Tag Archive: federal-reserve
Higher for Longer Lifts the Dollar, while SNB Surprises Many by Standing Pat–Over to the BOE
Overview: The Federal Reserve's hawkish hold, which
included 50 bp less of cuts next year than it had signaled in June, has lifted
the dollar against most currencies today. The notable exception is the Japanese
yen. The greenback did extend its advance to new highs for the year before the
market turned cautious ahead of the outcome of the Bank of Japan meeting
tomorrow. The Swiss franc is the weakest of the G10 currencies after the Swiss
National...
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Softer UK CPI Weighs on Sterling and Lifts Gilts, while Yen Slumps to New Low for the Year, Ahead of the FOMC
Overview: Softer than expected UK CPI has drawn
attention ahead of the key event of the day, the FOMC meeting. The UK's CPI has
spurred a dramatic rally in Gilts and saw sterling initially extend its recent
losses, falling to new four-month lows before stabilizing. The swaps market
sees less than a 50% chance of a hike by the Bank of England tomorrow. Meanwhile,
even though US Treasury Secretary Yellen suggested conditions in which
intervention by...
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Week Ahead: Thumbnail Sketch of Central Bank Meetings
The
week ahead is dominated by central bank meetings. Six of the G10 central banks
meets. The post-Covid monetary tightening cycle is ending. The start was not
synchronized, and neither will be end. It is tempting to think that those that
began the tightening cycle early will among the first to finish. Among emerging
markets that is true for Brazil and Chile, both of whom have begun cutting
rates. And Brazil is likely to deliver the second cut in...
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Battle for $1.07 in the Euro
Overview: Despite disappointing German
industrial output, where the 0.8% decline was twice expectations, the euro is
holding above $1.07, where large options exist that are expiring over the next
few sessions. The greenback is consolidating against the Japanese yen, where
the fear of intervention has increased. Sterling remains on its back foot after
yesterday's seemingly dovish comments by Bank of England Governor Bailey. Emerging
market...
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Still No Follow-Through Dollar Buying After Last Week’s Surge
Overview: The dollar was threatening to break higher
at the end of last week, and the euro and sterling closed below key supports. However,
so far this week, the greenback is consolidating and has not seen
follow-through buying. The key data this week, US consumption and jobs, and the
eurozone's CPI still lay ahead. The Antipodeans and Norwegian krone enjoy a
firmer today. A 0.8% contraction in Sweden's Q2 GDP was not as deep as had been
feared,...
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Dollar Consolidates as Market Considers Breakout and Rebuffs Beijing’s Latest Efforts
Overview: Many market participants sense an
inflection point is near. The dollar settled last week beyond key levels
against several major currencies, bolstered by higher short-term US rates. The
market is aware that the Bank of Japan could intervene in the foreign exchange
market with the trading near its best levels of the year, and the 10-year JGB
yield grinding higher. Beijing cut the tax on equity transactions, will
restrict IPOs, and urged...
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BRICS to Expand a Little, USD Steadies after Yesterday’s Retreat, Attention Turns to Jackson Hole
Overview: Strong Nvidia's earnings after the US
markets closed yesterday helped lift Asia Pacific markets today. All the large
bourses were higher but India. Hong Kong, South Korea, and Taiwan indices rose
more than 1%. Europe's Stoxx 600 is higher for the fourth consecutive session
and US index futures are higher, led by the NASDAQ. European benchmark bond
yields have extended yesterday's PMI-induced decline and are mostly 1-2 bp
lower. The...
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Greenback Remains Firm, with Yen and Aussie Falling to New 2023 Lows
Overview: The dollar and US rates remain firm. The
greenback rose to new highs for the year against the Japanese yen and
Australian dollar before steadying. Outside of the Swedish krona, which is off
nearly 0.5%, the G10 currencies are nursing small losses late in the European
morning, mostly less than 0.1%. Most emerging market currencies are also lower. The Chinese
yuan gapped lower for the second consecutive session and is also approaching
this...
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After Dramatic Week, Capital Markets are Stabilizing
Overview: After tumbling headlong this week, the
dollar appears to be broadly consolidating ahead of the weekend Among the G10
currencies, the Canadian dollar's 1.2% gain is the least and it made new
10-month highs earlier today The beleaguered Scandis soared The Norwegian
krone's 6.6% advance followed by the Swedish krona's 5.8% surge led the major
currencies The Dollar Index is off about 2.4% this week ahead of the North
American session It is...
