Thursday , August 18 2022
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Marc Chandler

Marc Chandler

He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.

Articles by Marc Chandler

Is the Dollar’s Month-Long Pullback Over?

4 days ago

The bullish dollar narrative was fairly straightforward. Yes, the US main challengers, China and Russia, have been hobbled in different ways by self-inflicted injuries. Still, the driver of the dollar was the expected aggressive tightening by the Federal Reserve. The market accepted that after being a bit slower than ideal (though faster and before many other large central banks), the Fed would move forcefully against inflation, even if it diminished the chances of an economic soft-landing.  However, now the market seems to have a different reaction function. The euro was impressively resilient after the job growth of more than twice expectations. However, the softer than expected US CPI sent the dollar broadly lower, inflicting some apparent technical damage to

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Week Ahead: More Evidence US Consumption and Output are Expanding, and RBNZ and Norges Bank to Hike

5 days ago

After two-quarters of contraction, many still do not accept that the US economy is in a recession. Federal Reserve officials have pushed against it, as has Treasury Secretary Yellen. The nearly 530k rise in July nonfarm rolls, more than twice the median forecast in Bloomberg’s survey, and a new cyclical low in unemployment (3.5%) lent credibility to their arguments. If Q3 data point to a growing economy, additional support will likely be found.  While the interest rate-sensitive housing sector may still feel the squeeze, we note that activity is at historically strong levels. Housing starts are expected to have fallen for the third consecutive month in July. That would be the longest decline since the last four months of 2018. However, around 1.5 mln annualized

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Heading into the Weekend, Dollar’s Downside Momentum Stalls

6 days ago

Overview: The markets are putting the finishing
touches on this week’s activity. Japan, returning from yesterday’s holiday
bought equities, and its major indices jumped more than 2%. China, South Korea,
and Australia struggled. Europe’s Stoxx 600 is firmer for the third consecutive
session. It is up about 1.3% this week. US futures are also firmer after reversing
earlier gains yesterday to close lower on the day. The US 10-year yield is flat
near 2.88%, while European benchmarks are 4-6 bp higher. The greenback is mixed.
The dollar-bloc currencies and Norwegian krone are slightly firmer, while the
Swedish krona, sterling, and the yen are off around 0.3%-0.6%. Emerging market
currencies are also mixed, though the freely accessible currencies are mostly
firmer. The

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US Dollar Soft while Consolidating Yesterday’s Drop

7 days ago

Overview: The US dollar is consolidating yesterday’s
losses but is still trading with a heavier bias against the major currencies
and most emerging market currencies. The US 10-year yield is soft below 2.77%,
while European yields are mostly 2-4 bp higher. The peripheral premium over the
core is a little narrower today. Equity markets, following the US lead, are higher
today. The Hang Seng and China’s CSI 300 rose by more than 2% today. Europe’s
Stoxx 600 gained almost 0.9% yesterday and is edging higher today, while US
futures are also firmer. Gold popped above $1800 yesterday but could not sustain
it and its in a $5 range on both sides of $1788 today. September WTI rebounded
yesterday from a low near $87.65 to close near $92.00. It is firmer today near

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Is it All Really about Today’s US CPI Print?

8 days ago

Overview: The US dollar is trading with a heavier
bias ahead of the July CPI report. The intraday momentum indicators are overextended,
and this could set the stage for the dollar to recover in North America. Outside
of a handful of emerging market currencies, which include the Mexican peso and
Hong Kong dollar, most are trading lower. Losses in US equities yesterday
and poor news from another chip maker (Micron) weighed on Asia Pacific equities.
Europe’s Stoxx 600 is steady and US futures are a little higher. The US 10-year
yield is going into the CPI report softly around 2.76%. The US Treasury sells
10-year notes today as the second leg of the quarterly refunding. European benchmark
yields are 2-3 bp lower. Gold continues to press against the $1800 cap. It has

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US Dollar Offered but Stretched Intraday

9 days ago

Overview: The US dollar
is trading heavily against all the major currencies, led by the Norwegian krone and
euro.  Emerging market currencies are
also firmer.  However, risk-appetites
seem subdued.  Even though most large bourses
in Asia Pacific advanced but Japan and Hong Kong, European markets are nursing
small losses and US futures are little changed. 
Benchmark 10-year yields are firmer with European yields 3 bp firmer
and Italy’s premium over Germany slightly narrower.  The 10-year Treasury yield is up three basis
points to 2.78%.  Gold is firm, knocking
on the recent cap below $1800.  September
WTI settled near $90.75 yesterday and is struggling to hold above $90 today
ahead of the EIA short-term outlook later today (OPEC and IEA on Thursday).  US natgas,

