Tuesday , September 27 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

The Precipitous Moves in the Roller Coaster Known as the Foreign Exchange Market

2 days ago

The dollar surged last week. Sure, the push of the Fed was notable, but the larger move from Sweden’s Riksbank
failed to impress. In fact, the Swedish krona was the poorest performer among the G10 currencies, tumbling 5% last week. Sterling was pummeled to $1.0860 even as the market moved to discount the likelihood of a 100 bp hike at the next Bank of England meeting on November 3. It cannot be entirely laid at the Fed’s feet. Sterling’s biggest drop (~3.5%) was recorded in reaction to the new government’s fiscal package.
Emerging market countries in Asia Pacific have been slower than other regions in raising interest rates. Banks seem to still be lowering their projections for China’s growth, Yet the Fed is blamed for their challenges. The drag on central

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Macro: Tell Us Something We Don’t Already Know

3 days ago

As September winds down, three
sets of economic reports will draw the most attention. We
will review them and then offer a snapshot of the emerging market central bank
meetings. As we have seen in the UK and Norway, several emerging market countries
raised rates early (beginning in the middle of last year) but still experienced
an acceleration of inflation. It obviously begs the unanswerable question about
the impact on US inflation if the Fed had taken its foot off the
accelerator sooner. There does not appear to be a tight relationship between
monetary policy and currency performance. This may warn against thinking the Bank
of Japan simply needs to hike rates to stabilize the yen.Many will see the US PCE deflator as the key
given the monetary cycle, but its

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It will be Enough, even if Too Much

5 days ago

Business travel commitments
keep me from updating the blog until the weekend, but I wanted to share a
few thoughts post-Fed. First, the Fed was more
hawkish, and the median dot sees 125 bp increase in the target rate in
Q4.  The hawkish thrust was also evident in projecting that the target
rate will remain higher for longer.  Even in 2025 sees the target rate
above the longer-term (neutral) level.   Second, the market still
does not fully accept the Fed’s message. The unemployment rate (pain) peaks at
4.6% in 2023.  This seems optimistic given the weak growth it
project.  It revised down this year’s growth to 0.2%–stagnation–from
1.7% in June.  Next year’s growth is seen better at 1.2%.  The
projections for the PCE deflator have it remaining above 2% in 2024

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Putin and Powell Lift Dollar

6 days ago

Overview: Between Putin’s mobilization of 300k Russian troops and Fed
Chair Powell expected to lead the central bank to its third consecutive 75 bp
hike later today, the dollar rides high. It has recorded new two-year highs
against the dollar bloc and Chinese yuan, while sterling was sent to new lows
since 1985. Asia Pacific bourses were a sea of red for the sixth decline in the
regional benchmark in the past seven sessions. Surprisingly, Europe’s Stoxx 600
is trying to snap a six-day losing streak and is posting small gains near midday.
Energy and utilities are leading the move. US futures are steady. Benchmark bond
yields are 3-5 bp lower today. That puts the US 10-year near 3.53%. Gold remains
stuck in the range seen at the end of last week (~$1654-$1680) but

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Riksbank Hikes 100 bp but the Krona gets No Love

7 days ago

Overview: Yesterday’s late rally in US shares
carried into the Asia Pacific session where all of the large markets advanced. However,
the bears are not abdicating and Europe’s Stoxx 600 is off for the sixth
consecutive session and US futures are trading lower. The sell-off in the bond market
continues. European benchmark yields are mostly 8-10 bp higher and the US 10-year
Treasury yield is up nearly five basis points to approach 3.54%. The two-year continues
to knock on 4%. The US dollar is firmer against all the major currencies. Despite
Sweden’s 100 bp rate, the krona is among the weakest of the G10 currencies,
losing ground against all but the Norwegian krone and New Zealand dollar. The
central bank of South Korea has requested hourly reports from the foreign

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The Greenback Firms to Start the New Week, Stocks Slide

8 days ago

Overview:  The busy week is off to a slow
start as Japan is on holiday and the UK and Canadian markets are closed to
honor Queen (Australia will commemorate with a holiday on Thursday). Nevertheless,
the sell-off in equities continues and the US dollar is firm. Most of the large
markets in Asia fell. India is a notable exception. Its benchmark rose for the
first time in four sessions, helped by bank shares and Infosys. Europe’s Stoxx
600 is off for the fifth consecutive session, and US futures are trading broadly
lower. European benchmark yields are mostly 3-6 bp higher. US Treasuries have
not trade in cash market, while the December futures point to a couple basis
points higher yield. The dollar is rising against most currencies today. The Antipodeans

