Wednesday , November 30 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

Calm Markets with Japan on Holiday Today and the US Tomorrow

7 days ago

Overview: The capital markets are quiet today with
Japan on holiday and the US on holiday tomorrow. Asia Pacific equities were
mostly firmer after yesterday’s rally on Wall Street. Europe’s Stoxx 600 is
about 0.25% higher and at its best level in three months. US futures are steady to
slightly higher. Benchmark 10-year yields are little changed. The dollar is narrowly
mixed against the major currencies, with Scandis leading the way. Sweden is
expected to raise rates tomorrow. Emerging market currencies are also mixed today.
The Philippine peso is the strongest with a 0.75% gain, while the Thai baht is
the softest, with a 0.50% decline. Gold was capped near $1750 yesterday and is
near the week’s low set Monday around $1732.50. January WTI is pushing below $80 a

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Consolidative Session, even if Not Turn Around Tuesday

8 days ago

Overview: The US dollar is trading with a somewhat heavier bias after bouncing
higher yesterday. All the G10 currencies are higher, led by the New Zealand
dollar, where the central bank is expected to hike first thing tomorrow. Most emerging
market currencies are also firmer. Those that are not, like the South Korean
won and Mexican peso, are nursing minor losses. The surge in Covid cases
weighed on Chinese shares that trade in Hong Kong, while the CSI 300 posted the
smallest of gains. Outside of South Korea, most of the other large bourses rose.
Europe’s Stoxx 600 is recouping yesterday’s small loss to trade near the three-month
high set a week ago. US futures are slightly higher. European benchmark 10-year
yields are 1-2 bp firmer, while the US 10-year Treasury

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Dollar Jumps, while Surge in Covid Cases Raise Questions about China’s Pivot

9 days ago

Overview: Surging Covid cases in China and Hong Kong
are undermining hopes of a Covid-pivot and the US dollar is broadly higher.
Equities are under pressure to start the week. Most of the large bourses in the
Asia Pacific but Japan, fell earlier today. Europe’s Stoxx 600 is paring last
week’s minor gain, which was the fifth consecutive weekly rise. US stock futures
are lower, while the 10-year US Treasury yield is flat near 3.83%. European
yields are mostly around two basis points firmer, but Italy’s benchmark is up
six basis points, perhaps amid some nervousness ahead of the cabinet vote on
the budget in the middle of the week. Sweden is expected to deliver a 75 bp rate
hike later this week but it is not offering the krona much support. It is
leading losses

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Macro and Prices: Data and Psychology in the Week Ahead

11 days ago

The
week ahead has a relatively light economic schedule, punctuated by the US
Thanksgiving Day holiday on November 24. Nevertheless, the data highlights include the preliminary November PMIs,
Tokyo’s November CPI, and the FOMC minutes from this month’s meeting. The data is not the driver now; psychology
is. The precise print,
for example, of the eurozone and the UK’s preliminary PMI will likely be of little
consequence. The composite has fallen for six consecutive months through
October. It has not been above the 50 boom/bust level since June. The issue is
not really if the eurozone is going to escape a contraction but rather its
depth and duration. The UK’s composite PMI has fallen since April with one
exception (June), and it has been below 50 for three months

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Higher Japanese CPI Won’t Change the BOJ’s Stance

12 days ago

Overview: The capital markets are heading into the
weekend mostly quietly in a consolidative fashion.  Ambiguous signals from yesterday’s US
equities saw a narrowly mixed performance among the large Asia Pacific bourses,
but of note, Hong and China markets saw this week’s gains trimmed. Europe’s
Stoxx 600 is up around 1% near midday and is slightly above last week’s
close.  US equity futures are trading
with a firmer bias ahead of a large expiration of equity options today.  Coming into today’s session the Nasdaq is up
about 0.25% while the S&P 500 is down as much.  The US 10-year yield is near 3.79%, a couple
basis points firmer on the day, but off nearly seven basis points on the
week.  European yields are mostly 2-4 bp
higher, though the 10-year Gilt is up

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The Dollar Comes Back Better Bid

13 days ago

Overview: Animal spirits are retreating today. Asia Pacific and European equities are lower, and US futures are narrowly mixed. US 2- and 10-year yields are edging higher, while European benchmark 10-year yields are mostly softer.  Italy and the UK are notable exceptions. Gilt yields are firming ahead of the budget statement. The dollar is trading higher against the G10 currencies. It still appears to be in a consolidative mode, but we continue to see risk of a more genuine correction after its recent downside momentum stalled. Emerging market currencies are also trading with a downside bias today. Like the foreign currencies, gold’s upside momentum has faded, and near $1763 in Europe, the yellow metal is at a three-day low. Support is seen near $1750. December

