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Tag Archives: EUR

Dollar Looks Vulnerable at the Start of the Week Ahead

The US dollar recovered from the sell-off sparked by the poor employment data released on June 3. It continued to move higher after the Federal Reserve met and shaved its forecasts for the next year and 2018.  The number of Fed officials that think only one hike may be appropriate this year increased from one in March to six in June.   The market is discounting less than a one in 10 chance of a July hike, though a upward revision to the May jobs data coupled a robust June...

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How Germany Could Upset Europe before UK Referendum

The assassination of the Jo Cox has broken the powerful momentum in the markets.  Investors recognize that the tragedy potentially injects a new element into consideration for the outcome of next week's referendum.   The campaigns will be resume over the weekend, and new polls will be available.  Investors will place more weight on polls conducted after the assassination.   The UK referendum is the big event next week.  However, there is another threat to Europe a...

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Capital Markets Remain at UK Referendum’s Mercy

A spate of opinion polls showing a tilt toward Brexit, and the leading UK newspaper urging the Leave vote on the front page,  keep the global capital markets on edge.  Equities are lower, though of note ahead of the MSCI decision first thing Wednesday in Asia, Chinese shares eked out a small gain.  Core bond yields are 4-5 bp lower, which pushes the 10-year German bund yield into negative territory for the first time.  Sterling, which had rallied more than a cent in the...

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Brexit Dominates

The risk that the UK votes to leave the EU next week is the dominant force in the capital markets.  It is a continuation of what was seen at the end of last week.  Sterling fell 1.4% against the US dollar before the weekend and is off another 1% today.  A week ago it traded as high as $1.4530.  Now it is nearing $1.41.  There have been several polls showing those wanting to leave are ahead.  The event markets show an elevated risk, but still favor those that want to...

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Greenback Proves Resilient

The US dollar traded heavily in the first few days of last week as investors continued to respond to the poor employment report.   However, Yellen's willingness to defer judgment while noting the underlying economic strength, JOLTS and the initial jobless claims, coupled with the ongoing anxiety over the June 23 UK referendum helped the dollar recover in the second half of the week.   Although four central banks meet and there are numerous economic reports, there are two...

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Dollar Retains Firm Tone, but Yen and Swiss Franc maybe Drawing Support from Brexit Fears

The US dollar weakened in the first half of the week as participants continued to react to the shockingly poor jobs report and shift in Fed expectations.  However, it recovered smartly yesterday and is seeing some modest follow through buying today.   The main exceptions today are the Japanese yen and Swiss franc, the only major currencies besting the dollar today.  For the week, it is the dollar-bloc and franc that have maintained weekly gains.    And those dollar-bloc...

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Greenback is Mostly Firmer, but Yen is Firmer Still

The US dollar is posting modest upticks against most of the European currencies and the Canadian and Australian dollars. However, it has fallen against the yen and taken out the recent low, leaving little between it and the May 3 low near JPY105.50.  The New Zealand dollar though is the strongest of the major currencies; gaining 1.5% following the RBNZ's decision to leave rates on hold, and signal of little urgency to cut again in the near-term.   In recent days, the odds...

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Cool Video: Bloomberg Television–All about the Periphery

I am in Boston to attend the Fixed Income Leaders Summit and was invited to join Alix Steel, Joe Weisenthal, and Scarlet Fu on Bloomberg TV.   We talked about the peripheral in Europe, especially Portugal, Italy and Spain.   Each has a pressing issue.  In Portugal, yields have not fallen as much as in other peripheral countries.  In Italy, they are belatedly addressing the recapitalization of Italian banks, but by the end of next week the bank-financed backstop that is...

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Currencies Broadly Stable, but Greenback is Vulnerable

The foreign exchange market is quiet.  The euro remains confined to the narrow range seen on Monday between $1.1325 and $1.1395.  We continue to look for higher levels near-term as the drop from May 3 (~$1.1615) to May 30 (just below $1.11) is corrected.  A move above $1.1420 would likely spur more buying.   The dollar has surrendered yesterday's gains against the yen that had lifted it to almost JPY108.00.  The pullback has been limited to the JPY106.75 area.  The...

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Swiss Reserves: Not what They Seem

News that Switzerland's reserves rose to a new record high of CHF602.1 bln in May from CHF587.9 bln in April spurred talk that the SNB has been intervening covertly.  One media account cited a trader calling the intervention as  "massive."  We are skeptical.  Given the massive holdings of foreign currencies, we suspect that the swing in valuation likely accounts for an apparent increase in reserves.   The reserves are reported in Swiss franc, which fell against both...

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