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The Dollar may Stabilize Ahead of the FOMC

9 days ago

Verbal intervention proved sufficient to keep the US dollar below JPY145, but the greenback gained broadly. It rose to new two-year highs against the dollar-bloc and Chinese yuan ahead of the weekend and to levels against sterling not seen since 1985. The elevated price pressures, while the labor market stays tight (weekly jobless claims fell for the fifth consecutive week and reached four-month lows), have encouraged the market to look for a higher terminal Fed funds rate. At the end of August, the peak in the policy rate was seen 3.75%-4.00%. Now is it seen closer to 4.50%.We expected the dollar to trade higher into the conclusion of the FOMC meeting on September 21, but last week’s gains were particularly strong against those currencies, like the dollar bloc

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No One Wants a Recession, but Central Banks are willing to Take the Risk to Demonstrate Anti-Inflation Resolve

10 days ago

week ahead is busy. Three G7 central banks meet, the Federal
Reserve, the Bank of Japan, and the Bank of England. In addition, Japan and Canada
report their latest CPI readings, and the flash September PMI are
released.  There
are three elements of the Fed’s meeting that are worth previewing. First is the
interest rate decision itself and the accompanying statement. Ironically, this
seems to be the most straightforward. Even before the August CPI
surprise, the Fed funds futures market was confident of another, the third, 75
bp increase. The labor market’s strength gives the Fed confidence
that the economy can still handle the expeditious attempt to bring inflation
back to target. The statement itself need not change very
much. It may recognize the weakening

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The Dollar Heads into the Weekend Well Bid

11 days ago

Overview:  The dollar is well bid. It has risen to new two-year highs against
the dollar bloc and Chinese yuan. Aided by worse than expected retail sales,
sterling, on its anniversary of leaving the European Exchange Rate Mechanism fell
to its lowest level since 1985. This fits into the broader risk-off move. The
S&P 500 fell to new two-month lows yesterday, and FedEx warnings after the
bell yesterday add to the string of worrisome comments from leading US corporates.
Asia Pacific equities bled lower. The Nikkei, Shanghai and Shenzhen, Australia,
and Index fell 1%-2% today. The MSCI Asia Pacific Index fell for the fifth
consecutive week. Europe’s Stoxx 600 is off more than 1% as it slides for the
fourth consecutive session. US futures are trading more than 1%

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Calmer Capital Markets…for the Moment

12 days ago

Overview: The capital markets are quiet today. Equity markets and bond yields have a slight upside bias, while the dollar is little changed. Despite reports that the lockdown in Chengdu is easing, Chinese equities underperformed in the Asia Pacific region. Japan, Hong Kong, Taiwan, and Australia eked out modest gains. After sliding around 2.4% over the past two sessions, the Stoxx 600 is up fractionally. US futures have edged slightly higher. The US 10-year yield is firmer by around three basis points near 3.44%, while European benchmark yields are mostly 1-2 bp firmer. Most of the major currencies are +/- 0.2% changed on the day. A similar picture is evident among emerging market currencies. Gold settled below $1700 yesterday and has continued to retreat today.

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Markets Remain on Edge

13 days ago

Overview: The firmer than expected US CPI set off a
major reversal of the recent price action. It is a two-prong issue. The first
is about inflation and the squeeze on the cost-of-living. The second, and more
powerful in the capital markets is how the Fed is likely to respond. This drove
US stocks and bonds lower and lifted the dollar broadly. Asia Pacific bourses
were a sea of red. Most major markets were off 1-2%, while the Nikkei, the Hang
Seng, and Australia’s benchmark off closer to 2.5%. Europe Stoxx 600 gapped
lower and is trying to recover though a small gap remains. US index futures are
trading firmer, though given the magnitude of yesterday’s losses the small gains
seem fragile. Benchmark 10-year yields are firmer. The US 10-year Treasury is up

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Will the Dollar Recover After CPI?

