI Asia Pacific Index seemed to be partly driven by Beijing’s crackdown on some tech companies and private sector education companies.  The benchmark fell by 1.9% last week and continued to be sold today, led by Hong Kong’s 4%+ drop and Shanghai’s 2.3% decline.  Only Japan of the large bourses posted modest gains after coming back from a two week holiday.  However, the Dow Jones Stoxx 600 in Europe rallied 1.5% last week, but its four-day advance is meeting profit-taking today, and it is nursing a 0.35% decline near midday in

Read More »

Stretched Dollar Remains Firm

8 days ago

The US dollar was strong last week, even though it ended up slightly lower against the Canadian dollar. Sterling fell to new six-month lows while the euro recorded its lowest level since late March, and the Australian dollar fell to new lows for the year.  Led by a 2% fall in the South African rand, with the bulk of the sell-off coming after the central bank kept policy rates unchanged, which is now lower on the year, most emerging market currencies weakened.  The Russian rouble was the strongest in that space, though the lion’s share of the gains came before the central bank hiked its key rate by 100 bp to 6.5% ahead of the weekend.  The dollar had seemed to track short-term US interest rates until recently, and its strength has come in the face of softer rates.  The implied yield of the

Read More »

Lower for Longer

9 days ago

The Delta variant of the virus has emerged as an important economic force, just as more countries appeared to adopt the attitude that we should now live with it like we do with the flu, which kills hundreds of thousands every year.  While the existing vaccines seem to have lost some of their ability to prevent the illness, they remain a power prophylactic against hospitalization and death.  Nevertheless, new social restrictions have been introduced in some high-income countries, even those like Israel, that have been fairly successful in vaccinating a large part of their population.  The virus is once again raising the prospects of slowing the economic recovery that was unevenly unfolding.  The preliminary July PMI for Australia, UK, France, and the US disappointed. Expectations for the

Read More »

New Record Cases in Sydney Casts a Pall over Australia

10 days ago

Overview: The combination of the dovish ECB’s forward guidance and the unexpected rise in weekly US jobless claims to a two-month high sent bond yields tumbling.  The US 10-year pulled back from 1.30%, and benchmark yields in the eurozone fell to new 3-4 month lows. The $16 bln 10-year TIPS auctioned yesterday resulted in a record low yield of a little more than -1.0%.  The bond market is quieter today, with the US 10-year yield little changed at 1.29% and European bond yields mostly 1-3 basis points higher.  Equities were mixed in the Asia Pacific region.   China’s crackdown on Didi may be scaring investors.  Chinese, Hong Kong, and Taiwanese markets fell, while South Korea, Australia, and Indian markets advanced.  European shares are higher for the fourth consecutive session, lifting

Read More »

Enguard Lagarde

11 days ago

Overview: The rally in US shares yesterday, ostensibly fueled by strong earnings reports, is helping to encourage risk appetites today.  The MSCI Asia Pacific Index is posting its biggest gain in around two weeks, though Japan’s markets are closed today and tomorrow.  The Dow Jones Stoxx 600 is building on yesterday’s rally, and with today’s ~0.8% gain, it is up on the week.  US equities are also trading with a firmer bias.  The 10-year US yield that spiked to nearly 1.125% on Tuesday is knocking on 1.30% today.  European bond yields are mostly softer, and Italy’s benchmark yield has slipped to a new three-month low (~67 bp).  The foreign exchange market is quiet.  The Norwegian krone and Australian dollar lead the majors today, while the euro and Canadian dollar are little changed. The

Read More »

Did Japan Deliver a Fait Accompli to the US?

12 days ago

Overview:  The biggest rally in US equities in four months has helped stabilize global shares today.  In the Asia Pacific region, Japan, China, and Australian markets advanced.  Led by information technology and consumer discretionary sectors, Europe’s Dow Jones Stoxx 600 is up around 1.35% near the middle of the session.  US equity futures are firm, though the NASDAQ is lagging.  The US 10-year yield that briefly dipped below 1.13% yesterday is firm today, around 1.25%, while European bond yields are 1-2 bp firmer. After a poor retail sales report, Australia’s benchmark yield slipped a couple of basis points, which was sufficient to mark a new three-month low (~1.15%).  Most of the major currencies are trading slightly heavier against the US dollar.  The Scandis and New Zealand dollar

Read More »

