Monday , August 19 2019
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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

FX Daily, August 16: Markets Take Collective Breath Ahead of the Weekend

3 days ago

Swiss Franc
The Euro has fallen by 0.01% to 1.0841

EUR/CHF and USD/CHF, August 16(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The global capital markets are ending the tumultuous week calmly, but it is far from clear that is will hold long. Next week’s flash PMIs have potential to disappoint, and there is risk of new escalation in the US-China trade conflict as the PRC threatens to take action to countermeasures to the new US tariffs. Most equity markets are higher, but the gains pare the week’s losses but extend the losing streak. The MSCI Asia Pacific’s has fallen nearly 7% of the four-week skid. The Dow Jones Stoxx 600 is having its best day of the week, gaining about 0.75% in the European morning, but

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FX Daily, August 15: Animal Spirits Lick Wounds

4 days ago

Swiss Franc
The Euro has risen by 0.18% to 1.0859

EUR/CHF and USD/CHF, August 15(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: It took some time for investors to recognize that the scaling back of US tariff plans was not part of a de-escalation agreement. There was an explicit acknowledgment by US Commerce Secretary Ross that there was no quid pro quo. The US tariff split was more about the US than an overture to China.  In fact, as China did in September when the US sanctioned it for buying weapons from Russia, this week it refused a request from the US for a port call in Hong Kong. This, coupled with a string of disappointing economic data China and Germany, saw a bullish flattening of yield curves and

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FX Daily, August 14: Markets Paring Exaggerated Response to US Blink

5 days ago

Swiss Franc
The Euro has fallen by 0.39% to 1.0862

EUR/CHF and USD/CHF, August 14(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The US cut its list of Chinese goods that will be hit with a 10% tariff at the start of next month by a little roe than half, delaying the others until the mid-December. This spurred a near-euphoric response by market participants throughout the capital markets. However, as the news was digested, it did not seem as much of a game-changer as it may have initially. Disappointing Chinese data also seemed to encourage risk-off. Asia Pacific equities had a muted response to the reversal higher in US stocks yesterday, and the Dow Jones Stoxx 600 is seeing most of yesterday’s gains

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FX Daily, August 13: Investors Remain on Edge

6 days ago

Swiss Franc
The Euro has fallen by 0.11% to 1.0851

EUR/CHF and USD/CHF, August 13(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The confrontation in Hong Kong and the fallout from the Argentine primary over the weekend join concerns the conflict between the two largest economies and slower growth to force the animal spirits into hibernation. Global equities remain under pressure. Japan’s Topix joined several other markets in the region to have given up its year-to-date gain. The MSCI Emerging Markets equity index is not from doing the same. European shares are faring better, and with today’s roughly 0.6% loss, the Dow Jones Stoxx 600 is up almost 9.2% this year. US shares are trading lower, which if

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FX Daily, August 12: Yen Remains Bid, While Macri’s Loss in Argentina Weighs on Struggling Mexican Peso

7 days ago

Swiss Franc
The Euro has fallen by 0.06% to 1.0883

EUR/CHF and USD/CHF, August 12(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: China again tried to temper the downside pressure on the yuan, and this appears to be helping the risk-taking attitude. Many centers in Asia were closed today, including Japan and India, though most of the other equity markets advanced modestly, including China, Korea, and Australia. Europe’s Dow Jones Stoxx 600 opened firmer but is staddling little changed levels unable to stain any upside momentum. Italian equities, including bank shares, are struggling to stabilize after the pre-weekend drubbing amid political anxiety. There is an

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FX Weekly Preview: Macro Deterioration

7 days ago

The US-China tensions remain the dominant driver of investor risk appetites. President Trump has repeatedly accused China of manipulating its currency on twitter, and finally Treasury Secretary Mnuchiin acquiesced after China failed to prevent the dollar from rising above CNY7.0. China set the reference rate for the dollar lower than models based on the basket the PBOC uses implied for the past three sessions, and this helped stabilize the situation.
Contrary to expectations, China is showing great restraint and still managing the pressure on the yuan. In the US, the end of the tariff truce was understood to undermine Fed Powell’s message that the rate cut at the end of July was a mid-course correction. Investors