14 days ago

Overview: The US dollar remains offered ahead of
today’s CPI report. Most European currencies are outperforming the dollar bloc,
and the greenback is holding inside yesterday’s range against the yen. Most
emerging market currencies are firmer, as well. China’s markets re-opened from
the long-holiday weekend and the yuan is a touch softer. After the strong close
to US equities yesterday, and some mild follow-through buying today in the
futures, equities in the Asia Pacific and Europe are also extending their
recent gains. Hong Kong was a notable exception in Asia and reports that
regulators asked state-owned entities to report their exposure to Fosun, one of
the largest non-state conglomerates, weighed on the Hang Seng. Europe’s Stoxx 600
is rising for the fourth

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Careful about Chasing the Dollar Lower in North America Today

15 days ago

Overview: The bout of profit-taking on long dollar positions begun last week
has carried into the start of this week. 
Despite the escalating rhetoric, the yen is not participating today and
is trading within the pre-weekend ranges. 
The greenback’s lows have been set in the European morning and have
stretched the intraday momentum indicators, suggesting that North American
dealers may not follow suit. The uncertainty about the Swedish election outcome
has not prevented the krona from leading the major currencies higher with a nearly
1.6% gain.  Emerging market currencies
are also mostly higher, led by the central European currencies and the South
African rand.  China, Hong Kong, and
South Korean markets are on holiday, but the other equity markets in the region

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The Dollar: Was it the ECB and BOJ or the Bounce in Equities?

16 days ago

After extending its recent gains, the dollar fell sharply at the end of last week. Many factors could have sparked the pullback, including the stronger expressions of concern by Japanese officials with an implicit threat of intervention and perceptions of an increased likelihood that the ECB will deliver another 75 bp hike next month. We had anticipated that the dollar bulls would turn cautious after the ECB meeting and before the September 13 US CPI report. Headline CPI may have fallen last month for the first time since May 2020. It follows a flat reading in July and could reinforce expectations that US inflation has peaked. This may see some participants reconsider a 75 bp hike at the September 20-21 FOMC meeting. However, given that price pressures remain

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US CPI in Focus

17 days ago

The US dollar rally is of historic proportions. Its climb is relentless, though there was around a 4-7% pullback for a few weeks beginning in mid-July. Since then, the greenback has made up for lost time and appreciated to multiyear highs against most of the major currencies. The first real bout of profit-taking in nearly a month seen in recent days looks corrective in nature.  
The different performances cannot be entirely traced to monetary policy differences, though the Japanese yen is easily the weakest of the majors, losing more than a fifth of its value this year. The BOJ is the only G10 central bank that insists that inflation is temporary. Indeed, we note that the market agrees with the officials. To wit, the BOJ’s latest projections see core CPI

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Sharp Dollar Setback may offer Bulls a Bargain

18 days ago

Overview: The dollar is having one of the largest setbacks in recent weeks. We expected the dollar to soften ahead of next week’s CPI, which may fan ideas/hopes of a peak in US price pressures, but the magnitude and speed of the move is surprising, and likely speaks to the extreme positioning. Still, we caution that the intraday momentum indicators are stretched, and the underlying bullish sentiment, may see North American operators take advantage of the dollar’s pullback. More broadly, risk assets are performing well. After a respectable equity performance in the US yesterday, Asia Pacific equities rose, led by Hong Kong, China, and Taiwan. Europe’s Stoxx 600 is up 1.6%, which if sustained, will be the most in a couple of months, and the first weekly gain in

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ECB: Coping with Conflict, Covid, and Climate

19 days ago

Overview: Heightened warnings from Japanese officials has helped the dollar
steady against the yen, while the euro hugs parity ahead of the outcome of the ECB
meeting, where a 75 bp hike is anticipated. Most Asian equity markets rallied
in the wake of yesterday’s gains in the US. China and Hong Kong were notable
exceptions. Europe’s Stoxx 600 is practically flat as are US futures. The US
10-year yield is softer, a little below 3.25%, while European benchmark yields
are slightly firmer. The 10-year JGB drew closer to the 0.25% cap. Emerging
market currencies are mixed, but the Chinese yuan rose for the first time this
week, albeit a little. Gold is extending yesterday’s recovery from below $1700
and is hovering around $1722 now. Crude oil tumbled 5.7% yesterday

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The Yen and Yuan Continue to Weaken

20 days ago

Overview: While the US dollar appears to be consolidating its recent gains, the Japanese yen and Chinese yuan remain under pressure. Officials seem more concerned about the pace of the move than the level it has reached. New and large fiscal initiatives that the new UK government has floated has failed to change sentiment toward sterling, which is the second weakest major currency today after the Japanese yen. The yen’s weakness did not prevent new losses in Japanese equities, and most equities in the Asia Pacific region fell, except China. Europe’s Stoxx 600 is lower, giving back yesterday’s 0.25% gain and more. US futures are steady to firm. Meanwhile, benchmark 10-year yields played catch-up in Asia, while they have come back softer in Europe and are 6-8 bp

