Tag Archive: Australia
Scandis and Antipodeans Lead the Greenback’s Recovery
Overview: The market continues to resist the Fed's
signal that another 50 bp of hikes may be necessary to ensure inflation is
headed toward its target. Previously, the market had rate cuts priced in, and
it took some time for the Fed's push back to be accepted. The market converged
with the Fed, and this helped the dollar recover. We suspect a similar pattern
to play out again. The market does not have even one of the two Fed hikes
discounted. As...
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ECB’s Turn
Overview: The Fed's
hawkish hold and signal that it may raise rates two more time this year sent
ripples through the capital markets. Risk appetites have been dealt a blow. However,
China's rate cut and likely additional supportive measures after disappointing
data, helped lift the CSI 300 by 1.6%, the most this year. The Hang Seng rose
by nearly 2.2%, the most in three months. Europe's Stoxx 600 is snapping a
three-day advance and US index futures...
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Japan’ Q1 GDP was Revised Up, While the Eurozone’s was Revised Down
Overview: The back-to-back surprise rate hikes by
the Australia and Canada spurred speculation that the Fed could hike next week,
and this lifted US rates and helped the dollar recover. The odds of a hike
increased, according to the indicative pricing in the Fed funds futures market
from about a 20% chance to a little above 35%. now. At yesterday's high, the
two-year yield was up a little more than 25 bp since the low before the US
employment data...
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Dollar Steadies After Fed’s Push Back
Overview: The market was gearing up for a June Fed
hike and officials and this helped lift the greenback. However, the Fed
Governor Jefferson, nominated to be the next vice-chair, pushed back against it.
His views are thought to reflect the Fed's leadership. Philadelphia Fed's
Harker, who is a voting member of the FOMC also backed a pause. This is not
quite what we expected when we suggested the US interest rate adjustment was
complete or nearly...
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The Greenback Stalls after Yesterday’s Surge as US Negotiators Move Closer to Last-Minute Deal
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
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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Yen Recovers from New 2023 Low, while Sterling Sets a New Low for the Month
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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Yen and Yuan Fall to New Lows for the Year
Overview: Some creeping optimism about the US
debt ceiling, easing of pressure on bank shares, and a continued rise in US
rates helped the dollar extend its recent recovery. Over the past two weeks or so,
the US 2-year premium has risen 25-30 bp against Germany and nearly 25 bp
against the UK. The 10-year US Treasury has risen from the lower end of its
seven-month range (~3.30%) earlier this month to approach the upper end of the
range that has...
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The Yen is Sold Despite Better than Expected Q1 GDP and the Greenback Pushes Above CNY7.0
Overview: Better than expected US core retail sales
and manufacturing output sent US rates higher and helped lift the greenback
during the North American session after a heavier tone in Asia and Europe. The
US two-year note rose to almost 4.12% and the 10-year note yield increased to
3.57%. Both are the best levels in two weeks. The dollar traded firmer against
most of the major currencies and the Dollar Index approached the one-month high
set on...
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Consolidative Session Marked by Weak Chinese Imports and White House Debt Ceiling Talks
Overview: The market sentiment remains fragile.
Equities are mostly lower. Japan was a notable exception, and concerns about
China's economy after a sharp decline in imports took mainland and Hong Kong
listed companies sharply lower. Europe's Stoxx 600 is giving back yesterday's
0.35% gain plus more. Bank shares are off 0.65% after rallying 4.20% over the
past two sessions. US equity futures are heavier. Benchmark 10-year yields are
mostly a couple...
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The Euro Stalled Near Its Best Level since April 2022 Ahead of ECB’s Decision
Overview: Without making
a commitment, the Federal Reserve opened the door to a pause in its tightening
cycle and the market has concluded it is over. The dollar slumped to new lows
for the move against sterling (and the Mexican peso), while euro stalled as it
approached last week's high, which was the best level since April 2022. The
dollar remains soft against most of the G10 currencies, today. The Norwegian
krone is leading after the 25 bp hike...
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Fed Day
Overview: A sharper than expected decline in US job
openings and weaker factory orders coupled with intensifying bank stress sent
ripples through the capital markets. The large US bank index fell 4.5%
yesterday, the most in six weeks, while the regional bank index fell nearly
5.5%, its biggest loss since March 13. Both indices took out the March lows. The
US 10-year yield unwound Monday's increase and the two-year note yield fell
back below 4.0%...
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RBA Surprises with a Quarter-Point Hike
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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Bank Stress Hobbles the Dollar, while Dissents Make the 50 bp Hike by Sweden less than Hawkish
Overview: The re-emergence of bank stress
reverberated through the US markets yesterday, downgrading the perceived
chances of a Fed hike next week and sending the US 2-year yield sharply lower. The
yield settled 13 bp lower, the largest drop in three weeks. The risk-off sent
the US dollar higher against most of the major and emerging market currencies. Follow-through
US dollar gains today has been mostly limited to the Australian dollar, where...
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Risk-Off Mood Dominates
Overview: Perhaps it was the extent of First Republic
Bank's loss of deposits that were reported with earnings yesterday, but risk
appetites dried up today. Asia Pacific equities were trounced outside Japan
today. Hong Kong and mainland shares that trade there set the tone today
falling 1.7%-1.9%. China's CSI 300 fell for the fifth consecutive session. Taiwan
and South Korean markets fell more 1.4%-1.6%. Europe's Stoxx 600 is off almost
0.5%,...
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US Dollar Slumps and China Surprises with Twice the Expected Trade Surplus
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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Fragile Calm Casts a Pall over the Capital Markets
Overview: There is a fragile calm in the capital
markets today ahead of the long holiday weekend for many. The poor US economic
data yesterday and third consecutive decline in the KBW bank index weighed on
risk sentiment. Most of the large bourses in the Asia Pacific region fell, with
Hong Kong and India notable exceptions. In Japan, the Topix bank index fell
1.1% after a 1.9% decline yesterday and is now lower on the week. Europe's
Stoxx 600 is...
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The Dollar Jumps Back
Overview: The pendulum of market expectations has
swung dramatically and now looks for 100 bp cut in the Fed funds target this
year. That seems extreme. At the same time, the dollar's downside momentum has
stalled, suggesting that the dollar may recover some of the ground lost
recently as the interest rate leg was knocked out from beneath it. The euro
twice in the past two days pushed through $1.09 only to be turned away.
Similarly, sterling pushed...
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Banking Stress Eases
Overview: The banking crisis is ebbing. The Bank of
England and European Central Bank assured investors that the AT1 bonds are
senior to equity claims, and Switzerland is a unique case. Bank share indices
in the Europe and the US rose yesterday, even though the shares of First
Republic Bank fell by 47% yesterday. The $123-stock at the end of last month
reached almost $11 yesterday. It is trading around $14.75 pre-market. Global equities are...
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Swiss National Bank Support Steadies Market as ECB Faces Difficult Choice
Overview: The pendulum of market psychology is
swinging dramatically. Amid the US banking crisis, Credit Suisse's long-running
pressures percolated back to top-of-mind, sending ripples through the capital
markets, trigging a sharp slide in the euro. The SNB support is helping the
markets calm today. The odds of a 50 bp hike by the ECB today have been cut to
about 50% compared with a nearly 100% a week ago. The market has about a 66%
chance of a 25...
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