Overview: US dollar and rates are firmer today. All the G10 currencies are lower, led by the Japanese yen. The UK reported firmer than expected CPI and this may have deflected some of the selling pressure away from sterling, which is off less than 0.2% to put it atop the pack ahead of the US open. Nearly all the emerging market currencies are lower led by central European currencies, the Mexican peso, and South African rand. As anticipated, China’s prime lending rates were left unchanged at 3.10% (one-year) and 3.60% (five-year). China’s stocks were among the few from the large markets that advanced today. South Korea and Indian equities traded higher. Europe’s Stoxx 600 is trying to end a three-day slide. It is up about 0.5% through most of the European morning.

Overview: Within hours of the US giving permission to Ukraine to use US weapons to strike Russian territory, which it did, Moscow announced a change it is nuclear doctrine that allow for the use of nuclear weapons against a conventionally armed adversary that is backed by nuclear powers. This follows on the heels of the failure of two telecom cables yesterday (Germany-Finland and Sweden-Lithuania). This escalation is roiling the capital markets. Bonds are rallying. Equities are under pressure, and the dollar is mostly firmer. The 10-year US Treasury yield is off five basis points to 4.36%. The softer Treasury yield, after news that China and Japan unloaded a combined $112 bln US Treasuries in September (a modest $20 bln was added to Euroclear–Belgium custodian)

Overview: The US dollar has begun the new week consolidating in a mixed fashion against the G10 currencies. Bank of Japan Governor Ueda remains circumspect and did not provide guidance about next month’s central bank meeting. Without positive guidance, the market sold the yen, but the swaps market shows about 13 bp of tightening has been discounted, up a couple of basis points from a week ago. Leave aside the New Zealand dollar, which is also under pressure ahead of next week’s RBNZ meeting that is expected to result in another 50 bp rate cut, the other G10 currencies are mostly +/- 0.15%. Emerging market currencies are also narrowly mixed. The South African rand is on top with a 0.4% gain and the Mexican peso is on the bottom of the leaders’ board with a 0.35%

There are powerful forces in the capital markets, and they do not appear exhausted even if there is some near-term consolidation. The Dollar Index has risen for seven weeks, which is to say that it has not fallen on a weekly basis so far here in Q4. The US two-year yield has risen for the past four weeks and six of the past seven. It has surged from about 3.55% at the end of September to 4.38% last week. The US 10-year yield has fallen in only two weeks since mid-September. It reached 4.50% at the end of last week, up from 3.65% on September 13. Yet, the change in inflation expectations accounts for a small part of the rate adjustment. The 10-year breakeven accounts for only about 25 bp of that 95 increase. It looks like another 25 bp or so can be accounted for

Overview:  The dollar bounced, and US rates rose yesterday afternoon in response to comments by Fed Chair Powell. But he did little more that reiterate what he had said at the recent press conference. Powell expressed a lack of urgency to move after having led the central bank in delivering a 50 bp cut to start the easing in September while indicating that direction of travel will be to a less restrictive rate. The dollar has come back lower today against the G10 currencies and US rates are a little softer. It is also lower against most emerging market currencies, too. Japan’s Q3 GDP (0.2%) was in line with expectations, while the UK disappointed (0.1% vs 0.2% projected). The US data highlight include October retail sales and industrial output. Equities are

Overview: Surging US yields helped send the dollar higher but wobbled the stock market yesterday. A fragile consolidative tone has emerged today for the foreign currencies. The greenback remains mostly within yesterday’s ranges. All but a few emerging market currencies are trading with a firmer bias. Beijing’s weaker dollar fix may have been the first protest of the yuan’s weakness since the election. The highlight of the North American session is the US October CPI. The year-over-year headline rate is expected to rise (2.6% vs. 2.4%) for the first time since March. The core rate is anticipated to be steady at 3.3%. It last fell in July. Ahead of the release, the derivatives market has a little more than a 60% chance of a December Fed cut discounted. Outside of

Overview: The dollar continues to ride high. It is up 0.20%-0.50% today against the G10 currencies. Most pairs have extended last week’s moves. The Dollar Index, which was near 100 in late September is approaching 106.00. Emerging market currencies are all weaker, as well. The dollar is being helped by higher US yields. After yesterday’s holiday, the US 10-year yield is up five basis points to near 4.36%. The two-year yield also is five basis points higher to almost 4.31%. Stocks are under pressure. China, Hong Kong, Taiwan, South Korea, and India saw their main index fall by more than 1% today. Europe’s Stoxx 600 is giving back most of yesterday’s 1.15% gain, while US index futures are off around 0.20%-035%. Gold has lost its luster since the record at the end