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Dog Days

10 days ago

Overview: The dog days of August for the Northern Hemisphere are here and the
capital markets are relatively subdued. Equities are firmer. The notable exceptions in Asia was China, Hong Kong, and Taiwan. The MSCI Asia Pacific Index has advanced for the last
three weeks. Europe’s Stoxx 600 slipped almost 0.6% last week and has recouped
most of it today. US futures are steady to firmer. The US 10-year yield is
struggling to stay above 2.8%, while European benchmarks are off 3-6 bp, with
Italian yields firmer after Moody’s cut the country’s credit outlook to
negative before the weekend. The dollar is mostly softer with the Australian
and New Zealand dollar’s leading the way (~0.60%-0.75% better). The euro and
yen are little changed. Among emerging market currencies,

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12 days ago

(Traveling and unable to provide a technical overview this week.) Rising price pressures,
stronger and more persistent than generally expected, has been the main
challenge for consumers, businesses, and policymakers. It will stay top of mind in the week
ahead as both the world’s two largest economies, the US and China, report July
consumer and producer prices.  During the Great Depression, the
central governments discovered their balance sheets, and budget deficits became
a nearly permanent fixture. This is true even for countries like Germany, which ostensibly
shunned Keynesian demand management and embraced "ordo-liberalism."
During the Global Financial Crisis, the central bank balance sheet was called
into action as policy rates hit zero (and fell into

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Downside Risks to the US Employment Report?

13 days ago

Overview: The US dollar enjoys a firmer bias against
the major currencies ahead of the July employment data. Emerging market
currencies are mixed. Asian currencies are generally firm while central Europe is a bit softer. Some detect a relaxation in tensions around Taiwan, though
China’s aerial harassment continues. Taiwanese shares jumped 2.25% to lead the
region that saw China’s CSI 300 rally over 1%. Europe’s Stoxx 600 is giving
back yesterday’s 0.2% gain, even though Germany, France, and Spain reported stronger
than expected June industrial output figures. US futures are narrowly mixed.
The 10-year US Treasury yield is around 2.69%, flattish, while European yields
are slightly firmer. Gold approached $1800 but has been turned back. It is near
$1785 near midday

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Over to the BOE

14 days ago

Overview: Strong gains in US equities yesterday and
easing fears following Pelosi’s visit to Taiwan helped lift most Asia Pacific
equities, with Hong Kong leading the way with a 2% rally. Taiwan, Australia,
and India did not participate in the regional rally. The Stoxx 600 is edging higher
today. It was flat on the week through yesterday. US futures are a little
firmer. The greenback is offered against the major currencies led the Antipodeans.
The Japanese yen continues to pare its recent gains, encouraged by the recovery
in US yields. Most emerging market currencies are also trading firmer. A few
central European currencies have joined the Indian rupee to trade a bit lower. The
10-year JGB, which is capped at 0.25%, is below 0.18% today. The US benchmark
is firm

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Market Takes China’s Response in Stride, Risk Appetites Recover

15 days ago

Overview: The market is
judging China’s response to Speaker Pelosi’s visit in a mild way and risk
appetites returned. Equity markets are higher, even though Chinese shares
weakened. Europe’s Stoxx 600 is edging higher after two days of small loses,
and US futures enjoy a firmer bias. The surge in US rates yesterday has calmed.
The US 10-year yield is firm near 2.76% and the 2-year yield is up a
couple of basis points near 3.07%. European yields are 4-5 bp higher and the peripheral
premium has narrowed a little. The dollar, which was buoyed by the jump in rates
yesterday, is mostly softer today. The Scandis lead the move, while the Swiss
franc and New Zealand dollar are softer. Swiss CPI was in line with expectations,
with the EU-harmonized measure, rising to 3.3%

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Aussie Hit with Profit-Taking after RBA Hikes 50 bp

16 days ago

Overview: Speaker Pelosi’s visit to Taiwan has added
to the risk-off mood of the capital markets today. Most of the large Asia
Pacific equities sold off, with Australia and India being notable exceptions. Europe’s
Stoxx 600 is off for the second consecutive session, and by the most (~0.60%)
since mid-July. US futures are also weaker. Benchmark 10-year rates are lower. The
10-year Treasury is off a couple of basis points to below 2.55%, while European
yields are mostly 5-6 bp lower, though Italy is lagging. The dollar is trading
higher against all the majors but the Japanese yen, where the squeeze continued.
The greenback traded at two-month lows near JPY130.40. The Australian dollar
has been hit by profit-taking after the central bank hiked 50 bp. Most emerging

