Tag Archives: 4) FX Trends

Overview: The dramatic shift in expectations for Fed policy is a potent shock, with reverberations throughout the capital markets.  The business press was full of accounts putting the nearly 50 bp decline in the US two-year note in an historical perspective. Yesterday, it fell by 61 bp as the market continued to unwind Fed hikes and reprice the chances of a cut as early as Q2. While the poorly received bill auctions suggests not significant deposit flight, the KBW...

Overview:  Federal Reserve Chair Powell's comments to the Senate Banking Committee were seen as hawkish by the market, even though it has been clear to most observers that the 5.10% median terminal rate that the Fed projected in December would be increased. Also, it seemed well appreciated a few Fed officials support a 50 bp hike at the February 1 FOMC meeting, two days before a "hot" jobs report that showed over 500k jobs were filled. It would just seem to go...

Swiss National Bank Chair Jordan threatened FX intervention! A couple of posts from Tuesday ICYMI while Powell was hogging the spotlight: ECB Knot: ECB can be expected to keep raising rates for quite some time after March ECB can be expected to keep raising rates for quite some time after March And, SNB Chairman: We cannot rule out that we will have to tighten monetary policy again We can use interest rates but also sell foreign currencies to get the right monetary...

Overview: The US dollar is trading with a firmer bias against nearly all the G10 currencies ahead of Federal Reserve Chairman Powell's semi-annual testimony before Congress. Speaking for the Federal Reserve, the Chair is likely to stay on message which is higher rates are necessary to cool the overheating economy. This comes on the heels of the Reserve Bank of Australia's 25 bp hike and indication that it is not pre-committing to an April hike. The Australian dollar...

Overview: The modest economic goals announced as China's National People's Congress starts was seen as a cautionary sign after growth disappointed last year. It seemed to weigh on Chinese stocks, though others large bourses in the region advanced, led by Japan's Nikkei and South Korea with gains of more than 1%. Europe's Stoxx 600 is little changed after rising for the past two sessions. US index futures are slightly softer. Strong gains were seen before the...

The dollar peaked last September/October and trended lower until the January jobs report and strong service ISM on February 3. These reports and firm inflation readings, owing, at least in part, to benchmark and methodological changes, helped spur the greenback's recovery. However, we learned last week that auto sales and the service ISM prices paid decelerated in February, and this week, we will learn that job growth has slowed considerably. If accurate, the median...

Overview: Talk from two Fed officials yesterday, which seemed to validate market expectations eased the upward pressure on the dollar and helped equities launch a dramatic recovery. The market is pricing in a terminal rate near 5.50%, a little higher than the median dot in December. The S&P 500 posted a dramatic recover and posted a potential bullish key reversal. Its 0.75% closing gain was the largest advance in nearly three weeks. A large drop in Tokyo's...

Overview: The jump in prices paid in yesterday's US ISM manufacturing coupled with the stronger eurozone inflation, with a new cyclical high reported in the core rate, underscores the market theme of higher-for-longer. This is seen as dollar supportive but also negative for risk-assets, including and especially equities. European benchmark 10-year yields are up another couple of basis points today and the 10-year US Treasury yield is pushing above 4% for the first...

Price pressures remain elevated, and labor markets are strong, giving most policymakers in the G10 the incentive to continue raising interest interests. There are two exceptions: Japan, the only country still with a negative policy rate (-0.10%), and Canada, where the central bank has indicated it would pause. While half-point hikes or larger were common in the second half of last year, the major central banks have slowed or will slow the pace to quarter-point moves...

Overview: Many investors may be skeptical of the accuracy of Chinese data, but its stronger than expected February PMI animated the animal spirits and bolstered risk-taking appetites. Asia Pacific equities jumped, led by the 4.2% rally in Hong Kong and a 5% surge in the index that tracks mainland shares. Among the long bourses Australia and Singapore slipped, and South Korean markets were closed for a national holiday. Europe's Stoxx 600 is posting a small gain and...