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Tag Archives: Bank of Canada

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

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...

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Markets Adrift ahead of Key Events

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...

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Without Yield Support, the Dollar Wilts

Overview: Falling US yields weigh on the US dollar.  The 10-year Treasury yield is flirting with the 1.50% mark, and the greenback is trading heavily against all the major and most emerging market currencies. European and the Asia Pacific benchmark yields are lower as well.  The JP Morgan Emerging Market Currency Index is edging higher for the fourth consecutive session.  The lower yields are not doing equities much good today.  Outside of China, the large equity markets in the region fell,...

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ECB, Bank of Canada, and the Peak in US CPI Base Effect

The media has played up the upcoming ECB with all the Sturm und Drang that can be mustered. However, investors and other market participants seem considerably less anxious.  And for a good reason:  at the end of the day, it does not really matter that much.  Since the ECB stepped up its bond purchases, the euro, yields, and premiums over Germany have risen. But, of course, there are other drivers of the capital markets, and that is the point.  Even though the euro is often quoted to the...

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The Dollar Finds Some Traction, while Bank of Canada Highlights the North American Session

Overview:  The sell-off in US equities yesterday helped drag the Asia Pacific bourses lower today, with the Nikkei leading the way with a 2% drop.  Australia held up among the best among the large regional markets with a 0.5% loss.  The sell-off stopped in Europe, where the Dow Jones Stoxx 600 is up about 0.3% near midday, led by the information technology and health care sectors.  However, the US future indices are sporting small losses.  The US 10-year yield has stabilized near 1.57% after...

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The Virus, Vaccine, and Economic Velocity

The fact that neither the dollar nor US interest rates rose after the stronger than expected March CPI and real sector that prompted upward revisions to GDP forecasts may be saying something about market sentiment and positioning.  It lends credence to the idea that the markets have entered a new phase.    Consider the US 10-year yield.  For the two months after the November election, the US 10-year yield traded between 0.80% and 1.0%.  It traded up to 1.20% in early January, but by the end...

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The New Week

The demise of America and the dollar has been an often-told tale.  Some even suggested that the sharp appreciation of the purely speculative crypto-token (Bitcoin) confirmed the loss of the US and the dollar's privileged position in the world economy.  In fact, quite the opposite appears to be taking place.  The latest reserve data from the IMF shows that foreign central banks held more dollars in reserves than ever before at the end of last year, over $7 trillion. The more timely custodian...

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Canada Signals Japan For Bond Yields

Back in October, late October specifically, the Bank of Canada removed the word “gradual” from its policy statement. Inflation, staff Economists projected, was moving up as was the Canadian economy. It was finally time to become more aggressive. Freed from that one word, BoC officials could opt for a “rate hike” at every meeting. It was widely expected in December that’s what would happen – the first consecutive benchmark rate increases in the cycle. Canada was leading, way out in front of...

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Expecting What’s Unexpected In Canada

There is much more chicken to each hawk than any of the birds would care to admit. What I mean by that is fairly straightforward, or it should be. Alan Greenspan was resolute. Right or wrong (the latter, trust the curves), after taking federal funds down to 1% officials pushed the rate right back up to 5.25% without pause. At every meeting interval during the middle 2000’s, the FOMC added another 25 bps. There was no equivocation or lamenting R*’s and complicated repo mechanics. They may not...

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Canada’s Fallacy Contribution

If there is one small silver lining from 2018’s economic performance, it is that Milton Friedman’s interest rate fallacy is being robustly proven yet again. Many Economists will have you believe that low interest rates, short or long, are stimulus. This is a huge mistake. Here’s what Friedman said in December 1997: As the economy revives, however, interest rates would start to rise. That is the standard pattern and explains why it is so misleading to judge monetary policy by interest rates....

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