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FX Daily, August 8: PBOC Helps Stabilize CNY, while US Equity Recovery Lifts Sentiment

11 days ago

Swiss Franc
The Euro has risen by 0.27% to 1.0948

EUR/CHF and USD/CHF, August 08(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The challenges for investors have not gone away, but a combination of factors has helped stabilize the capital markets. The PBOC set the dollar’s reference rate above CNY7.0, but not as high as anticipated, and this has seen the yuan strengthen modestly today. Meanwhile, the strong recovery in the S&P 500 has spilled over and helped lift global equities. Asia Pacific equities were led higher by a 13% gain China’s CSI300; ending a six-day decline with its biggest advance in a month. Europe’s Dow Jones Stoxx 600 is posting gains for the

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Yes, the Dollar is Above CNY7.0, but No, the Sky is Not Falling

11 days ago

The world’s two great powers are at loggerheads. Chinese nationalism meet your sister, US nationalism. Import substitution strategy of Made in China 2025 meet your cousin Make America Great Again.
Paradoxically, or dialectically, the similarities are producing divergent interests that extend well beyond economics and trade policy. Consider that the intermediate-range nuclear missile treaty between the US and Russia did not prevent China from building up such weapons. Now that the US-Russia has been rescinded, the US may deploy such missiles in Asia, or use it as a chip to see if a three-way agreement can be reached.
For now, economics and finance are front and center. While we have argued that the US and China have

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FX Daily, August 7: Three Asian Central Banks Surprise Investors

12 days ago

Swiss Franc
The Euro has fallen by 0.14% to 1.0918

EUR/CHF and USD/CHF, August 07(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: While investors keep a watchful eye on the dollar fix in China (a little firmer than projected) and tensions with the US, two other developments compete for attention. The Reserve Bank of New Zealand and the central banks of India and Thailand surprised the market with lower rates. The RBNZ cut by 50 bp, India by 35 bp, and the fact that Thailand cut at all was unexpected. The other development was another horrific German industrial production report. Benchmark 10-year bonds yields are falling to new lows. Equities are mostly

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FX Daily, August 6: Markets Stabilize with Help of CNY Fix in Muted Turnaround Tuesday

13 days ago

Swiss Franc
The Euro has risen by 0.23% to 1.0928

EUR/CHF and USD/CHF, August 06(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The escalation of the economic conflict between the world’s two largest economies is dominating the capital markets. The US cited China as a currency manipulator after the North American markets closed, ensuring the troubled start to Asian trading after the US equities and yields plummeted on Monday. The VIX surged to 25%, doubling in the past week. The dollar sold off not just because of the aggressive easing the market now judges will be necessary, but many fear that the next step in the escalation ladder could be US intervention.

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Cool Video: The implication of CNY7.0+

13 days ago

President Trump’s tweets last week announcing the end of the tariff truce signaled a new phase in the US-Chinese tensions. China responded as did investors. I was fortunate to have been invited to the Bloomberg set to discuss the issues of the day.
In this two-minute clip, I suggest there will be far-reaching implications for investors. World growth is getting marked down as deflationary forces strengthen. The dollar-yuan was a low vol pair, and it still is, but considerably higher than it was–from a two-year low near 3.4% to almost 5.6% earlier today. The trade conflict will produce more collateral damage. South Korea’s KOSDAQ fell 7.5%, and the won was weaker than the onshore yuan (barely).

I suggest China did

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FX Daily, August 5: China Strikes Back

14 days ago

Swiss Franc
The Euro has fallen by 0.13% to 1.0893

EUR/CHF and USD/CHF, August 05(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: Chinese officials took the US tariff hike quietly last week but struck back today. The PBOC fixed the dollar higher (CNY6.90), which it has not done, and will halt imports of US agriculture. The dollar shot through CNY7.0 to finish the mainland session a little above CNY7.03 and CNH7.07 for the offshore yuan. This has sent ripple effects through the global equities, which were already on the defensive at the end of last week. Most markets in the Asia Pacific region were off 1%-2%, which the Hang Seng down among the most (~-2.8%).

