Monday , October 26 2020
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Win Thin

Win Thin

Win Thin is a senior currency strategist with over fifteen years of investment experience. He has a broad international background with a special interest in developing markets. Prior to joining BBH in June 2007, he founded Mandalay Advisors, an independent research firm that provided sovereign emerging market analysis to institutional investors. He received an MA from Georgetown University in 1985 and a B.A. from Brandeis University 1983. Feel free to contact the Zurich office of BBH

Articles by Win Thin

Dollar Catches Modest Bid but Weakness to Resume

3 days ago

Geopolitical tensions have risen after US officials accused Russia and Iran of meddling in the elections; the dollar has caught a modest bid today
Stimulus talks continue; Pelosi warned that a deal may not come together before the November 3 election; whether Republican Senators change their minds after the elections depends on the outcome
Measures of cross-asset volatility suggest a far too generous interpretation of the odds for a clean Democratic sweep; KC Fed survey and weekly jobless claims will be reported; Mexico reports mid-October CPI
The UK has agreed to come back to the Brexit negotiating table; Israel is expected to keep rates at 0.10%; Turkey is expected to hike rates 175 bp
Japan reported weak September department store sales; LDP tax chief Amari

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Dollar Soft as Markets Await Fresh News and Rumours

5 days ago

The dollar is coming under pressure again; markets are finally waking up to the fact that a stimulus deal before 2021 is unlikely; 10-year Treasury yields have been trading in a narrow range for months
The quiet US data week continues; Ireland broke from the pattern of how other European countries are tightening mobility rules; Hungary is expected to keep the base rate steady at 0.60%.
Japan reported September convenience store sales; dovish RBA remains dovish; RBNZ Governor Orr tried to out-dove the RBA
PBOC maintained its benchmark loan rates, as expected; Taiwan reported strong September export orders
The dollar is coming under pressure again.  DXY is trading at the lowest level since October 13 and is nearing the October 9 low near 93. This is the bottom of

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Drivers for the Week Ahead

6 days ago

Some are holding out hope but we think the stimulus package remains dead; Fed releases its Beige Book report Wednesday; there is a full slate of Fed speakers this week
Fed manufacturing surveys for October will continue to roll out; weekly jobless claims will be reported Thursday; BOC releases results of its Q3 Business Outlook Survey Monday
Renewed virus restrictions are weighing on the economic outlook for the eurozone; no wonder ECB officials are sounding very dovish
Despite all the threats and bluster, it appears that Brexit talks will continue this week; Moody’s downgraded the UK a notch to Aa3 with stable outlook ahead of the weekend; UK has another big data week
Japan has a heavy data week; RBA minutes will be released Tuesday; NZ Prime Minister Ardern and

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EM Preview for the Week Ahead

7 days ago

Risk assets are coming off a tough week. The dollar was bid across the board except for the yen, which outperformed slightly. The only EM currencies to gain against the dollar were KRW and CLP. The major US equity indices somehow managed to eke out very modest gains but stock markets across Europe sank as the viral spread threatens to slam economic activity again. Yet we have seen time and time again that the safe haven bid for the dollar eventually gives way to broad-based dollar weakness and we expect that to happen this week. Strong China growth in Q3 is expected to underpin risk sentiment and this should help EM gain some traction. 
AMERICAS
Mexico reports mid-October CPI Thursday. Headline inflation is expected at 4.0% y/y vs. 4.1% in mid-September. If so,

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Dollar Gains as Market Sentiment Goes South

9 days ago

Virus restrictions across Europe continue to sour sentiment; the dollar is benefiting from the risk-off backdrop
The stimulus package is deader than Elvis; Fed manufacturing surveys for October will start to roll out; weekly jobless claims will be reported; Chile is expected to keep rates steady at 0.5%
The unofficial deadline for Brexit has likely been extended; the two-day EU summit in Brussels starts today; Israel reports September CPI
Australia reported September jobs data; the RBA is likely to add stimulus soon
China is seeing fading price pressures and a central bank that continues to pump liquidity into the system; protests in Thailand continue to rock the capital
Virus restrictions across Europe continue to sour sentiment. The big news this morning was

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Dollar Bounce Remains Modest as Headwinds Build