Overview: The dollar is bid to start the new week. It has taken out last week’s high against the Swiss franc, and the euro has been sold through last week’s lows. The divided opposition allowed Ishiba to continue as Japan’s prime minister, heading up a minority government. The German government collapsed last week. Chancellor Scholz wanted to hold off holding (and losing) a vote of confidence until January, setting the stage for elections, but it seems increasingly likely sooner. Meanwhile, the widening two year-interest rate premium means one is paid more to be long dollars by the most in nearly two years. Among the G10 currencies, the Australian and New Zealand dollars posting minor upticks against the dollar. The rest are heavier. The Turkish lira is firm

Two of the most tumultuous weeks of the year are behind us. The sweeping GOP victory in the US cannot be considered anything but a mandate. The shock experienced in 2016 is not being repeated, but there is limited visibility  Perhaps, the stance articulated at the press conference by Fed Chair Powell that the central bank does not "guess, speculate, or assume" about the policies of the next administration and the impact on efforts to achieve the dual mandate of full employment and stable prices is a good starting point for investors and businesses. One need not accept modern monetary theory to recognize cases, for example, where large deficit coincided with falling inflation. There are other variables in addition to budget deficits and tariffs that influence

Overview: The capital markets have been choppy as pre-existing positioning meets new thoughts on the implications of a second Trump administration. The dollar has found better footing today after giving back a chunk of Wednesday’s gains yesterday. The yen is an exception, but it is not exception that the dollar trades heavier against the yen as the US 10-year yield drifts lower. On the week, the most G10 currencies are holding on to gains against the dollar. Here the euro is the notable exception, off about 0.6%, and is thought to be the most at risk. Equities are mostly lower today. The market did not seem impressed with the local debt swap initiative from Beijing, and the CSI 300 fell 1%. Europe’s Stoxx 600 is giving back yesterday’s 0.6% gain in full, and US

Overview:  The markets are calmer after yesterday’s post-US election drama. A consolidative tone has emerged in the foreign exchange market, and the dollar is softer against all the G10 currencies, led the 1% gain in the Norwegian krone, after the central bank left rates on hold. Sweden’s Riksbank delivered the expected half-point cut and the krona is up 0.5%. Japanese officials warned against excessive moves, and the PBOC set the dollar’s reference rate almost 1% lower to limit its rise. Emerging market currencies also are mostly firmer today. Equities are higher today. All the large bourses in Asia Pacific advance, with China’s CSI300 up 3%. India is the main exception, and main index is off 1%. Europe’s Stoxx 600 is recouping most of yesterday’s 0.55% decline,

Overview: Shortly after the North American markets closed, before any results were known, the market jumped back into the “Trump trade,” which it had pared on Tuesday. The dollar and US interest rates soared. The euro is the hardest hit among the G10 currencies today, off about 1.6% and the Canadian dollar, the best performer …

Overview: A nervous calm hangs over the markets as the US goes to the polls. The proximity of the presidential contest warns that the results may not been known as soon as people hope. Indeed, many fear the voting simply begins the next phase of the contest, with premature declarations of victory and disputes over votes. The dollar is in mostly narrow ranges today, but the Antipodeans and Scandis are the strongest, and the Reserve Bank of Australia kept rates on hold and signaled that inflation may not be sustainably back to target until 2026. Emerging market currencies are mostly firmer, but there are a couple from Asia Pacific and central Europe that are softer, as if the Mexican peso. Equities are firm. All the large markets in Asia Pacific, but South Korea

Overview:  The US 10-year yield is off around a dozen basis points off yesterday’s high and European growth in Q3 was better than expected. This appears to have encouraged some dollar liquidation today. The greenback is softer against the G10 currencies, but the Canadian dollar and sterling. The much-awaited UK Autumn budget will be announced shortly. Sterling is consolidating around $1.30. Most emerging market currencies also are enjoying a firmer tone today. Asia Pacific and European equities are trading heavier. The Asia Pacific, all the large markets but Japan fell. The Hang Seng and mainland companies that trade there fell by more than 1.5%, to lead the region lower. The Stoxx 600 in Europe reversed early gains yesterday and fell by about 0.55%. Today, it is

Overview: A consolidative tone is emerging in the foreign exchange market as the week’s key events begin tomorrow:  UK budget, eurozone and US Q3 GDP, and the US ADP private sector jobs estimate, and quarterly refunding. Outside of the Norwegian krone, which is up nearly 0.5%, the other G10 currencies are largely +/- 0.1%. The yen, Swiss franc, and antipodeans are trading with a slightly heavier bias. Among emerging market currencies, most from the Asia Pacific area, but the Thai baht are lower, while central European currencies are mostly firmer. The Mexican peso’s 0.3% gain puts it on top of the emerging market currencies, after it settled softly yesterday. Stocks are firmer and bonds are softer. Most of the large bourses in the Asia Pacific region, except