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Yen Squeeze Continues

17 days ago

Overview: The US
dollar begins the new month better offered. It is softer against all the major
currencies. Short yen positions continue to get unwound, which is leading the
move, followed  by the Antipodeans, where the Reserve Bank of Australia is
expected to hike rates tomorrow. Most emerging market currencies are firmer
too, except for a few Asian currencies, the Russian rouble, and, of course, the
Turkish lira. Asian and European equities are higher. Japan and Indian markets
were up around 1% to lead the major bourses. Taiwan was a notable exception, slipping
fractionally. Europe’s Stoxx is posting a minor gain, but it follows more than
1% gains in the past two sessions. US futures are posting small losses. The US
10-year yield is little changed near 2.66%,

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Macro and Prices

18 days ago

Next week, there are three big events:  the US jobs report, the Reserve Bank of Australia meeting, and
the Bank of England’s meeting. That said, the final PMI readings
may be more helpful this time than we often see because of how quickly it
appears activity has stalled. After we review the likely highlights and
share a few other observations, we will look at the technical condition of the
major dollar pairs.  On August 3 in Sydney, the
Reserve Bank of Australia will likely deliver its third consecutive 50 bp
hike. The market has abandoned any thought of a 75 bp move and finished last week with a nearly 75% chance of a 50 bp hike. It had been almost entirely discounted at the end of the previous week. A 50 bp hike will lift the cash target rate to 1.85%. The

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August 2022 Monthly

18 days ago

We can hope that August will be quiet. The Federal Reserve, the European Central Bank, and the
Bank of Japan do not meet until September. With a snap Italian election on September 25, an Italian political storm may wait for vacationers to return. The volatility of the S&P 500, the VIX, is at three-month lows, and the equivalent measure in the Treasury market (MOVE) has come off sharply from the peak in early July that was above the 2020 extreme. Investors and businesses continue to wrestle with
rising prices on one hand and moderating economies on the other. At the
same time, the powerful heat wave affecting much of the world can potentially be a significant disruptive force on economies and supply chains. Also, a new Covid subvariant, while
less dangerous, is

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EMU GDP Surprises, while the Yen’s Short Squeeze Continues

20 days ago

Overview: The month-end and slew of data is making for a
volatile foreign exchange session, while the rash of earnings has generally
been seen as favorable though weakness was seen among the semiconductor chip
fabricators. China, Hong Kong, and Japanese equities fell but the other large
markets in the region rose. Europe’s Stoxx 600 is up around 0.8%. It is the eighth
advance in the past 10 sessions. US futures are higher and the S&P 500’s
advance of nearly 7.6% coming into today, if sustained, would be the largest
monthly advance since November 2020. Asia Pacific bonds played catch-up after the
big Treasury rally yesterday, but European and American yields and benchmark 10-year
yields are higher. The US 10-year is near 2.72%, up four basis points. European

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Attention Turns to US GDP, Ahead of Tomorrow’s EMU GDP and CPI

21 days ago

Overview: The Federal Reserve delivered its second consecutive 75 bp rate
hike, and Chair Powell left the door open for another large hike at the next
meeting in September. Yet, the market took away a dovish message and the dollar
suffered, rates slipped, and equities rallied. Central banks with currencies
pegged to the dollar had to hike too. This includes Hong Kong, Saudi Arabia,
Bahrain, and UAE, which matched the move in full. Kuwait and Qatar hiked by 25
bp and 50 bp, respectively. With the exception of Taiwan and Hong Kong, equities
in the Asia Pacific region rallied. Europe’s Stoxx 600 edged higher and saw its
best level since June 10 today but has lost momentum as the session progressed.
US futures are modestly lower after the strong gains yesterday and a

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Fed Day

22 days ago

Overview: Better US news from the likes of Google,
Microsoft, and Texas Instruments has helped lift sentiment today and is encouraging a more risk-on mood ahead of the FOMC meeting. News that US
President Biden and China’s Xi will talk tomorrow for the second time this year
may be notable but does not appear to be impactful in the capital markets. China’s
CSI 300 and the Hang Seng were exceptions to the general advance of equities in
the Asia Pacific region today. Europe’s Stoxx 600 that slipped less than 0.05%
yesterday is almost 0.45% higher today. If these gains are maintained, it would
be the seventh advance in nine sessions. US futures are 1.0%-1.5% higher, while
the 10-year Treasury yield is hovering around 2.80%. European benchmark yields
are mostly 3-5 bp