11 days ago

The dollar is making a modest comeback; stimulus talks have hit a dead end; we get more US inflation readings for September
Brexit talks continue ahead of the EU summit Thursday and Friday; a new bill by the UK government could change the investment landscape in the country
The EU recovery fund has hit some speed bumps; the Netherlands is the latest country to impose stricter measures; eurozone IP came in slightly lower than expected
China reported strong money and loan data; Singapore and Korea kept monetary policy unchanged, as expected
The dollar is making a modest comeback.  Friday saw the biggest down day for DXY since August 28, but it has since risen three straight days and is stabilizing just above the 93.50 area.  It has traded largely in a 93-94 range

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Dollar Bleeding Stanched as Markets Search for Direction

12 days ago

Markets have a bit of a risk-off feel today; the dollar bleeding has been stanched for now; IMF releases its updated World Economic Outlook
A stimulus package before the election appears doomed; Fed’s Barkin and Daly speak; a big data week for the US kicks off with September CPI today
UK jobs data came in decidedly downbeat even though the furlough scheme has not yet ended; BOE Governor Bailey said that the bank is not yet ready to implement negative rates
Japan will unveil a fiscal stimulus package before year-end; China reported strong September trade data; Chinese regulators scrapped the 20% deposit rule on FX forwards; Indonesia kept rates steady at 4.0%, as expected
Markets have a bit of a risk-off feel today. Yesterday’s US-tech driven risk on rally has lost

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Drivers for the Week Ahead

14 days ago

Dollar losses are accelerating; the virtual IMF/World Bank meetings begin Monday
A big stimulus package before the election still seems unlikely; there are a fair amount of Fed speakers during this holiday-shortened week
The main data event this week is September retail sales Friday; ahead of that, we get inflation readings for September; Fed manufacturing surveys for October will start to roll out
The account of the ECB’s September meeting added a layer of complexity to the bank’s outlook; eurozone reports August IP Wednesday; Brexit talks continue this week in Brussels ahead of the EU summit Thursday and Friday; UK reports labor market data Tuesday
Japan reports some important forward-looking data this week; Australia reports September jobs data Thursday; New

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Dollar Slide Continues as US Fiscal Stimulus Remains Questionable

15 days ago

The dollar remains heavy; stimulus talks may or may not be dead; the White House is still sending mixed signals
This is another quiet day in terms of US data; Canada reports September jobs data
We got some more eurozone IP readings for August; following Greece yesterday, it’s Italy’s turn today to register another record low for its 10-year bond yield
UK data came in significantly weaker than expected; Japan reported weak August real cash earnings and household spending
Chinese assets had a strong re-opening after a week-long holiday, helped by a strong services PMI reading; India delivered a dovish hold, as expected
The dollar remains heavy. DXY is trading at the lowest level since September 21 and is on track to test that day’s low near 92.749. A break below

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Dollar Remains Heavy as Markets Await Fresh Drivers

17 days ago

The US Vice Presidential debate was a comparatively cordial affair, though the impact on the election is likely to be limited; polls continue to move in favor of Biden, including in swing states
The weak dollar narrative under a Democratic sweep continues to play out; the outlook for fiscal stimulus is as cloudy as ever; FOMC minutes contained no big surprises
Weekly jobless claims will be reported; like last week, there will be a quirk to this week’s initial claims; Canada reports September housing starts
Markets have shrugged off the latest UK Brexit ultimatum; rising infection rates are driving government in Europe to re-impose restrictions; sovereign spreads of EU periphery countries have been trending lower.
BOJ upgraded its regional assessments; business

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Dollar Softens and US Curve Steepens as Odds of Democratic Sweep Rise

19 days ago

The dollar remains under pressure; the US curve continues to steepen; a compromise on fiscal stimulus before the election still seems unlikely; this is another quiet day in terms of US data
President Lagarde said the ECB is prepared to inject fresh monetary stimulus to support the recovery; we expect the ECB to increase its PEPP in Q4
German factory orders came in much stronger than expected; Russia reports September CPI
RBA delivered a dovish hold; the Australian government released an aggressive budget; Indian government appointed three new external members to the RBI’s MPC
The dollar remains under pressure. DXY broke below the 93.51 area Monday, which sets up a test of the September 21 low near 92.749. Similarly, the euro has broken above the $1.1775 area,

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Drivers for the Week Ahead

21 days ago

The US political outlook has been upended by recent developments; lack of a significant safe haven bid for the dollar so far is telling
This is a very quiet week in terms of US data; FOMC minutes will be released Wednesday; there is a full slate of Fed speakers
The eurozone has a fairly heavy data week; Brexit talks continue in London; UK has a heavy data week
Japan has a fairly heavy data week; RBA meets Tuesday and is expected to keep policy unchanged; that same day, the government releases its budget
The US political outlook has been upended by recent developments. President Trump remains in the hospital and conflicting statements from his doctors have only added to the confusion. Post-debate polls suggest President Trump’s support was hurt by his performance.