The US dollar extended its dramatic recovery against the major currencies for the fourth consecutive week. The dollar’s rally seems to stand on two-legs. The first shift in the expected trajectory of Fed policy, which has been partly encouraged by relatively firm economic data, both surveys and real sector reports. The derivatives market has from discounting 75 bp of cuts before the end of the year to not be quite sure that 50 bp will be delivered. This leg may be questioned if as we expect that jobs growth slowed considerably this month. However, given the storms and strikes, it will not be a clean report. The second leg the dollar is standing is the conclusion reached by some large pools of capital that despite Trump/Vance preference for a weaker dollar that

Overview: The dollar is trading quietly, with a slightly firmer today. There has been little follow-through selling after yesterday’s setback. The Canadian dollar and sterling are faring best. The yen is a little softer after Tokyo’s CPI came in lower as expected due to the government’s energy subsidy. The election for the lower house of the Diet is held Sunday. Emerging market currencies are also mostly softer. The JP Morgan Emerging Market Currency Index is poised to settle lower this week for the fourth consecutive week. Australian and New Zealand bonds played a little catch-up after the rally in Europe and the US yesterday. European 10-year rates are up 1-2 bp today. The UK’s Gilt is an exception. Its yield has come back softer after increasing by around

Overview:  It is ironic that a few months ago, many wanted to sell the dollar because the Republican president and vice president candidates said they wanted a weaker dollar. With the election drawing near and the race very tight, there has been a surge in the betting markets of a Trump-Vance victory, and this has corresponded with the dollar’s dramatic rise. US rates held on the lion’s share of their gains despite the sharpest loss in the S&P 500 since early September to cap the three-day slide. Still, the greenback is consolidating today, and seeing some of its recent gains pared against all the G10 currencies. And all but a few Asia Pacific currencies and the Russian ruble are firmer, too. Corrective forces are also evident in global stock and bond markets.

Overview: The persistent rise in US rates continues to help fuel dollar gains. The euro has been sold through $1.08 and the greenback has jumped over 1% against the yen to JPY152.75. It finished last week closer to JPY149.55. So far, Japanese officials have been fairly quiet, but this seems likely to change. The US two-year premium over Germany has widened by around 65 bp since late September to return to levels that prevailed in June. The greenback is firmer against all the G10 currencies, but sterling, which is straddling unchanged levels. Emerging market currencies are weaker today.The US 10-year yield is up a couple of basis points to 4.23%, while European benchmark yields are mostly 1-2 bp lower. The 10-year Gilt is an exception, and its yield is up almost

Business travel will prevent the updating of the blog in the coming days.  It resumes October 19 with the Week Ahead.  Overview:  The lack of details from China’s fiscal briefing, the soft CPI (and deeper PPI deflation), and a smaller than expected trade surplus did not prevent Chinese equities from advancing (CSI 300 +1.9%). Industrial commodities, such as oil, copper, iron ore, are mixed. Among the G10 currencies, the Australian dollar often acts as the China proxy is off more than 0.25%. The US dollar is mostly firmer, through mostly consolidating. The Canadian dollar is a notable exception. It remains under pressure and has fallen to new two-month lows. Emerging market currencies are mixed, with Asia Pacific currencies, including the Chinese yuan are

The combination of the stronger-than-expected US September jobs report and the slightly firmer inflation readings lifted US interest rates and the dollar. Several Fed officials spoke, and it did not appear that the employment or price reports changed views as much as it had impacted the capital markets. The September Summary of Economic Projections found a median projection (and 10 officials) that 50 bp of cuts in Q4 would be appropriate, but seven thought only one quarter-point cut. On the eve of the jobs report, the Fed funds futures had nearly 67 bp of easing priced in for the remainder of the year. It settled last week with about 45 bp discounted. We suspect the interest rate move is nearly over. For its part, key charts points in the foreign exchange market

Overview: The combination of the firmer than expected US CPI and larger than expected rise in initial and continuing jobless claims saw short-term US rates fall, and the odds of a quarter-point cut by the Fed rose from about 83% to about 93%. The Fed funds futures market boosted the odds of another quarter-point cut in December (~90% vs.78%). The dollar initially weakened but recovered, though the key levels held, such as $1.09 in the euro, $1.30 in sterling, $0.6700 in the Australian dollar, and CAD1.38. The greenback is trading with a mostly heavier bias today. Among the G10 currencies, only the Canadian dollar and yen are softer. Among emerging market currencies, only the Indian rupee and Turkish lira are lower. Equities struggled in Asia Pacific. Japanese

Overview: The US dollar is mostly softer ahead of the September CPI. The euro and Canadian dollar have recorded new lows for the move. The greenback extended its gains against the yen to JPY149.55 but has fallen to new session lows in the European morning near JPY148.85. Given the pushback against Fed Chair Powell’s 50 bp cut last month revealed in the FOMC minutes, it will take more than a soft headline CPI today to renew speculation of another large move. In fact, the Fed funds futures, which a week ago was discounting about a 50% chance of another half-point cut is now pricing in about an 83% chance of a quarter-point cut. There are 44 bp of easing discounted for this year down from about 67 bp a week ago. Three Fed officials speak in the North American

