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Tag Archives: GBP

Cool Video: Forces Driving the Dollar and Downplaying Claims Sterling is an Emerging Market Currency

From my remote location in Ocean Grove (next to Asbury Park of Bruce Springstein fame), I joined Martin Soong and Sri Jegarajah for a brief interview as the Asia session was about to begin the new week. A three-minute clip of the interview can be found here. I suggest that there are two main drivers of the markets now.  There is the fear of the new surge in Covid cases and the economic implications, on the one hand, which discourages risk-taking.  On the other hand, the vast sums of...

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Brexit Update

Three and half years after what was initially a non-binding referendum, the UK has seen its way to leave the EU.  The House of Commons passed the necessary legislation last week as Tories enjoys a parliamentary majority.  The House of Lords takes up the measures now. Although the Conservatives do not have a majority and a vigorous debate is expected, the unelected body is most unlikely to block Brexit.   What happens next?  The UK will formally exit the EU at the end of the month. ...

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Is Conventional Wisdom Too Optimistic? The Week Ahead

There have been three general issues that the macro-fundamental picture has revolved around this year:  trade, growth, and Brexit.  On all three counts, conventional wisdom seems unduly optimistic, and this may have helped dampen volatility. A series of signals suggest that the US and China remain far apart in trade negotiations.  The US wants China to promise to increase agriculture imports from American farms to more than twice the 2017 peak.  Not only is China understandably...

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Fed’s Mid-Course Correction to be Challenged while ECB Resumes Bond Purchases

The week ahead will help shape the investment climate for the remainder of the year.  The highlights include three central bank meetings (Federal Reserve, Bank of Japan, and the Bank of Canada).  Among the high-frequency data, the US and the eurozone report the first estimates of Q3 GDP, and the US October jobs data and auto sales will be released.  Investors will also get the preliminary Oct CPI for EMU. A few hours before the FOMC meeting concludes on October 30, the US will...

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Brexit High Drama

Before Prime Minister Johnson submitted the withdrawal bill that he had negotiated with the EU, a Tory-backed bill to not consider it until the implementation bill is approved, carried by a 322-306 margin.  The disgruntled Democrat Unionist Party's 10 votes made the difference, but there were also 10 independent Conservative MPs, who had lost the whip or voluntarily surrendered that also voted against the government.  A few have indicated that they do in fact support the agreement...

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October Monthly

Trade,  central bank policy, and Brexit dominated the investment climate in September. The US-Chinese trade conflict stopped escalating.  Although face-to-face talks are planned in October and the list of exemptions from the punitive tariffs has increased (US soy and pork, for example, are now exempt as are 10 components of Apple’s Mac Book Pro from China), the tensions remain high.  The conflict is more than about more than trade.  It is also about market access, unfair subsidies, and...

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Great Graphic: Views Distill to Short Sterling Long Yen Opportunity

We have argued that the road to an orderly Brexit remains arduous and that sterling had entered an important technical area ($1.2500-$1.2530).  At the same time, see the dollar as having approached the upper end of its broad trading range against the yen.  One of the important drivers lifting the dollar was the dramatic rise in US yields.  We thought that move is countertrend and that yields are headed lower again.   These views could be expressed in a short-sterling long yen...

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Jump in Yields Didn’t Derail Equity Rally While Sterling Rallies Ahead of the Weekend on (misplaced) Brexit Optimism

The most striking thing about last week's price action was the surge in US yields.  The 10-year yield jumped about 34 basis points, the most in three years and returned to levels not seen since August 2 (1.90%).  A deluge of investment-grade corporate bonds and US Treasuries ($78 bln auctioned to lukewarm reception), coupled with an acceleration of core CPI (highest in 11 years), optimism on the trade front, and Mnuchin's insistence on pushing forward with an extra-long bond, (50, and...

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Brexit Update

The October 31 deadline for the UK to leave the EU is less than 100 days away.  The new Prime Minister is beginning to convince others that that UK will, in fact, leave at the end of October.   PredictIt.Org shows the odds of the UK leaving has risen to almost 50% from about a 33% chance a month ago.   Here is a summary of where the situation stands and some key dates going forward.   1.  Boris Johnson handily won the Tory Party leadership challenge and succeeded May.  He quickly...

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Sterling Weakness Punctures Subdued Session

Overview: Summer in the northern hemisphere contributing to the subdued activity in the global capital markets. The MSCI Asia Pacific index stalled after a four-day advance, with Japanese, Chinese, and Australian equities offsetting gains in Taiwan, South Korea, and India.  Europe's Dow Jones Stoxx 600 is flattish, struggling to extend its three-day rally.  US shares are also little changed after the S&P 500 rose for the fifth consecutive session yesterday to new record highs.  It...

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