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Dollar Remains Soft but Sterling Pounded by Brexit Risks

22 days ago

The dollar remains under pressure as market sentiment continue to improve; stimulus talks were extended
Two major US airlines announced significant job furloughs starting today; US data for September will continue  to roll out; weekly jobless claims will be reported
The pound is underperforming as the flurry of optimism in the recent negotiations fades; final eurozone September manufacturing PMI was steady at 53.7
Bank of Japan quarterly Tankan report came in weaker than expected; Korea reported firm September trade data; Philippine central bank kept rates steady at 2.25%, as expected
The dollar remains under pressure as market sentiment continue to improve.  Global equity markets are mostly higher, with US futures pointing to a higher open here.  DXY is down for

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Dollar Softens as Risk-Off Sentiment Ebbs

26 days ago

The dollar continues to soften as risk-off sentiment ebbs; the first presidential debate will take place tonight
House Democrats have staked out their latest position at $2.2 trln; there is a fair amount of US data out today; Brazil has come under renewed pressure from fiscal concerns
The pound continues to outperform as comments from the latest Brexit talks remain skewed to the positive side; latest eurozone CPI and retail sales readings have started coming out
Japan reported September Tokyo CPI; it appears that calls for a policy review are growing within the BOJ
The dollar continues to soften as risk-off sentiment ebbs.  DXY traded Friday at the highest level since July 24 near 94.742 but has since fallen two straight days to the lowest level since September

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Dollar Soft as Markets Ignore Virus Numbers and Switch to Risk-On Mode

27 days ago

Virus numbers are rising across Europe and the US; the dollar is softening as risk-off sentiment ebbs
It is a fairly quiet day in the US; there is a glimmer of hope about a fiscal deal in the US; recent US data support the widely held view that more stimulus is needed
The final week of Brexit negotiations is upon us in Brussels and the pendulum is swinging towards optimism; Turkish assets may be one of the biggest causalities of the conflict between Armenia and Azerbaijan
US-China tensions remain elevated; China’s industrial profits continue to rebound, up 19.1% y/y in August; RBI rescheduled its planned policy meeting; Malaysia’s external trade figures came in much weaker than expected
Virus numbers are rising across Europe and the US. Fed Chair Powell has been

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EM Preview for the Week Ahead

28 days ago

Persistent risk-off impulses weighed on EM last week and that may continue this week. The Asian currencies outperformed last week while MXN, ZAR, and COP underperformed, and we expect these divergences to continue. Despite optimism about a stimulus package in the US, we think it remains a long shot. Meanwhile, virus numbers are rising in Europe and the US, with data from both regions likely to continue weakening.
AMERICAS
Mexico reports August trade Monday. A surplus of $5.03 bln is expected. Exports have fallen y/y since March but the larger collapse in imports has led the trade surplus to recover after an initial hit. Overall, the economy remains very weak and that is why we think the easing cycle may be extended into 2021. Banco de Mexico just cut rates 25 bp

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Dollar Firm as Markets Digest Rising Virus Numbers

September 26, 2020

Markets are digesting the rising infection rates across Europe; the dollar is taking another stab at the upside
Speculation is picking up that a compromise on a stimulus package could be reached; reports suggest House Democrats are working on a new $2.4 trln package as a basis for these negotiations
Reports suggest Fed Governor Lael Brainard is a top candidate for Treasury Secretary if Biden were to win; today is a quiet day in the US
Colombia is expected to cut rates 25 bp to 1.75%; Mexico cut rates 25 bp to 4.25% yesterday, as expected; we got two surprise hikes in EMEA yesterday
Some UK Tory MPs are looking for ways to block new restrictive measures; UK public sector borrowing came in slightly lower than expected; eurozone M3 growth slowed in August
FTSE

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Dollar Remains Firm Ahead of Powell Testimony

September 23, 2020

The dollar remains firm on continued safe haven flows but we still view this situation as temporary
Fed Chair Powell appears before the House Financial Services Panel with Treasury Secretary Mnuchin; the text of Powell’s testimony was released already
House Democrats plan to vote on a stopgap bill today; Fed manufacturing surveys for September will continue to roll out; Brazil COPOM minutes will be released
UK CBI September industrial trends survey came in weak; BOE Governor Bailey reiterated the discussion on negative rates but confirmed that implementation is nowhere in sight; new restrictive measures are trickling out in the UK
Riksbank kept policy unchanged, as expected; Hungary is expected to keep rates steady at 0.60%; Deputy Governor Debelle said the RBA is