Doom and Gloom Take Toll

13 days ago

Overview:  The capital markets have begun stabilizing after yesterday’s dramatic moves.  The MSCI Asia Pacific Index did, though, see follow-through selling, and the third consecutive loss saw the benchmark close below its 200-day moving average for the first time in a year.  Europe’s Dow Jones Stoxx 600 is posting small gains to snap a four-day drop.  US futures are also trading higher.  The US 10-year Treasury yield sank to 1.17% yesterday in heavy volume, 60 bp off its March peak.  It finished below its 200-day moving average for the first time since early November. The 30-year bond yield fell to five-month lows.  Both yields are little changed today, while European yields are 2-4 basis points lower, setting new three-month lows across the board.   The yield of the Antipodean

Read More »

Delta Variant Saps Risk Taking Appetites, Sending the Greenback Higher even as Rates Fall

14 days ago

Overview: Concerns that the Delta mutation will slow or even reverse the recovery efforts appear to be sapping risk-taking appetites.  Equities are under pressure.  Nearly all the markets in the Asia Pacific region and Europe are lower. The MSCI Asia Pacific is paring last week’s 1.4% advance, while the Dow Jones Stoxx 600 in Europe is off for the fourth consecutive session at six-week lows.  Only the consumer staples and health care sectors are posting small gains.  The S&P 500 futures are off nearly 0.5%.  The Dow futures are off more, while the NASDAQ futures are down a little less.  Bonds are bid, and the US 10-year yield is around three basis points lows near 1.26%.  Core European benchmark yields are softer, and most are trading at new three-month lows today. Peripheral bonds have

Read More »

Rates and Currencies Act like They are From Different Planets

15 days ago

Stronger than expected US inflation and retail sales, and counter-intuitively Treasury yields softened, and the dollar strengthened.  The 10-year yield slipped four basis points on the week to 1.32%.  The yield has risen in three of the past 15 weeks.  It is tough to argue that it is a fluke.  While it is holding above the 200-day moving average (~1.25%), the 30-year yield has spent the last two sessions below its 200-day moving average (~1.975).  The implied yield of the December Eurodollar futures fell five basis points last week and is off near 15 bp over the past five weeks.  The dollar rose against all the major currencies but the Japanese yen, which eked out a negligible gain.  The combination of economic data and central bank statement (and an end to asset purchases) spurred the

Read More »

ECB: Aligning Forward Guidance with New Inflation Target Framing

16 days ago

After the June CPI and PPI surge, the Federal Reserve does not appear to have changed its tune.  The price pressures are temporary, and the labor market is still "a ways off" from the "significant further progress" necessary to reduce the bond purchases.  Federal Reserve Chair Powell warned in his semi-annual testimony to Congress that inflation will likely remain elevated in the coming months before moderating.  Treasury Secretary Yellen shared a similar view separately. The case for the transitional nature of the price increases stems from the narrow breadth of price increases greater than 2% (around 1/3 of the CPI basket),, and most can be traced to the re-opening and base effect, like airfare, lodging, food away from home, and apparel.  Used vehicle prices again accounted for about a

Read More »

BOJ Tweaks Forecasts

17 days ago

Overview: The markets head into the weekend with little fanfare.  Most large equity markets in the Asia Pacific region slipped earlier today. Hong Kong, which will be exempt from the need to secure mainland’s cybersecurity approval for foreign IPOs, and Australia were notable exceptions. European bourses are edging higher, while US futures are oscillating around unchanged levels.  After closing below 1.30%, the US 10-year yield is around 1.33%.  European yields are little changed, but German, Dutch, Spanish and Greek benchmarks recorded new three-month lows today.  The US dollar is narrowly mixed.  Dollar-bloc currencies and the Scandis are posting modest gains, while the yen and Swiss franc are sporting a softer profile.  The euro is in about a 20-tick range through late European morning

Read More »

Strong Gains in US CPI and PPI Don’t Stop the Bond Market Rally

18 days ago

Overview: Strong inflation prints this week have not prevented the long-term US interest rates from tumbling.  The 10-year yield is about 10 bp lower than where it closed on Tuesday after the lackluster 30-year auction.  The 30-year yield itself is 11 bp lower.   Fed Chair Powell did not break new ground yesterday and insisted that the bar of "significant further progress" has not been met to begin reducing its bond purchases.   A possible deal in OPEC saw a sharp drop in crude oil prices, and there is some follow-through selling today.  European yields are lower, though hawkish comments are weighing on UK Gilt prices.  Australia’s jobs data were also better than expected, and the 10-year Aussie bond yield fell five basis points and is again at a discount to the US.  The dollar is mixed

Read More »

RBNZ Moves Ahead of the Queue, Will the Bank of Canada Maintain its Place?