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Greenback Jumps Back

23 days ago

Overview: With the exception of Japan, Taiwan, and India, the large equity
markets in the Asia Pacific region traded higher today. The Hang Seng led the
move (1.65%) amid reports that Alibaba will seek its primary listing there. Europe’s
Stoxx 600 is edging higher today. If it can hold on to the gains, it will be
the fourth consecutive rise, the longest advance since May. US futures are slightly
under water. Benchmark 10-year yields are mostly lower, with the US off a couple
of basis points to 2.77%. European yields are mostly 4-7 bp lower, but Italy’s
10-year is off only one basis point. The US dollar is mostly firmer. Among the
majors, the yen is the exception, and it is flat to slightly higher. The
pressure on the euro is dragging the central European

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Greenback Softens, but Think Twice about Chasing It

24 days ago

Overview: Aside from political economic risks, three
other challenges are emerging. First, the new sub-variant of Covid is spreading
rapidly. BA5 reportedly is accounting for around 80% of the new cases. It is
better able to evade antibodies from vaccines and earlier infections. Hospitalization
rates are also climbing. Dining, retail, and travel may be impacted. Second,
the World Health Organization declared monkeypox a global emergency. The US may
make a similar declaration shortly. It would ostensibly facilitate greater
global cooperation. Third, the heatwave looks set to continue for the coming
days. It is affecting energy production and consumption as well shipment using
some waterways, like the Rhine. Asia Pacific equities fell after US losses
ahead of the

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Momentum Indicators Warn of Further Dollar Weakness, but will Sellers Emerge ahead of the FOMC?

25 days ago

The dollar fell against all the major currencies last week but pared the losses ahead of the weekend. The sub-50 EMU flash composite PMI unwound the half-cent gain the euro recorded after the ECB delivered a 50 bp hike to kick off its first tightening since 2011.  Disappointing US economic data (housing, leading economic indicators, the Philadelphia Fed survey, and the flash composite PMI drop into contraction territory weighed on US 10-year yields. This helped support the yen after the BOJ kept its policy stance unchanged. The benchmark US yield fell by more than  14 bp last week after shedding 15 bp the previous week and posted its lowest weekly close since the end of May. Note that the 30-day correlation between the change in WTI and US 10-year yields is at

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The Fed and GDP: Week Ahead

26 days ago

The outcome of the Federal
Reserve Open Market Committee meeting on July 27 is the most important event in
the last week of July. After a brief flirtation with a 100 bp hike after the June
CPI accelerated, the market has settled back to a 75 bp move. The Fed
funds futures are pricing about a 10% chance of a 100 bp
hike. The market anticipates that after the second 75 bp hike, the Fed will most likely return to a 50 bp hike in September.  Fed Governor Wall, a leading
hawk, pushed back against the larger move but kept the door open pending new
data. He
specifically cited retail sales and the housing data. Retail sales were
stronger than expected (1.0% vs. 0.9% median forecast in Bloomberg’s survey), and the May series was revised to show a 0.1% decline instead of

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Dismal EMU Flash PMI on Heels of First ECB Rate Hike since 2011

27 days ago

Overview:  The euro is over a cent lower from yesterday’s peak, pressured by
the drop in the flash PMI composite below 50 for the first time since early
last year. More generally, the flash PMIs have shown the global economic
momentum is waning, and the bond markets have responded accordingly. The US
10-year yield is flirting with 2.80%, its lowest level in more than two weeks. European
yields are 15-20 bp lower and the spread between Italian and German bonds has stabilized.
Equities in the Asia Pacific region were mixed. Of the major markets, only
China’s CSI 300 finished lower on the week. Europe’s Stoxx 600 is up about 0.5%.
If it holds on to these gains, it will be the best week (~3.1%) since March. US
futures are softer. Most of the major currencies, led by

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Italian Politics Complicate the ECB’s Task

28 days ago

Overview: The appetite for risk seen earlier this week is fading. Yesterday’s
US equity gains helped lift most of the large markets in the Asia Pacific
region, but China’s CSI 300 fell 1.1%, giving back most of this week’s gains as
credit issues from the property sector haunt sentiment. Europe’s Stoxx 600 is trading
heavily ahead of the ECB meeting outcome. US futures are also trading off. Benchmark
10-year yields are firmer with the US Treasury near 3.05%. European yields are
mostly 3-6 bp higher, but Draghi’s second resignation is weighing on Italian
bonds, where the 10-year has jumped 15 bp. The US dollar is trading higher
against most currencies. The New Zealand dollar (~-0.8%) and the yen (~-0.45%)
are the weakest. The Swiss franc and euro are fractionally

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Calm before the Storm?