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Markets are Less on Edge as the Darkest Scenarios seem Less Likely

14 days ago

Overview: The situation in central Europe is still intense but it appears top US, European and Polish officials are more reluctant than some market participants to attribute the darkest of intentions and paint extreme narratives. The Polish zloty has recovered around 1.3% today and other central European currencies are also trading firmer to lead the emerging market currencies. The US dollar is broadly weaker against the G10 currencies. The large Asia Pacific bourses pared recent gains, and Europe’s Stoxx 600 is threatening to end a four-day advance. US equity futures are trading with a slightly firmer bias. European benchmark 10-year yields are softer, with Italy off 5 bp, but most are around 2-3 bp lower. The 10-year US Treasury yield is nearly two basis points

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Poor Chinese and Japanese Data Are Not Deterring Euphoria

15 days ago

Overview: Recent developments have spurred a euphoria
that is exciting the animal spirits. Greater confidence that US inflation has
peaked, and new initiatives from China, and yesterday’s Biden-Xi meeting are all
feeding this narrative. The dollar, which
slumped last week, is sliding anew today. Strategically, we anticipated the
turn, but tactically, we thought last week’s move had stretched the near-term
technical condition.  The dollar is sharply
lower (~-1%) against half of the G10 currencies and weaker against most emerging
market currencies.  Australian equities
bucked the regional trend that saw the large Asia Pacific bourses rally, led by
Hong Kong’s 4.1% gain.  Europe’s Stoxx
600 is struggling to extend its rally into a fourth session, while US equity

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The Dollar Posts Corrective Upticks, while the Market Digests China’s Initiatives

16 days ago

Overview: China’s new initiatives to support the property sector helped lift the Hang Seng. And while the China’s CSI 300 edged higher both the Shanghai and Shenzhen composites fell. Most Asia Pacific markets fell, while Europe’s Stoxx 600 is posting a small gain. US futures are sporting modest losses. European benchmark 10-year yields are 3-5 bp lower, including UK Gilts ahead of Thursday’s budget that is expected to confirm new borrowing (Office for Budget Responsibility projects to be GBP70 bln more than previously anticipated). The 10-year US Treasury yield is about seven basis points higher near 3.88%. The dollar is mostly firmer after last week’s sharp losses. The yen is leading to the downside with about a 1.3% loss, while the Canadian dollar is holding up

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Dollar Turn More Credible but Maybe Too Much Too Fast

17 days ago

Even before the softer-than-expected US inflation, we had been suggesting the dollar was in the process of carving out a significant high. Our strongest conviction was that sterling bottomed in late September at a record low near $1.0350. Our conviction had also been growing that the greenback has topped against the Canadian dollar, a little shy of our CAD1.40 target.
Short-term trend followers and momentum traders have to adjust positions, and long-term structural long dollar positions need to be re-assessed. While we accepted the turn would be dramatic, given the historic over-valuation of the dollar, our immediate concern is that by nearly any near-term technical measures, the dollar is oversold. In fact, we suspect that a near-term dollar low may have been

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Capital Flows Outstrip Trade Flows and that is Where to Look for Drivers of FX

18 days ago

Policymakers have often said
that exchange rates should reflect fundamentals. What does that really mean? Can they
do anything but that? It begs the question of which fundamental factors they should reflect. Therein lies the rub. We are still struck by the
latest Bank for International Settlements figures. Their survey found
that the average daily turnover in the foreign exchange market was $7.5
trillion a day. World
trade last year was about $22.5 trillion. The foreign exchange market sees that
every three days. Nevertheless, many still see trade as the factor that
exchange rates should bring into balance. Many observers are surprised when the
Chinese yuan depreciates, as it has this year, despite a huge trade
surplus ($730 bln through October, a 43% increase

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Caution Advised in Chasing FX, but Wow!