19 days ago

Overview: The Reserve Bank of New Zealand jumped to the front of the queue of central banks adjusting monetary policy by announcing the end of its long-term asset purchases.   New Zealand’s s 10-year benchmark yield jumped seven basis points, and the Kiwi is up almost 1%, to lead the move against the greenback today.  Sterling is up around a quarter of a percentage point after it reported a larger than expected rise in CPI.  Most of the other major currencies, but the Swiss franc and Swedish krona are posting small gains.  Emerging market currencies are also narrowly mixed, leaving the JP Morgan EM index virtually flat on the session.  Of note, ahead of Turkey’s central bank decision, the lira has stabilized after rising for the past four sessions.  Equity markets are struggling today.

Read More »

Deja Vu All Over Again

20 days ago

The demise of America is an often-told tale.   When Bitcoin was closer to $60k, some keen observers claimed it reflected the decline of the dollar and the US economy.  A popular meme is to compare America to the Roman Empire and its famous collapse.  The American political scientist Graham Allison popularized the idea of a "Thucydides trap" where the world power (the US) is challenged by a rising power (China) and the tendency toward armed conflict.  Palak Patel, formerly a lead analyst at Fidelity for Latin America and South Asia, has contributed a thoughtful volume to this broad genre.  His "The Tyranny of Nations," published in May, is a fascinating account that shows striking parallels between America today and the latter stages of the Dutch and British dominance.  He has found a

Read More »

Headline US CPI may Decline for the First Time in a Year

20 days ago

Overview: New record highs in the US S&P 500 and NASDAQ coupled with China allowing Tencent to acquire a search engine helped lift Asia Pacific equities.  It is the first back-to-back by MSCI’s regional index for more than two weeks.  Australia’s market was a notable exception.  The lockdown in Sydney is weighed on new confidence measures and prompts economists to cut growth forecasts for Q3.  European equities are softer.  Weakness in health care and utilities is offsetting the gains in information technology and materials.  US futures are slightly lower as well.  The US 10-year Treasury yield is little changed near 1.36%. European yields are marginally lower, while China’s 10-year bond yield of 2.92% is a new three-month low.  Only the yen and Australian dollar are posting minor gains

Read More »

Markets Adrift ahead of Key Events

21 days ago

Overview:  The new week has begun quietly.  The dollar is drifting a little higher against most major currencies, with the Scandis and dollar-bloc currencies the heaviest.  The yen and Swiss franc’s resilience seen last week is carrying over.  Most liquid and freely accessible emerging market currencies are lower, and the JP Morgan EM currency index, which snapped a four-day drop ahead of the weekend, is trading lower today.  It has fallen in three of the past four Mondays.  Benchmark 10 year bond yields are softer, with the 10-year Treasury yield off almost three basis points to 1.33%.  European yields are 2-3 bp lower.  China’s 10-year yield is off four basis points and at 2.94% is at a new three-month low, following last week’s softer inflation readings and reserve requirement cut.

Read More »

Can the Dollar and Bonds Rally Together for Long?

22 days ago

After reversing lower despite a robust jobs report on July 2, the greenback saw limited follow-through selling at the start of last week and instead recovered fully.  The major currencies that bore the brunt of the dollar’s gain were those currencies that are understood to be ahead of the Fed in normalizing policy.  The Norwegian krone and dollar-bloc currencies bore the bulk of the greenback’s adjustment, while clear laggards, like the yen and Swiss franc, posted moderate gains (0.8% and 0.7%, respectively, last week).  The dollar’s recovery occurred alongside a slide in US yields.  The 10-year note yield briefly traded below 1.25% for the first time in five months.  The implied yield on the December 2022 Eurodollar futures, which we use to track expectations for Fed policy, fell from 55

Read More »

Measuring Inflation and the Week Ahead

23 days ago

There is quite an unusual price context for new week’s economic events, which include June US CPI, retail sales, and industrial production, along with China’s Q2 GDP, and the meetings for the Reserve Bank of New Zealand, the Bank of Canada, and the Bank of Japan. In addition, the US Treasury will sell $120 bln in coupons while the US earned income tax credit and the child tax credit is rolled out.  The dollar surged even while interest rates fell.   The US 10-year yield has risen in only four weeks since the end of Q1, and it has fallen in seven of the past nine weeks.  It is off 111 bp since the start of the month.  The 30-year bond yield fell to 1.85%, its lowest level since early February, before recovering ahead of the weekend.  It is not only at the long end that interest rates have

Read More »