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September 2022 Monthly

26 days ago

The highlights of September include continued substantial rate hikes by the major central banks, save Japan. The Tories will pick a new leader, who will become the next prime minister of the UK. Italy looks determined to have a right-wing government. Sweden goes to the polls in mid-September. The price of defeating the Social Democrats, who have governed since 2014, maybe for the center-right to form an alliance with the nationalist Sweden Democrats. Like Brother of Italy, it has far-right and neo-fascist roots and has emerged as the largest opposition party. In Denmark,  the coalition government appears to be fracturing, and a snap election could be called. Also, the US midterm election in November begins coming into focus.
Central banks have come under

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New Lockdown in China and the First Drop in South Korea’s Chip Exports in 2 years Euthanizes Animal Spirits

26 days ago

Overview: The precipitous fall in equities continues while the dollar remains buoyant. Nvidia’s warnings about US curbs on sales to China and the first drop in South Korea’s chip exports in two years, coupled with the largest lockdown in China since Shanghai encouraged investors to move to the sidelines. Most of the major equity markets in the Asia Pacific region were off 1-2%. The Stoxx 600 is off for the fifth consecutive session and the second session of more than a 1% drop. US futures point to a gap lower opening of the US indices today. The 10-year US Treasury yield is flat around 3.18%, though the two-year rose to a new high above 3.50% before easing a bit. The greenback is firm. It set a new 24-year high against the yen and a new two-year high against

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EMU August CPI at 9.1%, while the Core Rate Jumps to 4.3%

27 days ago

Overview: The rise in global interest rates continues. The US 10-year yield is a few basis points near 3.15% and European benchmarks are mostly 5-6 bp higher. Of note, the sharp sell-off in UK Gilts has being extended. Yesterday’s 10 bp rise has been followed by another 14 bp surge today. Italian bonds are also getting hit. The 10-year yield is up a little more than 10 bp. The US dollar is mostly firmer against the major currencies, though the yen and Australian dollar are little changed. Among the emerging market currencies, a small number of Asian currencies, including the Chinese yuan and South Korean won are firmer, but most are under pressure. Equity markets in the Asia Pacific region were mixed, but the downside bias is evident in Europe, where the Stoxx 600

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Turn Around Tuesday Began Yesterday, Likely Ends before Wednesday

28 days ago

Overview: Corrective pressures were evident yesterday and they extended today in Asia and Europe but seem to be running their course now. Market participants should view these developments as countertrend and be wary of waning risk appetites in North America today. Most Asia Pacific equities rallied earlier today, save China and Hong Kong. Europe’s Stoxx 600 has retraced most of yesterday’s losses and US futures are trading higher. Benchmark bond yields are softer with the US 10-year note yield off about 3.5 bp to below 3.07%. European yields are mostly 3-5 bp lower, but UK Gilts are pressured by reports that foreign investors were heavy sellers last month. The US dollar surrendered earlier gains yesterday and is mostly lower today. The Australian dollar is

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Stocks and Bonds Sell Off, while the Dollar Rallies

29 days ago

Overview: The reverberations from last week continue
to roil the capital markets today. Equities and bonds have been sold and the
greenback bought. Most of the large markets in Asia Pacific fell by more 2%, including
Japan’s Nikkei, Taiwan’s Taiex, and South Korea’s Kospi. Ironically, the Shanghai
and Shenzhen Composites eked out minor gains, but the CSI 300 still eased. Europe’s
Stoxx 600 is off 1% after falling nearly 1.7% before the weekend. US futures
warn of another lower opening. Recall that the major indices gapped lower
last Monday as well. The US 10-year yield is up 7 bp to 3.11%, probing last
week’s highs, while the two-year yield reached new highs near 3.48% before steadying.
European benchmark yields are 12-13 bp higher. The dollar is firmer against

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The Week Ahead: Dollar Bulls Still in Charge

August 27, 2022

poor preliminary PMI readings, the ongoing European energy crisis, and the
recognized commitment of most major central banks to rein in prices through
tighter financial conditions are risking a broad recession. These considerations are weighing on
sentiment and shaping the investment climate. Most high-frequency
data due in the days ahead will not change this, even if they pose some headline
risk.  What we have seen among some
central bankers applies to market participants too. It is not so much that these central
bankers are congenitally doves or hawks, but they are simply activists. Whether conditions warrant tighter or easier monetary policy, the activists
lead the charge and are more aggressive than most of their colleagues in both
directions. Similarly,

