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Tag Archives: AUD

Greenback Still Trying To Turn

Rarely in the foreign exchange market is there a V-shaped extreme.  Most of the time, the high or low is a process that is carved over time.  Although the explanation of the dollar's weakness here in H1 vary, we continue to believe that the longer-term cyclical rally, the third since the end of Bretton Woods is intact.   The key driver, the divergence of monetary policy broadly understood, may be obscured from time-to-time by other factors, such as positioning, political...

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Dollar Trades Higher in Wake of the FOMC

The US dollar gains scored yesterday in response to what appeared to be a more hawkish FOMC than expected have been extended today.  The euro and the Swiss franc have recorded new lows for the month.   Sterling's attempt to recover from the election rout fizzled yesterday above $1.28 after the poor average weekly earnings data.  News today that May retail sales were dismal compounds concerns that higher inflation and weaker earnings growth will undermine consumption,...

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In the Run-Up to the FOMC

The US dollar is narrowly mixed ahead of the FOMC meeting, where a dovish hike seems widely expected.  The Australian dollar is leading the dollar bloc and Scandis higher.  The Aussie had to shrug off soft consumer confidence a day before the monthly employment report and perhaps was encouraged by the recovery in iron ore prices after initial weakness.   China's data may have also been supportive.  Chinese consumers continue to shop.  Retail sales rose 10.7%...

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Politics and Economics in the Week Ahead

Three of the four G5 central banks meet in the week ahead: the Federal Reserve, the Bank of England and the Bank of Japan. Only the Fed is expected to change policy, and investors are as sure that a 25 bp hike will be delivered as they can be.   Our calculations, based on assumptions where Fed funds will effectively trade (weighted average) for the second half of the month and where it may trade on the last day of the month (quarter end), suggested that fair value on a...

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Sterling Leads Dollar Recovery

The inability of the Tory Party to secure a parliamentary majority spurred a sharp decline in sterling.  It helped complete a topping pattern that we had been tracking.  Sterling had recovered smartly since dipping below $1.20 in mid-January.  The rally stalled in front of $1.3055, which is the 38.2% retracement of the losses suffered since the UK referendum a year ago.  More recently, it has appreciated this month ahead of election.  It reached the high while the...

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Markets Mark Time Ahead of Tomorrow

Tomorrow may be the most important day of the quarter for investors.  The ECB meets.  The UK goes to the polls.  Former FBI Comey testifies.  Ahead of these significant events, the global capital markets are mostly quiet, with some pockets of activity.   The US dollar is narrowly mixed.  The Australian dollar is the strongest currency today, gaining nearly 0.7%  against the dollar to edge through last month's high on the back of news that the economy expanded 0.3%...

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Yen Propelled Higher

The week was supposed to be dominated by the UK election and the ECB meeting, but the yen is stealing the show in the first part of the week. The US dollar has been sold through JPY110 for the first time since late April. The euro has fallen from JPY125.30 before the weekend to JPY123.25 today.  In our work, we tend to emphasize the yen's sensitive to the interest rate differential with the US.  The US 10-year yield cannot find traction.  It is off three basis points to...

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Dollar Dogged by Disappointing Data

The technical indicators warn that the US dollar is stretched, but the combination of disappointing auto sales and jobs report may deny it the interest rate support needed to facilitate a resumption of the bull market. While there are many observers talking about the abdication of the US from its global leadership role given the decision to pull out of the Paris Accord and the TPP, we think the dollar's performance can be explained by changing perceptions about the pace of...

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Dollar Marks Time Ahead of US Jobs Report

The foreign exchange market is becalmed, leaving the US dollar narrowly mixed.  The euro has been confined to less than a 20-pip range through the Asian session and most of the European morning.  The news stream is light.  The US withdrawal from the Paris Accord may have garnered the headlines, but as a market force, it is difficult to detect the immediate impact.   The UK reported stronger than expected construction PMI.  Unlike the manufacturing PMI reported earlier in...

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Great Graphic: Iron Ore and the Australian Dollar

This Great Graphic, from Bloomberg, shows the correlation between the price of iron ore and the Australian dollar on a rolling 60-day basis over the past year.  The correlation is  a little more than 0.81.  The relationship is the tightest since last August.     This is purely directional.  The correlation weakens considerably if we look at returns.  When conducted on the basis of percentage change, the correlation drops to a little more than 0.2.   While this is not...

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