19 days ago

Overview:  The softer than expected US inflation figures unleashed significant
market adjustment that continue to ripple through the capital markets. The
modification of some of China’s Covid stance may have also fanned some
optimism, but we suggest that measures are modest tweaks, and the surge in infections
will prevent the end of disruptive restrictions. Although we have been arguing
that a significant dollar top was being forged, the move is stretched from a
technical perspective and immediate caution is advised. The strong rally seen
in equities yesterday is continuing today. Hong Kong led the rally in the Asia
Pacific region with a 7.75% surge. China’s equities advanced but were laggards
among the large regional markets. The Stoxx 600 is adding another 0.3%

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High Anxiety: China’s Covid and US Inflation

20 days ago

Overview: Anxiety is running high. Rather than ease
its Covid restrictions, a surge in cases is seeing more areas in China come
under restrictions. The US reports CPI and of the ten reports this year, seven
of them have been stronger than expected. The turmoil in the crypto space has
gotten noticed even by those not involved. Asia Pacific bourses fell, led by
Hong Kong, and Europe’s Stoxx 600 is off for a second day. US equity futures
are slightly firmer. US and European 10-year benchmark yields are 2-3 basis
points higher. That puts the US Treasury yield near 4.11%. The US dollar is
trading higher against all the major currencies but sterling. Emerging market
currencies are also weakening against the dollar. Gold is little changed as it
hovers above $1700.

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Can the Dollar Sell Off Much More Before the CPI?

24 days ago

The apparent hawkishness of Fed Chair
Powell’s comments at the press conference following the FOMC’s fourth
consecutive rate hike extended the dollar’s recovery, which had begun in late
October. However, the inability of the greenback to rally after the
stronger-than-expected jobs data suggests the bounce has ended. Still,
participants may be cautious ahead of the October CPI report due November 10. Although many may think Powell indicated that
the Fed was finished with 75 bp moves, the Chair kept the door ajar. While
acknowledging it may be appropriate to slow the pace of tightening, he said it
could happen at the next meeting or the following one. The
market is pricing in about a 30% chance of a 75 bp at the December 14 meeting. The
September dot plot pointed

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The Week Ahead: How Sticky is US Inflation and How Soft is China’s?

25 days ago

There are three potential inflection points. The first is a
pause from the Fed; if nothing else, Powell signaled it was too early to think
about it. The second is for the Bank of Japan to change monetary policy.
Governor Kuroda has signaled that it is not time. Conventional wisdom is there
will not be a change until Kuroda’s term ends next April. However, we note that
the surveys suggest economists and BOJ inflation forecasts for next year have
converged. The third potential development can alter the investment climate if
China fundamentally changes the way it is resisting Covid. Reports are playing
up this possibility, and it emerged as a significant factor ahead of the
weekend as metals and oil soared while the dollar gave back a chunk of its
post-FOMC gains.

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US Dollar Offered Ahead of the Employment Report

26 days ago

Overview: Risk appetites have returned but may be
tested by the US jobs report. News of progress with US auditors in China helped
lift Hong Kong and Chinese equities. Most of the large bourses in the region
also rose. Europe’s Stoxx 600 is up a little more than 1% near midday after
shedding 1.3% over the past two sessions. US futures also are trading with an
upside bias. Benchmark 10-year yields are mostly a little softer today. The 10-year
US Treasury yield is at 4.13%, down slightly. The greenback is softer against all
the major currencies and most of the emerging markets as well. The dollar-bloc
leads the G10, while Thailand and Hungary lead the emerging market currencies. Softer
rates and the US dollar are helping gold recover from the push below $1617

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Fed’s Hawkishness Roils the Capital Markets

27 days ago

Overview: The Fed delivered the expected 75 bp
rate hike, and although it says it will take into account the cumulative effect
of past hikes and their lagged impact, the takeaway has been a hawkish message.
Risk appetites have evaporated. The dollar is stronger, while stocks and bonds
have been sold. Japan’s markets were spared due to the national holiday, but the
other large markets in the area were sold, lead by the 3% decline in the Hang
Seng. Europe’s Stoxx 600 gapped lower and is off almost 0.9% near midday. US
futures are nursing small losses after yesterday’s stunning downside reversal. Benchmark
yields are 11-15 bp higher in Europe, while the 10-year US Treasury yield is up
nine basis points to 4.19%. The dollar rides high, gaining on all the major and

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It is not So Much about the Fed’s hike Today but the Forward Guidance

28 days ago

Overview: A consolidative tone has emerged ahead of the outcome
of the FOMC meeting later today. The focus is not so much on the 75 bp rate
hike, but on its forward guidance. Many expect the Fed to signal it will return
to a 50 bp move next month, but we are not convinced that it will go beyond indicating
that 50 bp or 75 bp will be debated in December, depending on the data. The market
has a 5% terminal rate discounted. The Fed does not need to validate it now. Next
month it updates the dot plot and that is a more reasonable forum. Equities in Asia
Pacific and Europe rose. US futures are slightly firmer. Benchmark 10-year
yields are mixed. The US is flat around 4.04%, while European yields are mostly
1-3 bp firmer. The dollar is trading with a lower bias, with

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RBA Hikes by 25 bp, Chinese Stocks Surge, and the Greenback Trades Heavier