Overview: We suspect the market overreacted to the US jobs data, which was tainted by the lowest "establishment" response in over two decades and seasonal adjustments were likely thrown off by Hurricane Helene and the 33k strike at Boeing. We think Fed officials, and more speak today, have confirmed that it was not the game changer than many market participants think, which was likely influenced by positioning. It did help facilitate the dollar’s upside correction we had been looking for. The greenback is firm today. Sterling made a marginal new low, while the euro retested $1.0950. The Reserve Bank of New Zealand’s 50 bp cut took the New Zealand dollar down nearly 1%, though it was well anticipated. Only the Swiss franc is holding its own today among the G10

Overview: The US dollar is mixed but is mostly consolidating. The Australian dollar is a notable exception. The lack of new fiscal initiatives from China weighed on the Aussie, which is off for the fourth consecutive session. The other dollar-bloc currencies have also seen the recent losses extended. On the other hand, the Japanese yen and euro enjoy a firmer bias. After a dreadful drop in factory order, German industrial production surprised to the upside (2.9% vs. median forecast of a 0.8% gain in Bloomberg’s survey). China imposed levy on European brandy and initiated an investigation into European autos in retaliation for last Friday’s decision to increase tariffs on China-made EV for improper subsidies. Mainland Chinese stocks jumped as the local markets

Overview: The stronger than expected US jobs report triggered a 20 bp jump in the US two-year yield and sent the greenback broadly higher. The market slashed the probability that the Fed would cut by 75 bp in Q4. There are now slightly less than 50 bp discounted in the Fed funds futures strip. US rates have continued to back up today, and both the two- and 10-year yields traded above 4% today. The greenback is mostly firmer, though the yen, Swiss franc, and Norwegian krone are resilient. Sterling is leading the decliners with about a 0.35% loss. Dismal German factory orders added to the weight on the euro, which is hovering near the pre-weekend low of $1.0950. Most emerging market currencies are softer, but the Mexican peso and the South African rand are bucking

There were several developments last week that shape the investment climate. First, the September US employment report was stronger than expected and this reinforces the message from Fed Chair Powell. After initiating the easing cycle with 50 bp cut, the central bank is not in a rush and two quarter-point cuts in Q4 is most likely scenario. Once again, the market has converged to the Fed rather than the other way around. Second, the new Japanese government and the Bank of Japan are cautious about near-term rate hikes. The market has pushed the next move into 2025. Third, the eurozone’s preliminary September CPI fell below 2%. This boosts the chances of an ECB rate cut when it meets on October 17. Fourth, Bank of England Governor Bailey hinted at an acceleration

Overview: The dollar enjoys a firmer tone today. The escalating conflict in the Middle East is keeping the market on edge. And then there is tomorrow’s US employment report. Among the G10 currencies, sterling has been the hardest hit. It is off around 1% after Bank of England Governor Bailey seemed to signal that after pausing last month, the central bank may turn more aggressive here in Q4. Nearly all the emerging market currencies are lower. Global equities and bonds are struggling. Several markets in the Asia Pacific were closed for holidays. Tokyo rose on the back of the weaker yen, while Hong Kong saw some profit-taking after its recent surge. Europe’s Stoxx 600 is off for the third session this week. It is down about 0.7% after edging up 0.05% yesterday. US

Overview:  The US dollar is mostly little changed today. Comments from the new Japanese government and BOJ Governor Ueda reinforce the sense driven by the softness in the September Tokyo CPI and larger-than-expected decline in August industrial output that there is no urgency for another rate hike. The yen is the weakest of the G10 currencies today. The Norwegian krone leads the major currencies higher after underperforming yesterday. Outside of the yen and krone, the other G10 currencies are l +/- ~0.15% and inside yesterday’s ranges. Emerging market currencies are mostly softer. The Mexican peso is firm after the new president had comforting words for investors at her inauguration yesterday. While US auto sales were stronger than expected (15.77 mln unit pace),

Overview:   Japan will go to polls a little ahead of the US. And the US election still looks too close to call. Canada may be forced into snap elections if the Bloc Quebecois abandon’s negotiating with the minority Liberal government as it has threatened to do at the end of the month. The UK’s new Labour government is putting together its first budget to be delivered at the end of the month. Among the first tasks of the new French prime minister is submission of next year’s budget to the EU. The German government is unpopular, and the Bundesbank has warned of a possible contraction in Q3 after the economy shrank in Q2. Fed Chair Powell showed little sense of urgency and seemed to endorse the recent dot plot that implied two quarter-point rate cuts this year if