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FX Weekly Preview: The Dog Days of August are Upon Us

14 days ago

The die is cast. To defend the uneven expansion and ward off disinflationary forces, monetary authorities will provide more accommodation. The Federal Reserve delivered its first rate cut in more than a decade and stopped unwinding its balance sheet two months earlier than it previously indicated (worth $100 bln of additional buying of Treasuries and Agencies). Following the end of the tariff truce, and after the July jobs report, the market was certain the Fed would cut rates again in September, according to Bloomberg and CME calculations).
The ECB has signaled its intention to ease policy in September. It is also thought to be considering several different tools, including a deeper negative deposit rate, renewed

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August Monthly

15 days ago

After falling against all the major currencies in June, the US dollar rebounded in July. The Dollar Index finished the month at new two-year highs with the Fed’s suggestion it was engaged in a mid-course correction rather than a sustained easing cycle. The dollar also appeared buoyed by the extent of the dovishness by the ECB and the heightened risks that the UK leaves the EU at the end of October without an agreement. Short-term interest rate differentials that had been seeing a reduced US premium since last November stabilized in July. The resumption of US-Chinese trade talks also spurred optimism in some quarters even though the multifaceted competition continued on several fronts.
Keynes famously compared the

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Brexit Update

16 days ago

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. 

Boris Johnson handily won the Tory Party leadership challenge and succeeded May.  He quickly gave key ministerial posts to those favoring leaving without an agreement rather than accept the Withdrawal Agreement.  The new government has adopted a confrontational approach to the EU, and it has yet to be proved whether this will have

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FX Daily, August 2: End of Tariff Truce Trumps Jobs

17 days ago

Swiss Franc
The Euro has fallen by 0.40% to 1.0929

EUR/CHF and USD/CHF, August 02(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The market was finding its sea legs after being hit with wave and counter-wave following the FOMC decision, and more importantly, Powell’s attempt to give insight into the Fed’s thinking. Trump’s tweet than signaled an end to the tariff truce with a 10% levy on the $300 bln of imports from China that have not been subject to action previously. Investors understood this to mean a greater slowdown and pushed yields and equities sharply lower. The Asia Pacific and European markets have responded in kind. Japanese and Hong Kong markets

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FX Daily, August 1: Mid-Course Correction Sends Greenback Higher

18 days ago

Swiss Franc
The Euro has fallen by 0.15% to 1.0989

EUR/CHF and USD/CHF, August 01(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The Federal Reserve delivered the first rate cut since the Great Financial Crisis but couched it in terms of a mid-course correction rather than the start of a larger easing cycle. By doing so, Fed chief Powell cast the cut in less dovish terms than the market expected and the reaction function of the market has been clear. The US dollar has advanced against nearly all the world’s currencies. The greenback broke through key levels that had been holding capping it, like JPY109 and $1.11 for the euro. Asian equities followed the US lead

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FX Daily, July 31: Sterling Steadies, Attention Shifts to FOMC

19 days ago

Swiss Franc
The Euro has fallen by 0.15% to 1.1026

EUR/CHF and USD/CHF, July 31(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: After a shellacking in recent days, sterling has stabilized though there is not much of a bounce to speak of, suggesting the adjustment to the risk of a no-deal Brexit may not be complete. After the S&P 500 posted back-to-back declines, Asia Pacific equities struggled. Hong Kong shares led the regional decline. European stocks are little changed after the Dow Jones Stoxx lost nearly 1.6% yesterday, its largest loss in two months. The bank share index dropped 3% yesterday, the most in four months, but has steadied today. US shares are

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FX Daily, July 30: Sterling Pounded

20 days ago

Swiss Franc
The Euro has fallen by 0.10% to 1.1037

EUR/CHF and USD/CHF, July 30(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The prospect of a no-deal Brexit continues to pound sterling lower. A little more than two months ago, it was testing $1.32. Two weeks ago it was around $1.25. Today it traded near $1.2120 before stabilizing. On the other hand, the 10-year Gilt yield is below 65 bp, a new multiyear low, while the international-laden FTSE 100 is holding its own in the face of heavier equity prices in Europe. The major equity markets in the Asia Pacific region rose except for Taiwan, which some linked to the anticipation of Apple’s earnings later today.