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Jackson Hole and More

August 26, 2022

Overview: Ahead of the much-anticipated speech by
Federal Reserve Chair Powell, the Fed funds futures are pricing in about a 70%
chance of a 75 bp hike next month.  The
US 10-year yield is up nearly five basis points today to 3.07% and the two-year
yield is firm at 3.38%.  Asia Pacific equities
were mostly higher, with China the main exception among the large markets, after
US equities rallied yesterday.  Europe’s
Stoxx 600 is off about 0.3% to bring this week’s loss to a little over 1%.  It would be the first back-to-back weekly loss
in two months.  US futures are seeing
yesterday’s gains pared.  Europe’s
benchmark 10-year yields are mostly 4-8 bp higher.  The greenback is mixed with the European currencies
mostly higher, led by the euro, pushing above parity

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Dollar Longs Pared as Jackson Hole Gathering is set to Start

August 25, 2022

Overview: It seems that many market participants had
the same thing in mind, cut dollar longs before the Jackson Hole gathering. The
Antipodeans lead the majors move, encouraged perhaps by China’s new economic
measures, with around a 1% gain. The euro and sterling are up about 0.35% and
are the laggards. Emerging market currencies are higher as well, with the
notable exception of India and Turkey, which are nursing small losses. Equities
are having a good day. All the major bourses, but India, rose in the Asia
Pacific area, led by the 3.6% surge in HK. South Korea’s 25 bp hike did not
prevent the Kospi from rallying over 1% today. The Stoxx 600 is up by about
0.3%, and US futures are 0.5%-0.6% better. European 10-year benchmark yields are
4-7 bp lower and the

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New Recession Worry Stalls Dollar Express but Doesn’t Derail It

August 24, 2022

Overview: A simply dreadful flash US PMI stopped the dollar’s four-day rally in its tracks. It followed news that the eurozone, Japan, and Australia’s composite PMIs are below the 50 boom/bust level. However, the dollar recovered, even if not fully as the market seemed unconvinced that the data could change Fed Chair Powell’s message at Jackson Hole on Friday. A consolidative tone is evident today. Asia Pacific equities were mixed. China and Hong Kong fell more than 1% while South Korea, Australia, and India posted gains. Europe’s Stoxx 600 is off for the fourth consecutive session, the longest spill in a couple of months. US futures are straddling unchanged levels. The US 10-year yield is around 3.04%, little changed, while European benchmark rates are 2-4 bp

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Surging Energy Prices Pushing Europe Closer to Recession

August 23, 2022

Overview:  The poor eurozone PMI underscores likely recession and weighs on
the single currency, which was sold to a new 20-year low.  Rather than a "Turn Around Tuesday"  a broadly consolidative session is unfolding. Asian and European equities are weaker, while US futures are positive but little changed.  Benchmark 10-year bond yields are mostly firmer and the premium offered by Europe’s periphery is edging higher.  The US 10-year is little changed near 3.02%. Most non-European major currencies are firmer, with the exception of the Australian dollar.  The euro struggles to sustain even the most modest of upticks.  Emerging market currencies are mostly lower.  The Mexican peso is an notable exception.  It is the strongest in the EM space today, followed by the

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No Relief for the Euro or Sterling

August 22, 2022

Overview: The euro traded below parity for the second time this year and
sterling extended last week’s 2.5% slide. While the dollar is higher against
nearly all the emerging market currencies, it is more mixed against the majors.
The European currencies have suffered the most, except the Norwegian krone. The
dollar-bloc and yen are also slightly firmer. The week has begun off with a
risk-off bias. Nearly all the large Asia Pacific equity markets were sold. Chinese
indices were a notable exception following a cut in the loan prime rates. Europe’s
Stoxx 600 is off by around 1.20%, the most in a month. US futures are more than
1% lower. The Asia Pacific yields rose partly in catch-up to the pre-weekend advance
in US yields, while today, US and European benchmark

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Flash PMI, Jackson Hole, and the Price Action

August 20, 2022

many, this will be the last week of the summer. However, in an unusual twist of the
calendar, the US August employment report will be released on September 2, the
end of the following week, rather than after the US Labor Day holiday
(September 5).  The main economic report of the week ahead will be the preliminary estimate of the August PMI. The policy implications are not as obvious as they may seem. For example, in July, the eurozone composite PMI slipped below the 50 boom/bust level for the first time since February 2021. It was the third consecutive decline. Bloomberg’s monthly survey of economists picked up a cut in Q3 GDP forecasts to 0.1% from 0.2% and a contraction of 0.2% in Q4 (previously 0.2% growth). Over the past week, the swaps market has moved

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