Wednesday , May 25 2022
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Tag Archives: #trade

The Week Ahead: US CPI and PPI Set to Soften

The Fed's 50 bp rate hike is behind us.  Another 50 bp hike is expected next month. The April employment report will do little to calm the anxiety about the "too tight" labor market.  The decline in the participation rate was disappointing and this coupled with decline in Q1 productivity raies questions about the economy's non-inflationary speed limit.    One of the fascinating things about the markets is that sometimes the cause take place after the effect.  This is an interesting way to...

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Central Banks on a Preset Course Reduces Significance of High-Frequency Data

Arguably the most important data next week is the flash PMI.   It is not available for all countries, but for those generally large G10 economies, the preliminary estimate is often sufficiently close to the final reading to steal its thunder. Moreover, and this applies to high-frequency data more broadly, given the overshoot of inflation in most counties, with some exceptions, notably in Asia, central banks appear to be on set courses. The near-term data are interesting if you are into that...

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RBA Drops “patience” to Send the Aussie Higher

Overview: The Reserve Bank of Australia hinted that it was getting closer to a rate hike.  The Australian dollar was bid to its best level since the middle of last year.  Australian stocks advanced in a mixed regional session while China and Hong Kong markets were closed for the local holiday.  BOJ Kuroda called the yen's recent moves "rapid."  The yen is sidelined today as the dollar weakens against other major currencies, led by the Antipodeans.  In addition to the yen, the Swiss franc and...

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Powerful Short Squeeze Lifts Nickel, while the Prospect of new Joint EU bonds help steady the Euro

Overview: A powerful short squeeze in nickel saw the price double for the second day before the London Metal Exchange suspended trading.  It had allowed traders to defer delivery obligations.  However, other key commodity markets are a bit calmer today.  April WTI is in a $3 range on either side of $120.  US natural gas is about 3% lower after a 3.6% loss to start the week. European natgas is seeing early gains of more than 11% pared back to around 2.5%.  Copper is a little firmer after...

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ECB Meeting and US and China’s CPI are the Macro Highlights in the Week Ahead

One of the most significant market responses to Russia's attack on Ukraine is in the expectations for the trajectory of monetary policy in many of the high-income countries, including the US, eurozone, UK and Canada.  The market has abandoned speculation of a 50 bp hike in mid-March by the FOMC and the Bank of England.  It has also scaled back the ECB's move to 20 bp this year from 50 bp.  Even after the Russian invasion, the market had discounted a 75% chance that the Bank of Canada would...

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Capital and Commodity Markets Strain

Overview:  The capital and commodity markets are becoming less orderly.  The scramble for dollars is pressuring the cross-currency basis swaps.  Volatility is racing higher in bond and stock markets.  The industrial metals and other supplies, and foodstuffs that Russia and Ukraine are important providers have skyrocketed.  Large Asia Pacific equity markets, including Japan, Hong Kong, China, and Taiwan fell by 1%-2%, while South Korea, Australia, and India managed to post modest gains...

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Hope for De-Escalation of Tensions Continues

Overview: Hope that the geopolitical tensions in Eastern Europe are de-escalating is underpinning risk appetites.  The large bourses in the Asia Pacific region but China were all up more than 1% and Europe's Stoxx 600 gapped higher, but has come back to close the gap, with communications and financial sectors the largest drags.  US futures have softened over the past couple of hours.  The 10-year Treasury yield is hovering around 2.04%, while European yields are a little softer.  In the...

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Debt Markets Calm

Overview: A calmer European debt market and the second consecutive decline in the German two-year yield have weighed on the euro.  It briefly dipped below  $1.14 in the European morning.  European bond benchmark yields are softer and most peripheral premiums over Germany have narrowed.  Bonds in the Asia-Pacific area rose sharply after the sell-off seen in Europe and the US yesterday.  Australian and New Zealand 10-year yields jumped 12 and 10 bp, respectively.  The JGB benchmark poked above...

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Looking for Clarity While Waiting for Godot

In the first few weeks of the year, there have been several breakouts in the foreign exchange market that have not been sustained.  The dollar broke higher to start the year against the Japanese yen, rising to five-year highs only to reverse and return to the JPY112.50-JPY115.50 range that confined it more or less since the middle of last October.  The euro was bid to around $1.1485 in mid-January, its best level in two months.  It quickly reversed and fell to its lowest level since mid-2020...

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Quiet Start to New Year

Overview:  The New Year begins slowly.  Japan, mainland China, Australia, New Zealand, and the UK markets remain closed.  While Hong Kong shares traded heavily, Taiwan, South Korea, and India moved higher.  Led by consumer discretionary and staple sectors, Europe's Stoxx 600 is up about 0.6%.  US futures are 0.4%-0.6% higher.  European yields have drifted lower, with the periphery doing bettter than the core.   The US 10-year yield will begin the local session at 1.51%.  The dollar is mostly...

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