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FX Daily, July 29: Prospects of a No-Deal Brexit Weigh on Sterling

21 days ago

Swiss Franc
The Euro has fallen by 0.13% to 1.1037

EUR/CHF and USD/CHF, July 29(see more posts on EUR/CHF and USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: Unrest in Hong Kong and disappointing earnings reports from South Korea weighed on local equity markets, and the MSCI Asia Pacific Index fell for the third consecutive session. European equities are edging higher in tentative trading. The Dow Jones Stoxx 600 is firmer for the sixth session of the past seven. US shares are little changed after record-high closes before the weekend. Benchmark 10-year bond yields are mostly one or two basis points lower. Sterling’s continued weakness in the face of perceptions that the risks of a

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FX Weekly Preview: The FOMC and US Jobs Headline the Week Ahead

21 days ago

There is little doubt that the Federal Reserve will ease monetary policy at the conclusion of the FOMC meeting on July 31. We never thought the chances of a 50 bp move were anything but negligible, though even at this late stage, the market appears to be pricing in about a one-in-five chance.
Although a minority, and maybe worth a dissent or two (Rosengren? George?), we are sympathetic to those Fed officials that do not see the urgency to ease monetary policy. Even though Q2 growth slowed, the 2.1% pace, with more than a 4% surge in consumption, is above-trend growth, the Fed’s estimate of the non-inflationary rate. Investors will likely learn at the end of next week that job growth slowed in July. Non-farm payrolls

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Seven Points on the ECB and the Price Action

23 days ago

– Click to enlarge
1. As soon as it was clear that the ECB was not easing today, the euro began to recover, after making a marginal new low for the year (just above $1.11).
2. Draghi made it clear that easing was going to be delivered in September and on several fronts including rates (with mitigating measures like tiering) and new asset purchases (not decided on instruments, which plays into speculation of equity purchases—though I strongly doubt this will materialize).
3. In addition to adding the “or lower” when describing rates through mid-2020 (I had thought it could have been extended for all of 2020), the ECB dropped the phrase of inflation target being close to but below 2%, with a commitment to

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FX Daily, July 26: Markets Consolidate as the Dollar Index Extends its Advance for the Sixth Consecutive Session

24 days ago

Swiss Franc
The Euro has risen by 0.13% at 1.1056

EUR/CHF and USD/CHF, July 26(see more posts on EUR/CHF and USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: Investors are happy for the weekend. Between the ECB, Brexit, and next week’s FOMC, BOJ, and BOE meetings, the markets are mostly in a consolidative mode ahead of the weekend. The first look at Q2 US GDP is the last important data point of the week, though it is unlikely to impact next week’s Fed decision. Russia is widely expected to join the rate-cutting central banks today with a 25 bp reduction in its key rate to 7.25%. Asia Pacific equities mostly followed yesterday’s US lead and slipped lower today. The regional benchmark

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FX Daily, July 25: ECB Takes Center Stage

25 days ago

Swiss Franc
The Euro has risen by 0.71% at 1.1045

EUR/CHF and USD/CHF, July 25(see more posts on EUR/CHF and USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The euro remains stuck in its trough below $1.1150 ahead of the ECB meeting. The US dollar is firmer against most of the major currencies. The yen continues to resist the draw of the greenback. Most emerging market currencies are lower. The Turkish lira is weaker ahead of its central bank meeting, which is expected to deliver a large cut (~250 bp). The South Korean won eased after North Korea fired two “projectiles” and the Kospi Index bucked the regional trend of higher equities after record closing highs in the US.  European

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FX Daily, July 24: Poor PMI Weighs on Euro Ahead of ECB