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Dollar Gains from Risk-Off Trading Unlikely to Persist

September 22, 2020

Markets are starting the week in risk-off mode; the dollar is firm on some safe haven flows but this is likely to prove temporary
US politics is coming in to focus as the election nears; we fear that the likely horse-trading and arm-twisting will take away any residual desire to get another stimulus package done
The trend towards more restrictive measures continues with London in focus; between the virus numbers and Brexit risks, sterling remains under pressure
China left its Loan Prime Rates (LPR) unchanged, as expected; trade data out of Korea and Taiwan came in firm
Markets are starting the week in risk-off mode. It’s hard to point to one single cause, as there are many risks building. These include (but are in no way limited to) rising viral numbers in Europe,

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Risk Appetite Ebbs Ahead of BOE Decision

September 19, 2020

The dollar has gotten some limited traction despite the dovish FOMC decision; the FOMC delivered no surprises
We are seeing some more movement on fiscal stimulus; August retail sales disappointed yesterday
Fed manufacturing surveys for September will continue to roll out; weekly jobless claims will be reported; Brazil left rates unchanged at 2.0% but introduced some additional dovish guidance
BOE is expected to deliver a dovish hold; UK government reached a compromise with rebel Tory MPs by giving them a major concession; ECB gave regional lenders more regulatory relief
BOJ remained on hold but upgraded its economic assessment; Australia reported strong August jobs data; Indonesia kept rates on hold at 4.0%, as expected
The dollar has gotten some limited traction

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Dollar Bounce Ends Ahead of ECB Decision

September 13, 2020

The dollar rally ran out of steam; US Senate will hold a vote today on its proposed “skinny” bill
US reports August PPI and weekly jobless claims; US will sell $23 bln of 30-year bonds today after a sloppy 10-year auction yesterday
BOC delivered a hawkish hold yesterday; Peru is expected to keep rates steady at 0.25%
ECB is expected to keep policy steady; there were some eurozone IP readings; UK published its so-called Internal Market Bill
Japan may go to the polls this fall; Indonesia announced an unexpected return to lockdown for Jakarta; Malaysia kept rates steady at 1.75%, as expected
The dollar rally ran out of steam.  DXY traded yesterday at the highest level since August 12 but could not break above the key 94.00 area and is back near 93.00 today. The euro

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Sterling Pounded by Brexit Developments

September 11, 2020

The dollar rebound continues; odds of a near-term stimulus bill in the US are falling; ahead of inflation readings later this week, the US holds a 10-year auction today
Bank of Canada is expected to keep policy steady; Mexico reports August CPI; Brazil reports August IPCA inflation
The Brexit fallout widens; UK will have trouble striking new trade deals if it can’t be counted on to honor its past agreements; no surprise then that sterling remains under pressure
Australia September Westpac consumer confidence rose to 93.8 from 79.5 in August; New Zealand 3-year bond yields turned negative for the first time ever
The dollar rebound continues.  DXY is trading at the highest level since August 12.  However, for us to get more constructive on the greenback, DXY would

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ECB Preview

September 10, 2020

The ECB meets tomorrow and is widely expected to stand pat. Macro forecasts may be tweaked modestly and there are some risks of jawboning against the stronger euro, but it should otherwise be an uneventful meeting. Looking ahead, a lot of room remains for further ECB actions. We expect the ECB to increase QE at the December 10 meeting. However, another rate cut seems very unlikely, as does activation of OMT.
POSSIBLE NEXT STEPS
1. Jawbone the euro weaker – POSSIBLE NOW, LIKELY IN Q4. The strong euro is surely a topic of internal discussion, but MPC members are usually reluctant to address it publicly. ECB Chief Economist Lane recently signaled some concern about the strong euro, noting that it feeds into the bank’s forecasts and policy settings.
Press reports

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EM Preview for the Week Ahead

September 8, 2020

EM performance this week will hinge crucially on whether US equity markets can find some traction. If sustained, last week’s equity rout could lead to a deeper generalized risk-off trading environment this week that would weigh on EM FX and equities. As it is, markets are already digesting weaker economic data and rising virus numbers in countries that had crushed the curve. ECB meeting this week may hint at further easing to come, which could help risk assets recover a bit.
AMERICAS
Chile reports August trade Monday. August CPI will be reported Tuesday, with headline inflation expected to fall a tick to 2.4% y/y. If so, this would be the lowest since September and nearing the bottom of the 2-4% target range. The bank has been on hold since its last 50 bp cut