PBOC Cuts Reserve Requirements after Inflation Measures Ease

24 days ago

Overview:  The capital markets are winding down what has been a challenging week that has seen equity markets slide and the dollar and bonds rally.  The MSCI Asia Pacific fell for the fourth consecutive session, but the more interesting story may be the intrasession recovery that could set the stage for a better performance next week.   The Nikkei gapped lower and rallied by around 2%, though still closed (0.65%) lower.  Similarly, the Shanghai Composite recovered to new session highs after dropping over 1.1% at the open and closed less than 0.1% lower.  South Korea and Taiwan indices fell a little more than 1% and still closed near session highs.  Europe’s Dow Jones Stoxx 600 is up about 0.8% near midday in Europe to pare this week’s decline to about 0.25%. That said, it is the first

Read More »

Capital Markets Remain Unhinged

25 days ago

Overview: The dramatic move in the capital markets continues.  The US dollar is soaring as yields and equities slide.  The US 10-year yield has fallen below 1.30 to 1.26%  European benchmark yields are 1-4 bp lower, while Australia and New Zealand have seen a 7-9 bp drop today.  Signals that the PBOC may provide more monetary support helped drive China’s 10-year bond yield below 3% for the first time since last August.  Those currencies levered for growth, namely the dollar-bloc and the Norwegian krone, are bearing the burden today with a 0.50%-0.75% slide.  The Japanese yen and Swiss franc are doing best, while the euro tries to stabilize around $1.1800.  Emerging market currencies are under pressure, though a few eastern European currencies are holding their own.  The JP Morgan Emerging

Read More »

Dollar Stabilizes at Elevated Levels After Surging Yesterday

26 days ago

Overview:  The dollar has steadied after surging yesterday and has so far retained the lion’s share of its gains, though it remains lower against most major currencies today.  The dollar-bloc and Norwegian krone are the best performers while the yen is underperforming.  The freely accessible emerging market currencies, including the Russian rouble, Mexican peso, Turkish lira, and South African, are the strongest. The JP Morgan Emerging Market Currency Index is stabilized after falling nearly 1% yesterday.  The bond market rally that took the US 10-year yield below 1.35% and the 30-year below 2.0% extended today by a few basis points but have stabilized. European bond yields are also softer, and several countries have seen their yields fall to fresh three-month lows.  The MSCI Asia Pacific

Read More »

Greenback Shows Some Resilency after Follow-Through Selling Dried up

27 days ago

Overview: Follow-through dollar selling stalled as key levels were approached, including $1.19 in the euro, $1.3900 in sterling, $0.7600 in the Australian dollar, and CAD1.2300. Sentiment is mixed after the greenback sold-off before last weekend despite the fastest jobs growth in 10-months.  Emerging market currencies are mixed, with the JP Morgan Emerging Market Currency Index slipping slightly.  The 10-year US Treasury yield is flat near 1.42%, while European yields are 2-3 bp softer.  Australian yields are firmer following the RBA decision to taper in Q4 and maintain its target on the April 2024 bond.  New Zealand yields are also higher following a strong sentiment survey and calls for a rate hike as early as November.  Bourses in the Asia Pacific region were mixed. Some strength was

Read More »

The Dollar Reverses Lower: Is this the Real Thing?

29 days ago

The dollar’s bounce extended further than we expected, helped by an aggressively hawkish view of the Fed, which has seen the market price in more than one hike before the end of next year.  The dollar’s rally into early July left the technical indicators stretched, and we note that near-term trend reversals recently have occurred around the end of the month or US jobs report.  Despite the first employment report that beat expectations in three months, US interest rates softened.   In fact, the implied yield of the December 2022 Eurodollar futures contract fell four basis points.  The contract traced out what appears to be a key reversal by making new lows before rallying and closing above the previous high (in price).  The two-year note yield, which doubled in June, slipped lower for the

Read More »

Fed Minutes may Temper Hawkish Dots

July 3, 2021

The second half is getting underway.  Five events should be on your radar screen, but do not lose sight of the broader context.  This year, the dollar has often experienced near-term trend changes around the turn of the month and the US jobs report.  Consider the Dollar Index, albeit an imperfect metric.  The low for the year was recorded three days into January. It put in a high in early February and bottomed two days before the end of the month. The peak so far for the year was recorded on March 31, and then it trended lower in April before bouncing a little more than 1% into the end of the month and early May. Finally, it recorded a four-month low in late May and moved higher in June with two steps, before and after the FOMC meeting. A two-month high was recorded a couple of days after

Read More »