29 days ago

Overview: The biggest rally in the S&P 500 in
three weeks helped lift global equities today. The MSCI Asia Pacific index rose
for the third consecutive session, the longest streak this month. Europe’s
Stoxx 600 is up for a fourth day and is at its best level since mid-June. US
futures are firmer. The rally in equities has not spurred a rise in rates. The
US 10-year yield is back below 3%, and European benchmark yields are mostly 5-8
bp lower, though signs that a political crisis in Italy may be avoided has seen
Italy’s 10-year yield tumble by around 12 bp. The Antipodeans lead the major
currencies’ advance against the dollar. The Swiss franc and Norwegian krona are
the exceptions and posting minor losses. Among the emerging market complex, central

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The Dollar is on its Back Foot

July 19, 2022

Overview: The dollar’s downside correction continues
today, helped by hawkish signals from the Reserve Bank of Australia and unnamed
sources who have played up the chances of a 50 bp hike by the European Central
Bank on Thursday. Asia Pacific equities were mixed, and mostly lower after the losses
in the US yesterday. The prospect of a more aggressive ECB is weighing on
European equities. The Stoxx 600 is slightly lower after rallying 2.7% in the past
two sessions. US futures are higher. Key levels to watch are Friday’s high for
the S&P 500 and NASDAQ (~3796 and 11280, Friday’s high and the bottom of
the open gaps, respectively). The 10-year US Treasury is flattish near 2.98%. European
benchmarks are narrowly mixed, but the peripheral premiums have narrowed

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Is the Dollar Tired? Did Fed Frenzy Peak? A Look at the FX Price Action

July 17, 2022

The price exchange in the foreign exchange market was a story separate from the macro developments. The euro traded below parity for the first time since 2002. The yen fell to its lowest level against the dollar in 22 years. Sterling, the dollar-bloc currencies, fell to their lowest levels since 2020.  Yes, the stronger than expected rise in the US June CPI, above 9%, helped spur speculation that the Fed could raise rates 100 bp in a couple of weeks. Still, the probability was downgraded with some cautionary comments by a couple of the Fed’s hawks, even though the June retail sales were stronger than expected, and nine of the 13 categories showed an increase, and the May decline was revised to 0.1% from -0.3%. At the end of the week, the Fed funds futures had

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Market Prices in More Aggressive Fed AND is more Confident of Rate Cuts by the End 2023

July 14, 2022

Overview: The higher-than-expected
US CPI and the strong expectation of a 100 bp hike by the Fed in two weeks is
propelling the dollar higher. It jumped to almost JPY139.40 and the euro is off more than cent
from yesterday’s high (though holding above parity). Even where there has been
favorable economic news, like the strong jobs report in Australia, is failed to
dent the greenback. Most of the large bourses in the Asia Pacific regions
advanced. Hong Kong is a notable exception, and the Singapore and Philippines’
stocks fell after the surprise tightening moves. Europe’s Stoxx 600 is
extending yesterday’s 1% slide and is off around 0.8% in late morning turnover.
The S&P and NASDAQ futures are trading lower. They have fallen in the first
three sessions this week.

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Euro Parity Holds ahead of US CPI

July 13, 2022

Overview: The US dollar is consolidating with a slight
downside bias ahead of the June CPI report. The euro held above $1.00 but is
still pinned in the trough. The rate hike by the Reserve Bank of New Zealand failed
to have much impact. On the other hand, the JP Morgan Emerging Market Currency Index
is lower for the fourth consecutive session. Most of the large markets in the
Asia Pacific region rose, led by a 2.7% rally in Taiwan after the government
promised to support local equities. However, in Europe, the Stoxx 600 is off
about 0.5%, giving back yesterday’s gains. US futures are firmer, but the CPI will
be released before the local opening. The US 10-year yield is slightly softer
near 2.91% today, while European yields are 2-4 higher with wider spreads.

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Euro Tests Parity

July 12, 2022

Overview: Equities remain under pressure as
investors contemplate tighter financial conditions and the risks of recession. Most
of the large equity markets in the Asia Pacific region sold-off, led by a 2.7% drop
in Taiwan. Australia managed to buck the trend and managed a small gain. Europe’s
Stoxx 600 is off by about 0.2% near midday after a 0.5% loss yesterday. US futures
are lower and are threatening a gap lower opening for the S&P 500 and
NASDAQ. Bonds are rallying. The US 10-year yield is off almost 8 bp and is
slipping below 2.92% after a similar move yesterday. It closed at 3.08% last
week after the employment report. European benchmark yields are off 9-13 bp
with the peripheral premiums widening a little. The dollar rides higher, and
the euro tested

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