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EM Preview for the Week Ahead

July 12, 2020

This is likely to be one of the most eventful weeks we’ve had in a while. Not only do three major central banks meet, but four EM central banks also meet, and we get important June and July data from the US, the first Q2 GDP reading from China, an OPEC+ meeting, and an EU summit. This comes as markets are grappling with still-rising virus numbers in the US and resurgent numbers in many other countries that call into question the durability of the economic recovery. With so many events impacting virtually all assets, we expect a volatile week ahead for the markets and may serve as a gut punch to risk assets like EM.
AMERICAS
Colombia reports May manufacturing production and IP Wednesday. The former is expected to contract -28.0% y/y and the latter by -28.7% y/y.

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Dollar Bid as Market Sentiment Yet to Recover

July 8, 2020

The US has started the formal process of withdrawing from the WHO; the dollar continues to benefit from risk-off sentiment but remains stuck in recent ranges
The White House is asking Congress to pass another $1 trln stimulus plan by early August; President Trump hosts Mexican President AMLO for a two-day visit
Chancellor Sunak addresses UK Parliament today; Brexit talks continue; Nigeria devalued its official exchange rate yesterday
RBNZ is considering an extension of its home loan deferral scheme; the US is reportedly weighing proposals designed to undermine the Hong Kong dollar peg

The US has started the formal process of withdrawing from the WHO. This is not a market-moving event, of course, but it is impactful for the US’s global image. Brazilian President

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EM Preview for the Week Ahead

July 6, 2020

Risk assets remain hostage to swings in market sentiment. Stronger than expected US jobs data last week was welcome news. However, the tug of war between improving economic data and worsening viral numbers is likely to continue this week, with many US states reporting record high infection rates.
AMERICAS
Brazil reports May retail sales Wednesday. Sales are expected to contract -13.5% y/y vs. -16.8% in April. June IPCA inflation will be reported Friday, which is expected to rise 2.16% y/y vs. 1.88% in May. If so, it would be the first acceleration since December but still well below the 2.5-5.5% target range. COPOM delivered a 75 bp cut to 2.25% June 17 and left the door open to one last cut. Next policy meeting is August 5 and the CDI market is pricing in slight

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Dollar Soft Ahead of Jobs Report

July 3, 2020

Re-shutdowns continue to spread across the US; the dollar has come under pressure again
Jobs data is the highlight ahead of the long holiday weekend in the US; weekly jobless claims will be reported
FOMC minutes were revelatory; the Fed for now will rely on “outcome-based” forward guidance and asset purchases to achieve its goals; US House passed the latest China sanctions bill
The UK offered a home to nearly 3 mln Hong Kong citizens; Russia President Putin will likely be around for much longer, but the real risk is a new round of sanctions
Japan’s ruling LDP is discussing how to attract finance professionals from Hong Kong; Korea reported June CPI
Re-shutdowns continue to spread across the US. New York and California banned or delayed reopening of certain

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Dollar Begins the Week Under Pressure Again

June 30, 2020

The virus news stream remains negative; pressure on the dollar has resumed
The US economy is taking a step back just as Q3 is about to get under way; there are some minor US data reports today
UK Labour leader Starmer overtook Prime Minister Johnson in the latest opinion poll; Macron’s party did poorly in French local elections
French and German leaders meet to discuss the planned EU pandemic rescue package; UK and EU begin their “intensified timetable” for Brexit negotiations
Japan reported May retail sales and department store sales; China industrial profits rebounded nicely to 6.0% y/y in May
The virus news stream remains negative.
Deaths surpassed 500,000 worldwide, while confirmed cases exceeded 10 mln. Australia, Tokyo, and Austria are seeing a resurgence of

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EM Preview for the Week Ahead

June 29, 2020

Risk assets came under pressure last week as the virus news stream worsened. It’s clear that large parts of the US will be forced to delay reopening until their virus numbers improve. Markets had gotten too bullish on the US recovery story and so this reality check soured sentiment. This is a very important week for US data, and we think risk sentiment will remain under pressure ahead of what we think will be a likely downside surprise in the US jobs number Thursday. AMERICAS
Brazil reports central government budget data Monday, where a primary deficit of -BRL132.1 bln is expected. Consolidated budget data will then be reported Tuesday, where a primary deficit of -BRL135.0 bln is expected. Fiscal policy will become an increasingly bigger issue, as Lower House

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