29 days ago

Overview: Risk appetites have returned today. Bonds
and stocks are advancing, while the dollar is better offered. Unsourced claims
that Beijing has formed a committee to assess how to exit the zero-Covid policy
sent Chinese shares sharply higher. An index of mainland companies list in Hong
Kong jumped nearly 7% and closed up almost 5.5%. The Hang Seng surged 5.2%,
while all the large markets in the region advanced. Europe’s Stoxx 600
recovered yesterday and is up another 1.1% today. It is the sixth gain in the
past seven sessions. US futures are broadly higher. Benchmark 10-year yields
are mostly 7-10 bp lower, while the US 10-year Treasury yield is off about 9 bp
to 3.96%. The dollar is broadly lower. Among the majors, the Norwegian krone is
leading the charge

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The Dollar Returns from the Weekend Bid

October 31, 2022

Overview: The dollar has come back from the weekend bid. After the ECB and BOJ meetings last week, the focus has shifted back to the US where the FOMC meeting concludes in the middle of the week and the October employment report is out ahead of the weekend. Sterling and the yen are the weakest performers among the G10 currencies and are off 0.45%-0.50%. The Antipodeans are performing best and are straddling little changed levels. Emerging market currencies are lower, led by the South African rand, the Russian rouble, and the Chinese yuan. Most of the large bourses in the Asia Pacific region gained by Hong Kong and the mainland’s CSI 300. Europe’s Stoxx 600 is slightly lower after rising four of last week’s five sessions. After strong pre-weekend gains, the US

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November 2022 Monthly

October 30, 2022

With this month’s hike, the Federal Reserve would have raised overnight rates by 300 bp while doubling the pace that its balance sheet is shrinking over the past 100 days. The US economy is the largest in the world, and US interest rates and the dollar are vital benchmarks. America’s centrality remains in what has been dubbed a G-Zero world, even if its share of the world economy is a bit less than it used to be, or the dollar’s share of global reserves has been eroded a bit more by the smaller currencies than the euro or yuan. So what happens in the US often has repercussions around the world.It is striking that a little more than a year ago, US leadership was questioned over how it withdrew from Afghanistan, and parallels with Vietnam were drawn. Since then, US

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RBA, FOMC, BOE Meetings Featured while the Greenback’s Recovery can be Extended

October 29, 2022

The week ahead is important from a macro
perspective. The data highlights include China’s PMI, eurozone preliminary
October CPI and Q3 GDP, and the US (and Canadian) employment reports. In
addition, the Federal Reserve meeting on November 2 is sandwiched between the
Reserve Bank of Australia meeting and the Bank of England meeting.Let us preview
the data before turning to the central banks. Yet the
challenge with the data is that the underlying macro views are unlikely to
change. Central banks say that policy will be data-driven, but it begs the
question of what data and how it fits with the forward guidance.This seems to
be less the case in China. The October PMI will be reported
before the markets open on Monday. The US, eurozone, and UK preliminary October

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Dollar Slump Stalls Ahead of ECB Meeting

October 27, 2022

Overview: The dollar’s recent losses have left it stretched on a near-term basis after today’s ECB meeting, the focus will shift to the Federal Reserve, next week’s meeting, and the employment report. The greenback is trading with a firmer bias against the G10 currencies, while the emerging market currencies are more mixed. There, several Asian currencies are leading the advance today (South Korea, Taiwan, and the Philippines). Central European currencies are posted 0.6%-0.8% losses as is the Chinese yuan. Benchmark 10-year yields are also firmer by 6-8 bp today, including US Treasuries. Chinese and Japanese stocks were lower, but the other large regional markets, led by South Korea and Taiwan, advanced. Europe’s Stoxx 600 is off 0.4%, as a three-day nearly 3.5%

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Dollar Slumps, Yuan Rallies by Most this Year amid Intervention Talk

October 26, 2022

Overview: The US dollar is having one of toughest days of the year. It has been sold across the board and taken out key levels like parity in the euro, $1.15 in sterling, and CAD1.36. The Chinese yuan surged over 1%. Chinese officials promised healthy bond and stock markets. There is some talk that the PBOC may have intervened directly in the forex market. Large bourses in the Asia Pacific region rallied and the CSI 300 rose by 0.8%, its first gain of the week. After rising by around 2.8% over the past two sessions, Europe’s Stoxx 600 is slightly lower. A disappointing batch of corporate earnings is weighing on US futures. The US 10-year yield is around four basis points lower at 4.06%, while European yields are mostly 2-4 bp higher. A softer dollar helped lift