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The Greenback Stabilizes After Pre-Weekend Drop
Overview: The US dollar is mostly firmer after selling off hard
before the weekend in response to the jobs data. Ranges are mostly narrow, but
the Australian and New Zealand dollars are the heaviest following news of
China's deflation. Emerging market currencies are mixed, but of note the
liquid, freely accessible currencies, South African rand, Hungarian forint, and
Mexican peso are atop the leader board. Despite repeatedly lower US dollar
fixes...
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Market Continues to Converge With Fed’s Forward Guidance
Overview: A key development in recent days has been
the market's convergence with the Federal Reserve's forward guidance regarding
scope for two quarter-point hikes in the second half. The US two-yield is up
about six basis points today, extending yesterday's 15 bp increase. It is
approaching 5%. The Fed funds futures strip implies one hike has been fully
priced in and about a third of the next one. The dollar has risen against all
the G10...
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PBOC Fixes Dollar Lower, but It Recovers Against the Yuan, Riksbank Hikes and Market Yawns
Overview: The US dollar is narrowly mixed against
the G10 currencies. Stronger than expected Australian retail sales helped
steady the currency after the soft inflation data took it down. Sterling has
also steadied after it suffered its largest loss yesterday (~0.9%) in over a
month. Sweden's 25 bp rate hike has not given the krona much of a lift. Central
European currencies lead the emerging market currencies higher, while the PBOC
set the...
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Greenback Jumps on Weak Flash PMIs
Overview: As the market reluctantly edges toward the
Fed's guidance, the disappointing PMIs from Europe (but also Japan and
Australia) helped boost the greenback. The Dollar Index is trading at seven-day
highs above 103 after briefly dipping below 102 to set a new low since mid-May
yesterday. The unwinding of cross positions is helping the yen hold its own
today as it consolidates near its worst level of the year. The surging dollar
and risk-off...
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Higher for Longer
Overview: The central
banks of Norway and Switzerland have hiked rates by 50 bp and 25 bp,
respectively. Attention is on the Bank of England. A 25 bp hike is widely
expected but after strong inflation report, the risk is clearly for a 50 bp
hike. In fact, we suspect a quarter-point move could see sterling sold. With a
new orthodox economics team in Turkey, a large rate hike is expected today. Late
in the North American session, Mexico's central...
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UK Inflation Surprises to the Upside and Weighs on Sterling
Overview: The UK surprised with higher-than-expected consumer
inflation and budget deficit, and the odds of a 50 bp hike tomorrow edged
higher. Sterling has been sold on the news and is the weakest of the G10
currencies, off about 0.5%. The dollar is mixed with the euro, Swedish krona,
Canadian dollar, and Swiss franc posting small gains. Emerging market
currencies are lower, including the Chinese yuan, which is at new lows since
last November. The...
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Fed Day: Skip = Hawkish Pause, but Market Says Finito
Overview: The year-end effective Fed funds rate
implied in the futures market is about 5.11%. The rate has been averaging 5.08%
since the Fed hiked rates last month The Fed may go to pains to explain that
the steady that to be announced later today is just a pause to get a better
read on the economy, the market favors this to be the end of the tightening
cycle. The dollar is trading softer against nearly all the G10 currencies. Emerging
market...
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Dollar Gains Extended, Oil Steadies at Higher Levels after Saudi’s Cut, US Bill Deluge Begins Today
Overview: The US dollar has extended its post-employment
gains today, helped by firmer rates and several countries seeing downward
revisions from the preliminary May PMI. The greenback is trading with a firmer
bias against all the G10 currencies and most of the emerging market currencies,
including Turkey, India, and China. July WTI gapped higher after the Saudi
Arabia announced a voluntary and unilateral cut of one million barrels a day in
output...
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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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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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The Dollar Consolidates after Powell Sapped its Mojo
Overview: Federal Reserve Chair Powell's offered a
stronger case for a pause in the monetary tightening before the weekend and
this sapped the dollar's mojo. The greenback is mostly consolidating through
the European morning in quiet turnover. The JP Morgan Emerging Market Currency
Index is trying to snap a four-day decline. The South African rand is
recovering from its recent slide and is up nearly 1%. The South Korea won is
benefitting from...
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