26 days ago

Swiss Franc
The Euro has fallen by 0.17% at 1.0966

EUR/CHF and USD/CHF, July 24(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: Disappointing flash PMI pushed an already offered euro lower ahead of tomorrow’s ECB meeting. European bonds rallied and equities, amid a rash of earnings, is trying to extend the advance for a fourth consecutive session. Italian and Spanish 10-year benchmark yields are off four-six basis points, while core bond yields are off two-three basis points. Asian equities were mixed, with the biggest markets, including Japan, China, Hong Kong, and Australia advancing, while most of the others slipped lower. US shares are trading lower after

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FX Daily, July 23: Debt Deal Help Lifts the Dollar

27 days ago

Swiss Franc
The Euro has fallen by 0.32% at 1.097

EUR/CHF and USD/CHF, July 23(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: The gains in US equities and the apparent US budget agreement has underpinned equities today and the US dollar. Asia Pacific equities recouped yesterday’s losses, and Europe’s Dow Jones Stoxx is posting gains for the third consecutive session, helped by some earning beats, to probe two-week highs. US shares are firmer. Benchmark 10-year yields are mixed with the Asia Pacific softer and European firmer. Despite elevated political tensions in Italy, Italian bonds are bucking the regional trend with softer yields. The UK will have a new

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FX Daily, July 22: Greenback is Mostly Firmer to Start New Week, while the Euro is Pinned near $1.12

28 days ago

Swiss Franc
The Euro has fallen by 0.03% at 1.1007

EUR/CHF and USD/CHF, July 22(see more posts on EUR/CHF and USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: What promises to be an eventful two weeks has begun quietly. The ECB, Fed, BOJ, and BOE will meet over the next fortnight. The central banks of Turkey and Russia meet this week and are expected to cut rates. The UK will have a new Prime Minister. The UK-Iranian seized each other ships, and the UK seeks a resolution. Japan may remove South Korea from its preferred trading partners. The US House of Representatives is set to go on the summer recess with the debt ceiling looming. Asia Pacific equities trade heavily after the losses in

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FX Weekly Preview: Highlights in the Week Ahead

28 days ago

Three events that will capture the market’s attention next week: The consequences of the Japanese election, the first look at US Q1 GDP, and the ECB meeting. The central banks of Turkey and Russia also meet. Both are expected to cut interest rates, following rate cuts in the middle of last week by South Korea, Indonesia, and South Africa.
Japan goes to the polls on July 21 to elect the upper chamber of the Diet. There is little doubt that the LDP-Komeito coalition will retain its majority. The real issue is whether it keeps its 2/3 super-majority, which allows it to pursue constitutional changes. The economy itself is struggling, and the sales tax increase in October is unpopular. In addition, news of a (~JPY20 mln

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FX Daily, July 19: Dollar Pares Losses as Market Partly Corrects Confusion of Magntiude and Timing of Fed

July 19, 2019

Swiss Franc
The Euro has fallen by 0.35% at 1.1024

EUR/CHF and USD/CHF, July 19(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: Comments underscoring the importance of acting preemptively by two Fed officials sent the dollar reeling and helped lift equities after the S&P fell to a two and a half week low. The decline in rates and the US shooting down of an Iranian drone in the Gulf helped spur gold to new six-year highs. There was some attempt to clarify the (NY Fed’s) comments and the dollar has pared yesterday’s losses. However, there has not been a return to the status quo ante. Asia Pacific equities rallied strongly, led the Nikkei’s 2% gain. All the bourses

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FX Daily, July 18: Dollar on Back Foot as Equities Slide

July 18, 2019

Swiss Franc
The Euro has fallen by 0.09% at 1.107

EUR/CHF and USD/CHF, July 18(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com – Click to enlarge

FX Rates
Overview: Profit-taking continues to weigh on global equities earnings concerns saw the biggest drop in the S&P 500 in three weeks. The MSCI Asia Pacific Index fell for the fourth consecutive session. The Nikkei gapped lower for the second straight session and has now retraced half of the gains scored since early June. The Shanghai Composite is at its lowest level in a month. Led by information technology, industrials, and energy, the Dow Jones Stoxx 600 is off by around 0.5% near midday in Europe. US shares are trading lower. We see risk back

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