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Consolidative Tuesday

October 25, 2022

Overview: The yen and sterling are trading quietly after
the recent drama, but with the Party Congress ending, the Chinese yuan has been
permitted to fall faster. It approached the 2% band today and its loss of about
0.65% today makes it the weakest among the emerging market currencies. Most of
the major currencies seem to be consolidating. Chinese stocks pared earlier
losses as foreign buying via the Hong Kong link returned after large sales yesterday.
Asia Pacific equities were mixed, while Europe’s Stoxx 600 is slightly firmer after
yesterday’s 1.4% gain. US futures are softer. Benchmark 10-year yields are
mostly 5-8 bp lower in Europe. The 10-year Gilt is off about 3 bp and the 30-year
yield is down four basis points bringing both to about 3.70%. The 10-year

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BOJ Injects More Volatility, while UK’s Tory Party Leadership Contest may be Over Today

October 24, 2022

Overview:  Japanese efforts to curb the weakness of the yen provided drama
today. What many suspect was intervention before the weekend was wearing off
and officials may have sold dollars again today in front of JPY150. Despite
initial success, the dollar is back near JPY149.50 as the North American
session is about to begin. The end of the Chinese Congress has seen the yuan
weaken to new lows. While the large bourses in the Asia Pacific region rose,
China and Hong Kong were notable exceptions and foreign investors sold what
appears to be a record of mainland shares today. Europe’s Stoxx 600 is seeing
early gains pared, while US futures are pointing to a lower opening. The US
10-year yield is a little softer, slightly below 4.20%, while EMU yields are as
much as

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Macro and Prices: The Week Ahead

October 22, 2022

There are five macro highlights in the week ahead. After providing a thumbnail sketch of them, we will look more closely at the price action of the leading dollar-pairs. We suspect that the dollar is in the process of carving out a top amid ideas that a 5.0% terminal Fed funds rate is discounted. Sterling’s panic low recorded late September near $1.0350 may indeed by the cyclical low. It took place amid cries that it was an emerging market and linear projections were offered of it falling to $0.90-$0.95. The exaggeration is part of the psychology that seems associated with extremes in prices. The new week begins with the preliminary PMI readings. The flash report for countries with is sufficiently accurate that the thunder from the final reports is stolen. An

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Greenback Holds Above JPY150, while BOJ goes MIA

October 21, 2022

Overview: The continued surge in US rates and inability of the
equity market to sustain gains saw the post-Truss sterling rally unwind amid a
broader recovery of the dollar. Sterling has been sold to new lows for the week.
Meanwhile, the dollar has held above JPY150, and the BOJ hand has not been seen.
It rose to almost JPY151 in Europe. Equity markets are on the defensive. Nearly
all the bourses in Asia fell, and the 1.65% drop of the Stoxx 600 is the
biggest loss this month. US futures are also trading heavily. Yields are
soaring, with European benchmark yields up 9-12 bp, while the 10-year US Treasury
yield is about five basis points higher near 4.27%. This is the 13th
consecutive week that the US 10-year yield has risen. Gold is approaching the
two-year-low

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Dollar Trades Above JPY150 and Truss Gets No Reprieve

October 20, 2022

Overview: China and Japan continue to struggle to
stabilize their currencies, while global interest rates rise. The offshore yuan
has fallen to new lows but in late dealings the onshore and offshore yuan have
recovered. The dollar also traded above JPY150 for the first time since 1990
and the market knows it is on thin ice as with the threat of official
intervention. A risk-off mood permeates. Equity markets have retreated in the
Asia Pacific region and Europe. US futures are also trading lower. Benchmark 10-yields
are 1-3 bp higher in Europe, and 10-year US Treasury yields reached a new high
around 4.17% before steadying. The greenback is mixed. Among the G10
currencies, the Australian and Canadian dollars are firmer, while sterling, the
Swiss franc, and Swedish

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Currency and Bond Markets Challenge the Bank of Japan

October 19, 2022

Overview: Asia Pacific equities were mixed as the China,
Hong Kong, Taiwan, and South Korean markets, among the large markets were unable to
gain in the wake of a solid performance in the US. Europe is also struggling to
maintain the upside momentum that has lifted the Stoxx 600 for the past four
sessions. It is nearly flat as this note is penned. US futures are firm. Benchmark
bond yields are higher, and the 10-year US Treasury yield is edging above
4.05%. European yields are mostly 3-4 bp firmer. The greenback has a modest
upside bias, though the dollar-bloc currencies are holding their own. Emerging
market currencies are modestly lower. Gold has slipped to a new low for the
month, a little below $1640. December WTI has steadied around $83 after yesterday’s

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